The city of Hong Kong, which has enjoyed relatively free trading laws from mainland China and has established itself as a major trading centre over the years, may be at risk of capital fleeing due to draconian laws that China seeks to impose on it, curbing its trade and the political freedom it enjoyed.
The problem begins with Beijing's plan to enact national security laws in May 2020 over the whole country, including Hong Kong, which has had an independent judiciary, loose business regulation, low trade barriers and guarantees of freedom of expression until now. The national security law aims to target sedition and terrorist activities. This comes after anti-Beijing protests last year which had cases of extreme violence against the public.
This raises many questions for those doing business because there is a great fear that the definition of national security is so vague and ambiguous that China may accord severe punishment for petty crimes or dissent.
However, the Hong Kong officials have responded by support for the law. The Chief Executive, Carrie Lam, has said that this law addresses problems which the business sector has been “worrying about over the past year.” Leung Chun-ying, a top Chinese advisor, has said that the law does not “hinder foreign investors”, nor “hinder the freedom enjoyed by local residents”.
The fear still abounds, with a significant number of people seeking to flee the city, the largest fall in the local stock market since 2008 after the announcement of the security law and the doubling of the funds deposited in Singaporean banks, which is attributed to the situation in Hong Kong by economists.
Many investment firms have expressed their concerns on tightening of the grip by mainland China on Hong Kong. William Kaye, a longtime investor in China and founder of Pacific Group, the investment firm, has said that “what is just a trickle could become a flood of capital out.”
The US government has also lodged a strong protest with China against the imposition of draconian security law on Hong Kong. It is important to note that the USA has granted special status in trading to Hong Kong which has given some competitive advantages and contributed to the business growth of Hong Kong.
The US had warned China that with the new security law, the special status granted to Hong Kong will be revoked by the USA. As China failed to do so, the USA revoked Hong Kong’s Special Status through an executive order by President Trump on July 14, 2020.
A revocation of its special status would mark “the beginning of the death of Hong Kong as we know it,” Steve Tsang, director of the University of London’s SOAS China Institute, said last year.
Apart from the special status revocation, the same day President Trump also signed an Hong Kong Autonomy Act to impose sanctions on foreign individuals and entities for ‘contributing to the erosion of Hong Kong’s autonomy.’ Under this law, persons responsible for human rights violations in Hong Kong can be subject to sanctions like visa bans and asset freezes.
Hong Kong Chief Executive Carrie Lam, has said it’s “totally unacceptable” for foreign legislatures to interfere in Hong Kong’s internal affairs, and that sanctions would only complicate the city’s problems. She also gave reassurance to the investors that Hong Kong adheres to the rule of law and has an independent judiciary.
The Chinese attempt to exert greater control over Hong Kong and the protest by the local people with moral support from the international community has once again put the spotlight on the behaviour of China, as it is trying to establish itself as a global economic and military super power.
The people of Hong Kong have unfortunately become a pawn in the great game of geopolitical power projection. It is still too early to predict whether China will blink first and roll back the draconian law or Hong Kong will end up as collateral damage in China’s quest for a place on the high table of global power players.
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SolarWinds Attack and its implication for U.S. Security: Sabotage or espionage?
SolarWinds, a publicly listed Texas-based company with a value of more than $6 billion, has a very reputed customer list including multiple U.S. government agencies. The company develops softwares for businesses and agencies to help manage and monitor their networks, systems and IT infrastructure. The company is a service provider to over 425 of the Fortune 500 companies, top 5 U.S. accounting firms, all major U.S. telecom providers, the U.S. treasury, several global universities and educational institutions, the NSA and the White House.
A set of hackers managed to sneak a malicious code into the software update of SolarWinds for a tool called “Orion”. Earlier, in 2020, the hackers had injected malware into the updates of Orion which were released between March and June of 2020. On 5th of Jan, 2021, the Federal Bureau of Investigation (FBI), Cybersecurity and Infrastructure security Agency (CISA), the Office of the director of National Intelligence (ODNI) and the National Security Agency (NSA) made an official joint statement stating, "an Advanced Persistent Threat (APT) actor, likely Russian in origin, is responsible for most or all of the recently discovered, ongoing cyber compromises of both government and non-governmental networks". U.S. government agencies like The Pentagon, National institute of Health, FBI, DHS, the Department of Energy and the Department of Veterans affairs were some significant users of Orion. In fact, in August 2020, the Department of Veterans affairs renewed its Orion license in a 2.8-million-dollar order. The Department of Veterans affairs has been heavily involved in COVID-19 relief.
The Orion hack began as early as March 2020. Over 18,000 customers had installed the compromised software which implies that these customers were vulnerable to spy operations throughout 2020. The malware inserted in the updates provided remote access of an organization’s network to the elite hackers. Since the malware was undetected for months, it gave the hackers an opportunity to obtain information from their targets. In fact, the hackers could also monitor emails and other internal communications. FireEye, the cybersecurity company who were the first to discover the breach describes the capability of the malware, from initially lying dormant up to two weeks, to hiding in plain sight by masquerading its investigation as “Orion Activity”. In 2016, Russian Military hackers used a method called “supply chain” to infect companies performing business in Ukraine with a hard-drive wiping virus called NotPetya. This attack is considered to be one of the most damaging cyber-attacks till date. The infiltration tactic used in the current hack is also identified to be similar to the “supply chain” method.
