SIM REPORT: North America

issue 01, 20 September 2019

Canada: Senior police official with access to international intelligence arrested on espionage charges

The arrest of a senior police official who had access to international intelligence on espionage charges on 13 September has sent shockwaves through the Canadian civil service and allied intelligence communities. Cameron Ortis, who worked as director-general of the federal police force’s National Intelligence Coordination Centre, faces five charges under sections of the Security of Information Act, including one related to employees bound to secrecy by the nature of their work, and two charges under the Criminal Code. The allegations relate to Ortis’ activities between 2015 and 2019, however few details have been released as to these.

According to local reports, suspicion first emerged in March 2018 when an internal federal police document was found on a laptop belonging to Vincent Ramos, a Canadian businessman who was arrested and convicted in the US for his firm’s sale of encrypted phones to organised criminal groups. This led Canada’s federal police to turn their attention to Ortis in May 2019; police then secured a warrant to search his home. Ortis appeared in a court in Ottawa on 13 September, where his case was adjourned until 20 September for him to secure legal counsel.

In his role, Ortis had access to a wide range of intelligence, both from domestic and international sources. As a member of the Five Eyes intelligence alliance – alongside Australia, New Zealand, the UK and the US – Canadian intelligence services share intelligence with the other members of the alliance. The 47-year-old Ortis, who has worked for the federal government since 2007, according to his LinkedIn profile, would have had access to significant quantities of confidential material, possibly for up to 12 years, and particularly in his most recent position. Amid a lack of information on Ortis’ alleged activities, speculation has focused on his academic interests, including East Asian cybersecurity, and his purported knowledge of Mandarin Chinese.

Ortis’ arrest has significant consequences for Canada’s federal police and their relations with the country’s intelligence allies. If the allegations against Ortis are correct and sensitive intelligence was shared with a criminal organisation, or hostile state or non-state actors, this is likely to hurt ongoing intelligence operations and reveal classified information on Five Eyes members’ staff, operations, investigations and capabilities. Prime Minister Justin Trudeau has sought to reassure fellow members of the alliance, stating that Canada is working to reassure them and that it is ‘taking this situation very seriously’. The charges against Ortis, however, will lead to scrutiny of the federal police’s vetting and security clearance processes, and the alliance’s intelligence-sharing protocols. The development may also reduce the Canadian government and international allies’ appetite to provide intelligence to the federal police and among each other.

The case highlights the importance of information security, both in the public and private sectors. Organisations should ensure that all sensitive or propriety information is handled under strict data procedures which seek to minimise the risk of insider threat incidents, or data handling lapses. Companies should regularly review their vetting and data handling processes, which members of staff have access to sensitive information, and monitor for irregular movements of data.


United States: Workers at automotive giant strike over pay and working conditions dispute

On 16 September, workers at Detroit-based automotive giant General Motors (GM) represented by the United Auto Workers (UAW) union began a strike over a pay and working conditions dispute. Approximately 50,000 GM employees have taken part in the strike, which is disrupting operations at 33 manufacturing plants and 22 parts distribution warehouses across nine states. The strike, the first to be called by UAW since 2007, was organised to demand that workers receive higher wages, affordable quality healthcare, a share of company profits, and to protest against GM’s plan to close car assembly plants, including in the states of Ohio and Michigan.

The strike, which reportedly costs GM between USD50 and 100 million per day in lost output, will have a significant impact on the company’s profit margin if it lasts beyond several days. While the company has stressed that contract talks are ongoing, there is a considerable risk that the action may last into the week beginning 23 September. In turn, this could prompt shortages of popular vehicle models in showrooms, potentially leading to price hikes and a slowdown in vehicle sales, while disrupting operations at companies along GM’s supply chain.

While US car production recovered strongly from the 2008-09 financial crisis, during which output almost halved, after the US and Canadian governments bailed out major automakers with approximately USD85 billion of funding, it has steadily declined in the previous two years, despite President Donald Trump’s pledges to kickstart the country’s manufacturing industries. Trump, who has repeatedly pressured auto manufacturers to expand production in the US and threatened to place tariffs on imported vehicles, has mostly been unsuccessful in ‘reshoring’ the automotive industry to the US, which has been hit by US tariffs on steel that have increased manufacturers’ costs. Moreover, the global automotive industry is undergoing significant changes, most notably the transition from gasoline-powered vehicles to those which run on electric engines, and the rise of driverless vehicles. This shift particularly threatens established manufacturers such as GM, Ford, and Chrysler, whose decades-old business model and manufacturing processes must adapt in a rapidly evolving market. The need to free up funding for this transition led GM to announce 14,000 job losses across the US and Canada in November 2018, which soured relations with employees.

Despite the GM workers’ strike, the long-term prospects for the US automotive industry remain strong. US companies, such as Tesla and Uber, are at the forefront of innovation in electric and driverless vehicle technologies, while the favourable business climate and pro-innovation policies will attract continued investment in the sector. The manufacturing sector, however, faces a broad range of challenges, including growing automation of manufacturing processes and productivity challenges in an increasingly globalised industry. Companies whose supply chains are linked to GM should monitor developments related to the strike, assess the impact on operations, and adjust these accordingly.


