"Hmm...we may not be watching the latest Game of Thrones episode tonight, dear."

Strictly out of [ahem] professional curiosity, I have covered official efforts to crack down on torrent sites distributing copyrighted material for "free," to the outrage of their respective copyright holders. With the most remunerative activities going into intellectual property--and the wealthiest countries being the largest producers of IP--efforts to enforce IP laws will always be there. Most major torrent sites have been harassed or shut down at one point or another--among other: Isohunt, the Pirate Bay, Demonoid, and so on. Despite having their servers located elsewhere in the world, the long arm of US law eventually got around to enveloping them.

For the longest time, however, Kickass Torrents had somehow eluded this fate. Last week, however, the inevitable happened as it too was shut down:

With millions of unique visitors per day KickassTorrents (KAT) has become the most-used torrent site on the Internet, beating even The Pirate Bay. Today, however, the site has run into a significant roadblock after U.S. authorities announced the arrest of the site’s alleged owner. The 30-year-old Artem Vaulin, from Ukraine, was arrested today in Poland from where the United States has requested his extradition.

In a criminal complaint filed in U.S. District Court in Chicago, the alleged owner is charged with conspiracy to commit criminal copyright infringement, conspiracy to commit money laundering, and two counts of criminal copyright infringement.

The snitch was Apple:

The complaint further reveals that the feds posed as an advertiser, which revealed a bank account associated with the site. It also shows that Apple handed over personal details of Vaulin after the investigator cross-referenced an IP-address used for an iTunes transaction with an IP-address that was used to login to KAT’s Facebook account.

“Records provided by Apple showed that tirm@me.com conducted an iTunes transaction using IP Address 109.86.226.203 on or about July 31, 2015. The same IP Address was used on the same day to login into the KAT Facebook,” the complaint reads.

In addition to the arrest in Poland, the court also granted the seizure of a bank account associated with KickassTorrents, as well as several of the site’s domain names. Commenting on the announcement, Assistant Attorney General Caldwell said that KickassTorrents helped to distribute over $1 billion in pirated files. “Vaulin is charged with running today’s most visited illegal file-sharing website, responsible for unlawfully distributing well over $1 billion of copyrighted materials.”

Actually, it is remarkable that it took so long to shut down this torrent tracker, which maintained servers in the US of all places. That's something that not even the Pirate Bay was dumb enough to do:

Perhaps most tellingly, in the first instance KAT failed to learn from the ‘mistakes’ made by Megaupload. While the cases are somewhat dissimilar, both entities chose to have a US presence for at least some of their servers. This allowed US authorities to get involved. Not a great start.

“[Since 2008], KAT has relied on a network of computer servers around the world to operate, including computer servers located in Chicago, Illinois,” the complaint against the site reads. The Chicago server weren’t trivial either. “According to a reverse DNS search conducted by the hosting company on or about May 5, 2015, that server was the mail client ‘mail.kat.ph’.” Torrent site mail servers. In the United States. What could go possibly go wrong?

So, does the Kickass Torrents story end here? Actually, mirror sites have begun popping up all over the place already:

Shortly after KAT went offline dozens of people began promoting mirrors and copies of the site. Some are just trying to keep lost files accessible, but there’s also a group trying to take over the brand, similar to the efforts seen following YIFY’s demise.

For example, the operator of Kickass.la sent an email to several reporters promoting a new KAT address. In a follow-up, we were told that the site is an “official backup,” and that a copy of the database is in their possession. However, the site appears to be little more than a partial copy and the person behind it later admitted that they are not related to KAT.

Only adding to the confusion are the many other copies and alternatives claiming to be the official resurrection of KAT. Some even advertise themselves as such, but most have been available for a longer time as proxy/mirror sites.

Kickasstorrents.to, for example, has been around for a long time, hosting cached pages of the original site. The latter is also true for others, such as Dxtorrent.com. But in any case, there is no true backup with freshly added content available.

Another mirror that has been widely discussed is kickasstorrents.website (which is NOT a project of Isohunt.to, as some reports suggest). Unlike others, the people behind this site are very clear about the fact that they are not related to the original KAT team. Their copy currently lists torrent files from the past one and a half years, but like other mirrors it doesn’t have a working forum or upload functionality.

As with narcotics enforcement, my belief is that torrent sites will not go away for as long as there is demand for their, ah, warez. Just as dozens of mirror sites for Kickass Torrents have sprouted up, there is much additional evidence that torrent sites simply don't die. The Pirate Bay is up and running again is a slightly different guise. Demonoid is back too, this time with a Palau domain [!]

Old torrent sites don't die; they just reappear elsewhere after a while when the Feds' attention has moved on it seems.

Counterfeiting crime in China doesn't pay...or at least that's what they'd like to portray.

