Perspective Intelligence

Writings on Security and Intelligence by Roderick Jones

Archive for the ‘CyberWar’ Category

The First Violent Crisis of Globalization has Ended – the Next One is Emerging

Former British Prime Minister Gordon Brown has referred to the financial crisis of 2008 as the ‘first crisis of globalization’.  This is a great descriptive applied to the wrong problem.  Al-Qaeda was the first crisis of modern globalization.  Financial crashes have previously infected inter-connected markets, but never before has a non-state group been able to set the global security agenda.  Al-Qaeda and Bin Laden were able to do this by applying a mixture of medieval religious ideology and guerilla warfare to the dominant tools of globalization. Al-Qaeda seemingly understood the strengths, weakness and opportunities of globalization and exploited them for increasingly empty violent aims.  The use of adaptive financial tools in the form of hawala banking, co-opting the apparatus of failed states and most spectacularly both weaponizing and de-stabilizing one of the primary drivers of globalization, in the form of civil aviation, allowed al-Qaeda to strike internationally.  Al-Qaeda also virtualized itself and quickly moved into the new media space opened up by the explosion of the Internet but this also exposed its weakness as the Arab Spring has bloomed.  Information wants to be free and al-Qaeda is poisoned by freedom.  Al-Qaeda has been described as innovative and it certainly was the first movement out of the gate to exploit the conditions the world moved toward following the end of the Cold War.  However, this particular crisis should now be regarded as closed.  The United States and its western allies have formed effective tools to respond to threats such as al-Qaeda. Building new military systems and emphasizing technology, information use, surveillance systems and Special Forces have proven to be an effective doctrinal response — and are also appropriately what finally put an end to al-Qaeda’s leader. Read the rest of this entry »

Written by Roderick Jones

May 20, 2011 at 4:21 pm

Flash Crash Revealed A Market Vulnerable To Cyberterrorists

02 Nov 2010

Roderick Jones

The ability to crash or negatively impact financial markets would be an incredible cyber-warfare tool.

The recent release of the long-awaited government report on the May 6 “flash crash” highlighted one specific trade as the catalyst for a series of chain reactions, accelerated by computer algorithms, that whipsawed the market. While the report goes a long way toward explaining the events of that afternoon, it doesn’t begin to address the systemic weaknesses of the market, highlighted by the nearly 600-point drop in the Dow Jones industrial average in a matter of minutes — and the Dow’s even faster recovery.

To an observer of global security risk, the flash crash looked like a horrific new way to cause economic, political and social damage. Although the crash played out in the U.S., the systems that underpinned it are being used globally and are currently seeing their greatest growth in Asia. The rise in the use of high-speed technology and reactive algorithms to conduct a variety of market functions is driven in part by the innovation and growing dominance of high frequency trading.

One of the more startling pieces of news to come out of the flash crash is the geographic shift in trading. Wall Street is no longer the heart of the U.S. financial market, nor is London’s Square Mile the epicenter of the U.K. market. The data and trading components of the financial systems are now centered in New Jersey and Essex, respectively.

Does this mean that the “ring of steel” surrounding the City of London or the New York Police Department presence outside the Big Board can be scaled back or eliminated? Not entirely, as both market centers are still symbolic targets. But it might be a good idea to move some of these protective resources to the data centers supporting critical financial systems. Although the security of the data centers has no doubt been considered at some length, resulting in bomb-proofing and improved data protection, it would be surprising if all vulnerabilities surrounding the staffing of these sites have been fully explored.

The potential cyberwar element of high frequency trading is a fascinating area of future security risk — not only for financial markets but also for the countries that host them.

One of the fundamental concerns with the system becomes apparent when examining what has been described as the democratization of trading. In short, the use of technology allows companies to offer trading platforms at very low cost to anyone by locating their services in data centers alongside the exchanges themselves. For a small amount of capital, anyone can connect an algorithm to a financial market from anywhere. It remains fundamentally unclear who is responsible for conducting real-life due diligence on the traders tying into the financial system. Much political noise is devoted to which people are allowed to enter a country, but little thought is put into who is tapping into the financial system.