United States: Mass shootings prompt corporates to limit arms, ammunition sales

On 31 August, seven people were killed and at least 20 wounded when a lone gunman, who had been stopped in his car by police, began shooting at passersby as he drove between the cities of Odessa and Midland, Texas. The assailant, 36-year-old Seth Aaron Ator, was later shot dead by police outside a cinema in Odessa. Local police confirmed that the assailant used an AR-type weapon purchased from a private seller, despite Ator previously failing gun background checks; purchases from private sellers do not require background checks. The gunman did not expressly state a motive for the killings; however, it is reported that he lost his job that morning.

The murders marked the third major mass shooting in the US in August. On 3 August, a lone gunman killed 22 people at a Walmart supermarket in El Paso, Texas, in an attack intentionally targeting members of the city’s Hispanic majority, while on 4 August, another lone gunman killed nine people and wounded 17 in an attack on a bar in Dayton, Ohio. The Gun Violence Archive, an online, not-for-profit organisation which records incidents of gun violence across the country, has recorded 303 mass shootings across the US in 2019; mass shootings are defined as shootings in which at least four people were injured or killed, excluding the attacker.

The spate of mass shootings, and the shocked reaction it sparked across the US, has prompted several corporates to impose restrictions on arms and ammunition sales. Walmart announced on 3 September that it will stop selling certain types of ammunition following shootings at its stores in El Paso and Southaven, Mississippi, and that it would cease handgun sales in Alaska, the only state where it sold such items. The decision followed a similar move by rival firm Dick’s Sporting Goods in late August, which ended sales of assault rifles. On 12 September, almost 150 CEOs from some of the country’s largest companies, including Twitter, Uber, and Airbnb, signed a letter to senators calling for them to approve enhanced background checks and strengthen laws which allow courts to seize the arms of certain individuals. 

Legislative efforts to toughen background checks have yet to pass either the Democrat-held House of Representatives or Republican-held Senate, and despite President Donald Trump’s calls for ‘meaningful’ background checks, the White House has yet to put forward proposals. Proposals which do pass the lower house, however, are likely to face strong resistance, both from the Senate and the president. 

The five-year average of mass shooting events has steadily increased since 2000, including under both Republican and Democrat administrations. Without legislation designed to restrict new gun sales, the prevalence of mass shootings is likely to remain high in the five- to ten-year outlook. Opponents of gun reform, who stress citizens’ rights to bear arms under the Second Amendment of the US constitution, are well organised; the National Rifle Organization, the country’s most prominent gun advocacy group, supports and funds numerous members of congress’ campaigns, from both the Republican and Democratic parties. The corporate decisions to halt the sales of weapons, and growing civil society calls for restrictions, are more likely to be successful in producing gun control than congressional or presidential initiatives; the likelihood of reform appears small, however, as no movement appears to have the necessary support to shift lawmakers views.   


CORRUPTION RISK

UNITED STATES

22 August 2019

US fines Deutsche Bank $16 million to settle China, Russia corruption charges

Deutsche Bank has agreed to pay more than USD16 million to settle charges that it violated US corruption laws by hiring relatives of foreign government officials in order to win or retain business, the US regulator said in a statement.

Source: Reuters

A2 Global comments: The fine came after the US Securities and Exchange Commission (SEC) alleged that Deutsche Bank had violated the Foreign Corrupt Practices Act. The fine highlights the corruption risks faced by corporates who operate in the US and overseas, and whose human resources and broader business practices may vary according to jurisdiction. Companies which operate in the US should ensure that global operations comply with US and other countries’ international anti-corruption legislation, such as France’s SAPIN II.

 

POLITICAL RISK

CANADA

19 September 2019

Justin Trudeau brownface: Canada PM apologises after image emerges

Justin Trudeau has apologised for wearing brownface makeup to a party when he was a teacher in 2001, saying “it was a racist thing to do” – and marking a potential turning point in next month’s tightly contested general election.

Source: The Guardian

A2 Global comments: The brownface scandal has led to uproar both within Canada and overseas, and is likely to damage Trudeau and his Liberal Party’s prospects in the upcoming October 2019 election, which was already set to be a narrowly-contested race. This increases the likelihood of the Conservative Party of Canada and its leader Andrew Scheer forming the next government, either as a majority administration or as the main party in a coalition government.

CANADA

26 August 2019

Anti-immigration billboards across Canada taken down after backlash

Anti-immigrant ads on billboards across Canada are being taken down after a public outcry and multiple petitions against them, the company that owns the billboards said. The ads were launched in support of Maxime Bernier, leader of the small right-wing anti-immigration People’s Party of Canada, and called for a halt on mass immigration to Canada. They started appearing in several Canadian cities last week and were bought by True North Strong and Free Advertising Corp (TNSFAC).