The Orion software framework contained a backdoor that communicated via HTTP to third party servers. Cybersecurity firm, FireEye has been tracking the trojanized version of Orion plug-in as SUNBURST.
FireEye Logo
FireEye described the use of SUNBURST backdoor on one of its blogs published on 13th December 2020. It stated,
“After an initial dormant period of up to two weeks, it retrieves and executes commands, called “Jobs”, that include the ability to transfer files, execute files, profile the system, reboot the machine, and disable system services. The malware masquerades its network traffic as the Orion Improvement Program (OIP) protocol and stores reconnaissance results within legitimate plugin configuration files allowing it to blend in with legitimate SolarWinds activity. The backdoor uses multiple obfuscated blocklists to identify forensic and anti-virus tools running as processes, services, and drivers.”
FireEye described the attack through the SUNBURST backdoor as “highly evasive”. Meanwhile, SolarWinds is facing a class action lawsuit filed by a stakeholder of the IT Infrastructure Management software company in the U.S. District Court for the Western District of Texas on 4th Jan 2021. The lawsuit is filed against SolarWinds’ ex-president, Kevin Thompson and chief financial officer, J. Barton Kalsu on the grounds of violating Federal Securities laws under Securities Exchange Act of 1934. The complaint states that SolarWinds Company failed to disclose that "since mid-2020, Orion monitoring products had a vulnerability that allowed hackers to compromise the server upon which the products ran". The complaint also mentioned that SolarWinds update server had a fairly weak and easily accessible password, ‘solarwinds123’.
Microsoft’s internal security research team found evidence that the same hackers had accessed some internal source code in their company’s systems. Microsoft mentioned that the attempted activities were beyond just the presence of malware SolarWinds code in their environment. Microsoft has “an open source like culture” which allows teams within Microsoft to view the source code. The company acknowledges that it is a threat model but they are downplaying the risk by saying “just viewing the source code should not cause any elevated risk”.
The Russian Hackers have also managed to breach the network of Austin City, Texas. The breach dates back to at-least mid of October 2020. The hackers have seemed to target the U.S. Treasury, Departments of Commerce and Homeland Security, The Pentagon, Cybersecurity firm FireEye, and SolarWinds. The breach of the network of the Austin city is an apparent win for Russian hackers. Theoretically, the compromise could have helped them access sensitive information in accordance with the city governance, elections, city police and by excavating deeper, the hackers can practically burrow inside energy, water and airport networks of the city.
Berserk Bear, the hacking outfit that is currently believed to be behind Austin’s breach appears to have used Austin’s network as grounds to stage larger attacks. Berserk Bear also known as BROMINE inter alia several names is believed to have been responsible for a series of breaches of significant U.S. infrastructures in the past year.
The attacks on SolarWinds, U.S. government and FireEye have been linked to another Russian group called APT29 also popularly known as Cozy Bear. Berserk Bear is allegedly a unit of Russian federal Security Service (FSB). Cozy Bear is known to be affiliated with the Russian Foreign Intelligence Service, or SVR. FSB and SVR are considered to be successors of the Committee of State Security of the Soviet-era which was widely known as the KGB.
The Austin Council seems to have been aware of the breach from October 2020. The FBI and CISA had published an initial advisory warning of “advanced persistent threat actors” (APTs) on October 9th, 2020. The advisory warned the city council of APTs targeting state and local governments. On October 22nd, a follow-up advisory was published in which both agencies accredited the breach to Berserk Bear. CISA published a heat map listing the types of organizations that were breached, scanned or targeted by Berserk Bear. The reputation of Berserk Bear of lurking fit their common pattern of espionage-oriented attacks. Sami Ruohonen, a researcher at Finnish cybersecurity firm F-Secure said that the adversaries have already been in the network for more than a couple of months before someone discovers their existence. Ruohonen also mentioned that this technique is specially preferred by APT groups because, the longer they go unnoticed, the longer they have a remote access to the network. F-Secure, in a report published in 2019, compared Berserk Bear and similar groups to the cyber equivalent of sleeper cells.
The cybersecurity experts have warned Austin city and the U.S that Berserk Bear hackers are not just involved in espionage and sabotage. They can gear up at any moment and create havoc in the United States. These Russian Hackers can cause city blackouts, disturbance in water supply and can even disrupt COVID-19 relief. Vikram Thakur, a technical director at Symantec who has tracked Berserk Bear for years quotes, “We should be cognizant of the level of information that they have, turning on valves or closing valves, things of that sort — they have the expertise to do it.”
SolarWinds replaced their ex-CEO Kevin Thomson with Mr Sudhakar Ramakrishnan. Unlike his predecessor Thomson, who is an accountant by training, Ramakrishnan comes from a security background having led Pulse Secure in the recent past. The new CEO publicly stated that the company will be making 5 critical changes to put security front and center. The company also hired ex-CISA chief Chris Krebs and Facebook’s former security lead, Alex Stamos. Krebs and Stamos work as independent consultants to help the company coordinate its crisis response. Krebs told the Financial Times that it could even take years to uncover the full extent of the hack. On the brighter side, the new CEO mentioned that the company has engaged several cybersecurity experts to assist SolarWinds in its efforts to become more secure. We can hope that, with better expertise, vision and understanding of threat and vulnerability management, the company is now headed towards a better future.