Chinese officialdom's reaction to the PRC's image as a manufacturer of copycat products--knock-offs, fakeries, and so forth--has been consistent. That is to say, it publicly discourages the manufacture of such items. Aside from making China vulnerable to copyright and trademark infringement suits, it does not do the national image any favors. You can of course argue that these same authorities have actually been loath to crack down on the manufacture and sale of such fakeries insofar as they remain a source of livelihood for some citizens, but the official line is that they are unwelcome.

How unwelcome? Visiting the China Daily recently reminded me that they have an entire section dedicated to the "fight against counterfeit goods":

China has been the manufacturing powerhouse for some decades. By capturing 22 percent of the global manufacturing market, the country makes and sells everything from needles to cars.

But industrial-scale production has also created some problems. Companies looking to make a quick buck have taken to making counterfeit products. To crack down on this practice that not only hurts consumers, but also the country’s trade, the government has stepped up its drive to reform legal infrastructure and amend copyright, patent and trademark laws.

Aside from stories of enforcement--or better yet, the difficulties of enforcement when there are admittedly a lot of counterfeits still being made in China--others of interest include those of former fake makers going legit. For instance, see this one on motorcycle parts:

When Yu Guoping came to Guangzhou two decades ago, he dreamed nothing more than just selling bunches of Chinese motorcycle accessories to businessmen from home and abroad. He didn't really care which brand he was selling or whether the quality deserved the price, as long as he made as much money as he could to feed and clothe and shelter himself in the emerging southern city.

"The market was largely unchecked back in those days when counterfeit and low-quality goods were rife," said Yu, admitting that prices trumped all when selling Chinese products without the protection of intellectual property rights. However, profits lure competitors, which then squeezes profits. Yu had to find another way to keep his business from continued slowdown and survive highs and lows of trade. 

There inevitably comes the "aha" moment:

He established his own brand, with the trademark of YGP, in 2008, targeting mainly African countries. "Promoting a new brand is like raising your own baby. It may be tough at first, but the boy will become strong and stand out if given time and efforts," said Yu. "You don't have much leeway of pricing if you keep selling other companies' products."

The neat thing about official sources is that they seldom deviate from the state-promoted line regardless of their veracity, and it's no different here.

Any which way but lose [sic]: Time to get the @#$% out of Dalian.

Here's another no-win situation China confronts: Until a few years ago, people used to try and evade the PRC's capital controls on inflows since the rise in the yuan's value was more or less guaranteed due to external pressures to revalue and the upward trajectory of Chinese growth. Nowadays, you still have the capital controls, but expectations for the currency are different--competitive devaluation as its economy slows down resulting in massive capital outflows.

What to do? PRC citizens are now engaged in a cat-and-mouse game with officialdom on how to best smuggle money out of the country. After all, why hold your cash in yuan when it's a surefire money loser so to speak? With limits to how much yuan you can convert in the mainland, the only way is out if you want to preserve value. Just recently, authorities busted an underground bank that illustrates the scale of these activities: try $64B worth of foreign exchange transactions. That's pretty big even by PRC standards:

China said it cracked the nation’s biggest “underground bank,” which handled 410 billion yuan ($64 billion) of illegal foreign-exchange transactions, as the authorities try to combat corruption and rein in capital outflows that have hit records this year.

More than 370 people have been arrested or face lawsuits or other punishment in the case centered in eastern Zhejiang province, the official People’s Daily reported on Friday, citing police officials. The case brought the total for underground banking and money-laundering activities to 800 billion yuan since April, the newspaper said.

The probe began in September last year and the police took almost a year to sort through more than 1.3 million suspicious transactions, the state-run Xinhua News Agency reported separately. The authorities froze more than 3,000 bank accounts, Xinhua said.

Let's just say the regulators don't have the upper hand here:

The case highlights the nation’s struggle to control capital outflows that have helped to send real-estate prices soaring from Vancouver to Sydney -- even when Chinese citizens are officially limited to converting $50,000 of yuan per year. Some people may be moving the proceeds of corruption, while others may be concerned about the outlook for the economy and the potential for the yuan to weaken.

“The government wants to stem outflows and stabilize the yuan’s exchange rate, but the outflows cannot be stopped unless people change their expectation on yuan depreciation,” said Xi Junyang, a finance professor at Shanghai University of Finance & Economics. Besides illegal banking operations, “a lot of money is leaving the country by legal means,” Xi said.

China’s capital outflows may have climbed to a record $194 billion in September before cooling to $62 billion in October, according to a Bloomberg gauge which also takes into account decisions by exporters and direct investment recipients to hold funds in dollars.

Like in drug smuggling, mainlanders are also using many small transactions to move cash around:

The tactics used by Chinese citizens to defeat the controls include so-called smurfing, where large sums are moved by breaking them down into a series of smaller transfers using the bank accounts and foreign-exchange quotas of a range of individuals.