Source: Reuters

A2 Global comments: The majority of Canada’s population is of immigrant descent. In the 2016 census, approximately one million people identified themselves as members of Canada’s First Nations from the total population of around 35 million people. The billboards, and calls for their removal, signal an increasingly polarised political climate ahead of the October 2019 federal election. Businesses operating in Canada’s advertising and publicity sectors should review the contents of political campaign material for xenophobic or discriminatory content prior to entering into contracts with parties and political movements.

UNITED STATES

18 September 2019

Robert O'Brien: Trump names new national security adviser

US President Donald Trump has named a new national security adviser to replace John Bolton. Robert O'Brien has had a long career in foreign policy working for both main US parties and currently heads hostage negotiations at the State Department.

Source: BBC News

A2 Global comments: O’Brien’s appointment signals a shift away from the US’s confrontational approach to its adversaries which marked Bolton’s tenure as national security adviser. In turn, this is likely to lead the US to adopt more conciliatory positions on the most important geopolitical and security matters, particularly regarding its approach to Iran. While the Trump administration will continue to pursue its so-called ‘Americas First’ agenda, O’Brien’s hiring increases the likelihood of political solutions to disputes with countries including Venezuela, Afghanistan, and North Korea.

UNITED STATES

18 September 2019

US Fed cuts interest rates for second time since 2008

The US central bank has cut interest rates for only the second time since 2008, amid concerns about slowing global growth and trade wars. As expected, the Federal Reserve lowered the target range for its key interest rate by 25 basis points to between 1.75% and 2%.

Source: BBC News

A2 Global comments: The Fed’s decision highlights the bank’s concern over the US economy’s prospects for growth, and follows calls from President Donald Trump to slash rates to stimulate economic activity. The move, however, was not unanimous – two of the ten committee members wanted to keep the interest rate as it was, while one member wanted to cut it further. While the decision will incentivise economic activity in the short- and medium-terms by decreasing the cost of borrowing and reducing interest paid on savings, it erodes the monetary policy options available to counter the country’s next economic downturn.

UNITED STATES

4 September 2019

San Francisco council calls NRA 'domestic terrorist organisation'

The San Francisco city government has formally labelled the pro-gun lobbyist National Rifle Association (NRA) a "domestic terrorist organisation".

Source: BBC News

A2 Global comments: The bill, passed by the Democrat-dominated San Francisco Board of Supervisors, urges the city and San Francisco county to review their relationships with firms which do business with the NRA. San Francisco, like other major cities in California, is significantly more liberal than other parts of the country, where such a designation would be inconceivable. Companies which operate in major Californian cities and have links to pro-gun advocacy organisations should assess the potential of similar moves on their operations, and consider adjusting policies and partnerships accordingly.

UNITED STATES

2 September 2019

Ku Klux Klan donation account suspended by PayPal

PayPal suspended an account used to raise funds by one of the US's largest white supremacist groups six days after it was first flagged by an anti-bigotry campaigner. The Loyal White Knights of the Ku Klux Klan had promoted the account via a donation page on its website. PayPal acted on Friday after others picked up on the issue and urged it to block the recipient.

Source: BBC News

A2 Global comments: PayPal’s suspension of the account follows moves by numerous online platforms, including social media websites, to limit the online operations of racist and hate groups, and extremist political organisations. The company, however, has been criticised for not removing the account more quickly. Businesses which own platforms on which users create and upload content, should ensure that violations of codes of conduct are addressed swiftly once they are discovered, including through the suspension or banning of accounts or members.

 

HEALTH RISK

UNITED STATES

6 September 2019

US health officials urge people to stop vaping as third death reported

US health officials warned people not to vape until they determine the cause of a severe respiratory illness, which has killed at least three people and hospitalized many more.

Source: The Guardian

A2 Global comments: Vaping – or the use of electronic cigarettes – has become increasingly popular across the world in the past five years. In the US, President Donald Trump’s administration has called for flavoured e-cigarettes to be banned, however in the UK, public health authorities recommend that smokers switch to vaping, which is seen as a less damaging option for their health. Staff who use e-cigarettes should ensure such use complies with local laws and regulations.

 

 TRAVEL RISK

UNITED STATES

21 August 2019

A US airport is the latest place to ban plastic water bottles

On Tuesday (20 August), the San Francisco International Airport (SFO) started banning plastic water bottles smaller than one liter from being sold at concession stands, lounges, restaurants, or vending machines.

Source: Vox

A2 Global comments: The measure seeks to reduce travellers use of plastics, in a move towards becoming a zero-waste hub by 2021. Business travellers using SFO should ensure they comply with the measure, and anticipate the introduction of similar bans at airports across the US in the one-year outlook.

 

SECURITY RISK

UNITED STATES

18 September 2019

U.S. Seeks Tighter Security Reviews of Foreign Tech Investments

The Trump administration proposed new regulations on Tuesday (17 September) to toughen national-security reviews of foreign investments in US companies involved in technology and infrastructure.

Source: Bloomberg

A2 Global comments: The regulations, which form part of a broader US government push to protect US technology and intellectual property, do not target any particular country. The US has previously expressed concern about adversaries, particularly China, taking control of leading US companies in the security, technology, and defence industries.


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