Anonymity, of course, is not a crime. And it has taken a while to understand what, if anything, a rogue algorithm could do if introduced into a particular market. Clearly, the ability to crash the entire market would make for a spectacular attack if the events of May 6 could be replicated, but this seems unlikely.

However, further examination suggests that a kind of denial-of-service attack could be discretely aimed at particular nodes in the financial system, as evidenced by the practice of using algorithms to bombard a market with buy and sell offers to slow it down enough to create a financial arbitrage opportunity elsewhere. It’s not that far-fetched to imagine a terrorist creating a number of algorithms that could act in concert as a denial-of-service attack against financial exchanges.

On a larger scale, the order by mutual fund firm Waddell & Reed to sell $4 billion in index futures contracts, which is being blamed for setting off the May 6 crash, will not have escaped the notice of national governments interested in exerting financial pressure on their opponents. The size of this trade may be beyond the ability of smaller groups to execute, but it is entirely possible for a government to sponsor this kind of market manipulation against its international opponents. In fact, there is a long history of using financial manipulation to gain diplomatic and even military advantage; the weakness of a massively networked system relying on trading algorithms can clearly be exploited during times of international tension.

The ability to crash or negatively impact financial markets would be an incredible cyber-warfare tool. For this reason, the flash crash should be examined further through the lens of security risk to ensure that the vulnerabilities and opportunities are well understood.

Roderick Jones is CEO of Concentric Solutions International, a San Francisco–based security risk management company.

Article appeared in Institutional Investor November 2010


Written by Roderick Jones

November 15, 2010 at 10:04 am

Posted in CyberWar

New Terrorism: Five days in Manhattan

Two events centered on New York City separated by five days demonstrated the end of one phase of terrorism and the pending arrival of the next. The failed car-bombing in Times square and the dizzying stock market crash less than a week later mark the book ends of terrorist eras.

End of an era for terrorism

The attempt by Faisal Shahzad to detonate a car bomb in Times Square was notable not just for its failure but also the severely limited systemic impact a car-bomb could have, even when exploding in crowded urban center. Car-bombs or Vehicle-Borne IED’s have a long history (incidentally one of the first was the 1920 ‘cart and horse bomb’ in Wall Street, which killed 38 people). VBIED’s remain deadly as a tactic within an insurgency or warfare setting but with regard to modern urban terrorism the world has moved on. We are now living within a highly virtualized system and the dizzying stock-market crash on the 6th May 2010 shows how vulnerable this system is to digital failure. While the NYSE building probably remains a symbolic target for some terrorists a deadly and capable adversary would ignore this physical manifestation of the financial system and disrupt the data-centers, software and routers that make the global financial system tick.  Shahzad’s attempted car-bomb was from another age and posed no overarching risk to western societies. The same cannot be said of the vulnerable and highly unstable financial system.

Computer aided crash (proof of concept for future cyber-attack)

There has yet to be a definitive explanation of how stocks such as Proctor and Gamble plunged 47% and the normally solid Accenture plunged from a value of roughly $40 to one cent, based on no external input of information into the financial system. The SEC has issued directives in recent years boosting competition and lowering commissions, which has had the effect of fragmenting equity trading around the US and making it highly automated. This has created four leading exchanges, NYSE Euronext, Nasdaq OMX Group, Bats Global Market and Direct Edge and secondary exchanges include International Securities Exchange, Chicago Board Options Exchange, the CME Group and the Intercontinental Exchange. There are also broker-run matching systems like those run by Knight and ITG and so called ‘dark-pools’ where trades are matched privately with prices posted publicly only after trades are done. As similar picture has emerged in Europe, where rules allowing competition with established exchanges and known by the acronym “Mifid” have led to a similar explosion of types and venues. Read the rest of this entry »

Written by Roderick Jones

May 13, 2010 at 1:00 am

Open Versus Closed Systems

“The principal characteristic of twenty-first-century international relations is turning out to be nonpolarity: a world dominated not by one or two or even several states but rather by dozens of actors possessing and exercising various kinds of power. This represents a tectonic shift from the past.”

