eRussia. Bad reputation, leading edge attainment

Nikolai Patrushev is the secretary of the Russian Federation Security Council. At the Moscow Conference on International Security in June he said that over 120,000 cyber attacks were carried out on Russia’s critical infrastructure in 2020. While most of these were internal a significant number of them originated in the US, Germany and the Netherlands. Well before the Putin-Biden summit, Patrushev was calling for international cooperation against cybercrime. On 31 May 2021, in an interview with the Russian state newspaper Russia Gazette, he said ‘Russia calls for boosting international cooperation for the sake of forming a global legal system that would ensure the safe and equal use of information and communication technologies’. He also pointed out that on 12 May 45,000 ransom where cyber attacks were carried out worldwide including on Russian mobile phone companies, banks and the railways.’

The apparent oblivion by the US authorities to the massive level of cybercrime originating on Russian servers but not necessarily originating with Russian actors does call into question the effectiveness of American government spending on cyber security. The US media describing every cyber problem that comes out of Russia as an intervention personally ordered by President Putin gets in the way of the truth and useful solutions to the problems.

It doesn’t have to be this way. Let me tell you the story Andy Crocker told me. When Tony Blair was Prime Minister of the United Kingdom, William Hill, a chain of betting shops was threatened with Distributed Denial of Services attacks on Grand National Day, today of maximum spend on betting in the UK. Blair had set up a special police unit, the National Hi-Tech Crime Unit to make the UK an attractive location for IT companies. The Scotland Yard detective Andy Crocker was put on the case. After a diversion to Costa Rica, the trail led to Russia. With the active cooperation of the Russian Police, Crocker gathered evidence and tracked down the Russian technician responsible for the details of the attack. A prosecution was brought and the perpetrators sentenced. This was and is the only example of such cooperation. Andy’s story is featured in the book Fatal System Error.

Why has there been such failure since? There is a large and formidable industry dedicated to spreading negative propaganda about President Putin and Russia. It is inescapable that Russia invaded Georgia and Ukraine but then Turkey occupies Cyprus, Indonesia occupies Irian Jaya, China occupies various territories. The negative propaganda about Russia is put about by tax evaders, tax avoiders, fraudsters, murder suspects and other survivors of the Yeltsin era who have fled to the West. Such people have spent a great deal of money ensuring all spin about Putin is negative. Add to these the insecurities of the smaller countries on Russia’s western and southern fringes who are concerned both about Putin and Russia. This damages efforts to get to the reality in terms of national security, crime, trade and investment.

It is particularly important to note the degree to which electronic systems are now used in everyday life in Russia, particularly in government administration. Russia is perhaps the leading large economy in going digital with government systems and is not far behind Estonia for countries of any size.

Cyber Government in Russia

The first country in the world that I was able to use contactless cards was Russia. Russia is very much e-aware. In particular, the Russian government is taking a world lead amongst large countries in electronic processes. e-registration to set up a business is long in place. Russia’s anonymized and automated state tendering processes are a model of good practice also used by utilities and major state owned companies leading to a huge fall in corruption.

Alcohol distribution is now tightly controlled by an excise labelling process. Labelling of consumer goods with QR goods to detect authenticity of brands and compliance with quality standards is being rolled out sector by sector.

Tax submission has been simplified.  It used to be that filing taxes every month meant visiting 3 or 4 separate offices across the city and having documents stamped at each. No more. Everything is online.

The reorganization of VAT in particular has been spectacular. No Russian firm now submits a VAT form. All invoice generating software and cash tills are connected to a central database which instantly records the transaction and the VAT due to be paid or refunded (slowly). This has huge knock-on effects. The Russian government can see the performance of the economy minute by minute, sector by sector. Corporate tax filings can be easily checked. VAT fraud has fallen from about 20% to less than 1%. For comparison, in the UK the fraud rate is about 9%. Mishustin’s success has led to other tax related projects such as

  • a land registry to ensure all owners liable to pay Land Taxes can be traced.
  • a forestry registry to reduce illegal logging

Most ministries now have registries of key regulations, licences issued in their operating sector and other necessary information.

The goal is to have at least 90% of business and personal interactions with government administration done electronically with early focus on tax collection and social improvement. This month, the agenda for the Cabinet meeting will include discussions on such processes as

  • applying for a nursery school place for a child
  • applying for a passport
  • applying for care for a sick relative

Note, this is about the process, not the policy. Russia has chosen an unusual focus for a Central Government by prioritizing processes and is making huge strides picking the low hanging fruit.

It is not just the government sector. The Russian private sector has been at the leading edge of some world developments in e-access. For example, Russian ATMs accept cash payments for a wide range of services for the unbanked. Russian banks were early to offer cell phone (not smart phone) based banking services. Russia expects the use of plastic cards to disappear by 2025 as Russian consumers switch to payment methods based entirely on smartphones using locally developed software.

Russia is a place to explore the latest in e-Processes that might affect your business in the future elsewhere in the world.

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