“Today’s world differs in a fundamental way from one of classic multipolarity: there are many more power centers, and quite a few of these poles are not nation-states. Indeed, one of the cardinal features of the contemporary international system is that nation-states have lost their monopoly on power and in some domains their preeminence as well.”

-Richard Hass, Head of the Council on Foreign Relations and former head of Policy Planning at the U.S. Department of State, writing in 2008.

Google’s rise over the past ten years has coincided with and arguably assisted in the creation of extra-state entities, which can project enormous power globally. The equation can be simplistically stated: in an information economy, control of information equates to raw power. The Industrial Revolution fueled the British Empire, control of markets fueled the American Empire, control of information is fueling the Google empire. In the space of ten years, the Internet has gone from supporting pets.com to being the pre-eminent vehicle for projecting power. However, the continuation of the open Eco-system of information, innovation and development, which has provided the platform for this success is not assured (as has been highlighted by a variety of Internet scholars and strategic thinkers). Open systems are messy, and therefore, closed wall Internet systems may grow in popularity as consumers seek protection from some of the anarchy that reigns online. This scenario is not new. The United States is the original messy open political system and by managing to control this method of organizing society it became a super-power. China offers an alternative: a closed wall system to protect its citizens from the anarchy of open society. Google has been the champion of the open Internet. Just as American exceptionalism has driven the United States to intervene globally to uphold Jeffersonian values, Google intervenes in FCC auctions to ensure the open access to information. Of course the commercial imperative cannot be denied – the United States has financially benefited from promoting the market state, and Google financially benefits wherever there is an open (uncensored) Internet. It has been unclear whether Google would ever seek alliances with nation-states given its extra-territorial virtual nature, but that time appears to have arrived.  Read the rest of this entry »

Written by Roderick Jones

February 19, 2010 at 3:39 pm

Hack-Jet: Losing a commercial airliner in a networked world

Last landing at CDG airport for this airbus A330

When there is a catastrophic loss of an aircraft in any circumstances, there are inevitably a host of questions raised about the safety and security of the aviation operation. The loss of Air France flight 447 off the coast of Brazil with little evidence upon which to work inevitably raises the level of speculation surrounding the fate of the flight. Large-scale incidents such as this create an enormous cloud of data, which has to be investigated in order to discover the pattern of events, which led to the loss (not helped when some of it may be two miles under the ocean surface). So far French authorities have been quick to rule out terrorism it has however, emerged that a bomb hoax against an Air France flight had been made the previous week flying a different route from Argentina. This currently does not seem to be linked and no terrorist group has claimed responsibility. Much of the speculation regarding the fate of the aircraft has focused on the effects of bad weather or a glitch in the fly-by-wire system that could have caused the plane to dive uncontrollably. There is however another theory, which while currently unlikely, if true would change the global aviation security situation overnight. A Hacked-Jet.

Given the plethora of software modern jets rely on it seems reasonable to assume that these systems could be compromised by code designed to trigger catastrophic systemic events within the aircraft’s navigation or other critical electronic systems. Just as aircraft have a physical presence they increasingly have a virtual footprint and this changes their vulnerability. A systemic software corruption may account for the mysterious absence of a Mayday call – the communications system may have been offline. Designing airport and aviation security to keep lethal code off civilian aircraft would in the short-term, be beyond any government civil security regime. A malicious code attack of this kind against any civilian airliner would, therefore be catastrophic not only for the airline industry but also for the wider global economy until security caught up with this new threat. The technical ability to conduct an attack of this kind remains highly specialized (for now) but the knowledge to conduct attacks in this mold would be as deadly as WMD and easier to spread through our networked world. Electronic systems on aircraft are designed for safety not security, they therefore do not account for malicious internal actions.   Read the rest of this entry »

Written by Roderick Jones

June 9, 2009 at 2:03 am

The Lulz takes on North Korea

As a one-time student of the cold war, pondering the potential causes of a global nuclear war was something of a Sunday afternoon past-time. The historic classic is of course the Cuban missile crisis but equally important were the series of near misses based on the faulty reading of radar early-warning systems when flocks of birds flew over the Artic Circle, or overly aggressive NATO military exercises feeding Soviet anxieties. With the recent North Korean provocations, sadly this subject is back in vogue. In some ways, although there are no clear diplomatic solutions to the North Korean danger, it does play to traditional intellectual strengths the US has in the field of geo-political nuclear strategy – a relief from the messy world of non-state actors, insurgency and cyber-militias. However, there may be a new element in all of this that could act as the proverbial flock of geese: cyber-pranksters.

North Korea is famously a closed society, which hasn’t registered or used its Internet domain designation (.kp). However, it does have a ‘government’ website operated by theKorean Friendship Association hosted in Spain. Over the past month the loose affiliation of hackers, pranksters and griefers operating under the ‘Anonymous‘ theme have reportedly organized two Distributed Denial of Service (DDoS)attacks against this site – knocking it offline for 90mins at a time. Would this be seen as western provocation by North Korea? Who knows, but it does raise the question of how uncontrolled or accidental cyber-warfare could have unintended consequences, a new factor in an old dynamic. Unlike nuclear technology the ability to conduct cyber-warfare is not the sole preserve of states. Individuals, or loosely affiliated groups of individuals operating on a trans-national basis can replicate some if not all of a nations capability. The image-boards, which are the home point for these ‘Anonymous’ cyber attacks operate collaborative wiki’s to organize and co-ordinate their attacks — this enables them to harness the power of the crowd. The targets vary substantially from YouTube to Club Penguin, therefore interest in overt political statements are more the exception than the norm. Clearly there is much more to say on the ‘Anonymous’ and ‘Chan’ phenomena but for now it is interesting to note this new factor in an all too familiar stand-off.

Communism or Lulz?

PDF’s of Insurgency Wiki relating to North Korea and 888Chan message board on the same subject.


Written by Roderick Jones

June 1, 2009 at 1:57 am

Posted in Anonymous, CyberWar

ISC report into 7/7 and Information Clouds

The Intelligence and Security Committee (ISC) in the UK was established by Parliament as part of the 1994 Intelligence Services Act to examine the work of the intelligence and security agencies in the UK.

The ISC was asked to review information, which emerged following the CREVICE trial in April 2007 that Mohammed Siddique KHAN and Shazad TANWEER (two of the four 7/7 bombers) had come to the attention of MI5 during the CREVICE operation. The question bluntly asked was, “If MI5 had come across Mohammed Siddique KHAN and Shazad TANWEER before, why didn’t they prevent this outrage?” Read the rest of this entry »

Written by Roderick Jones

May 19, 2009 at 1:53 am

Posted in CyberWar, Islamist, Terrorism

Tagged with , ,

Virtual Assassination as a Counterterrorism tool

As part of the virtualization of terrorism it is worth considering what, if any, terrorist tactics can be applied in this new paradigm. One tactic, which can probably transfer from the real world to cyber environments is assassination, or in this case virtual-assassination. The tactic of assassination has value for a number of reasons. It can remove competent or charismatic leadership, damage morale and as a side effect can force an increase in security. So how would all this work in cyberspace?  You can’t of course physically murder someone there. But by looking at what assassination actually achieves it is possible to formulate a scenario that has a similar cyberspace effect.  Read the rest of this entry »

Written by Roderick Jones

May 28, 2008 at 1:54 am

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