In the Zhejiang case, a suspect identified as Zhao Mouyi used a different method, setting up more than 10 companies in Hong Kong from 2013 and transferring more than 100 billion yuan through so-called non-resident accounts, which are used by offshore companies in China when they are transferring money abroad, according to the newspaper’s report.

Taking advantage of a “loophole” relating to non-resident accounts -- which has since been filled by banks -- Zhao circumvented the capital controls by directly transferring yuan overseas and then exchanged the money into foreign currencies at banks including HSBC Holdings Plc in Hong Kong, the People’s Daily said. Zhao then allegedly transferred it to his clients’ accounts, the report said, citing the local police.

Times have changed, dear. Instead of foreigners trying all sorts of ways to get money into China, nowadays residents are trying all sorts of ways to get money out of China.

Hong Kong's roaring trade in illicit cigarettes is largely of its own making.

As far as I can remember, the violent, crime-ridden mean streets of Hong Kong portrayed in Bruce Lee movies (or even the Sleeping Dogs video game) have never really existed. During British rule, the excellent police force was able to keep gang members in line and confined to activities that posed minimal physical threat to citizens. During Chinese rule, things have remained largely the same. However, things have taken a turn towards Bruce Lee movieland in recent years. With the Hong Kong government taxing the bejesus out of cigarettes, its smokers have turned more and more to illicit sources. An industry-sponsored study (with the caveats that entails) points out that a quarter of all cigarettes now sold there are considered contraband goods:

One in every four cigarettes smoked in Hong Kong last year was illicit, costing the government HK$2.5 billion lost in tax revenues, according to study released on Wednesday. The “Asia-16” study, conducted by UK-based Oxford Economics and funded by tobacco giant Philip Morris, shows 1.3 billion, or 28 per cent, of cigarettes consumed were illicit. Despite a 5.6 per cent point drop compared to 2013, Hong Kong ranks fourth in illicit cigarette trading out of 16 Asia-Pacific markets studied, behind Brunei, Macau, and Malaysia.

Adrian Cooper, chief executive officer of Oxford Economics, said the city had a “significant problem” with illicit cigarettes. “[It’s] driven in part by the substantial retail price gaps with neighbouring countries that were exacerbated by tax rises in 2009 and 2011,” he said, adding that the price difference created a huge incentive for cross-border trade of cigarettes.

According to the report, the price of the most-sold brand in Hong Kong last year was US$7.1 per pack of 20, significantly higher than US$1.1 in China, US$3.8 in Macau, and US$3.0 in Taiwan. In 2014, excise taxes were raised by 11.7 per cent, which brought up the retail price of the most-sold brand by 10 per cent. 

$7.1 per pack! Is it any wonder that gangs are thriving in such an environment. It's not quite Al Capone during the prohibition since cigarettes are still being sold--albeit at an exorbitant price--but you can see the parallels for black markets to operate:

Concern groups called for stronger action against organised smuggling gangs and syndicates. “Hong Kong’s serious illicit tobacco problem is dominated by cross-border organised crime groups that use the proceeds to finance other criminal activities,” said Jeff Herbert, adviser to the advocacy organisation Hong Kong United Against Illicit Trade (HKUAIT) and a former senior superintendent with the Hong Kong police force. “[The government] needs to get a lot tougher with such organised crime syndicates.”

Herbert suggested three main solutions: use the Organised and Serious Crimes Ordinance as an effective means to seek heavier penalties, freeze assets of organised criminals, and confiscate their crime proceeds; run more public education campaigns; and introduce a balanced excise policy with regular but moderate tax increases in pace with inflation. Herbert also warned against excessive tax increases as he believed that would only push more smokers to consume illicit cigarettes.

Hong Kong is not a "closed" economy wherein the government can tax smokers as much as it wishes. There will be other, illegal sources for those looking for a cheaper nicotine fix. In this case, there is a balance to be struck between public health and crime control that the territory isn't quite finding yet.

Like selling relics, ISIS funds itself by selling energy supplies.

Here's another terminology-stretching exercise for you to contemplate: Despite virtually no nation-state recognizing the so-called "Islamic State in Iraq and Syria," ISIS designates itself as such. ISIS knows Westphalia. Unbeknownst to many, that ISIS occupies considerable amounts of "Iraqi" and "Syrian" territory has resulted in an uneasy bargain between the Assad regime and the ISIS forces that occupy gas-producing regions:

Isis and the Assad regime remain battleground enemies, but on Syria’s gasfields the need for electricity has forced them into a Faustian bargain. Gas supplies 90 per cent of Syria’s power grid, on which Isis and the Assad regime depend. Isis controls at least eight power plants in Syria, including three hydroelectric facilities and the country’s largest gas plant. The regime has companies that know how to run them. 

Syrian activists and western officials have long accused the regime of making secret oil deals with Isis, which controls nearly all of Syria’s petroleum-producing east. But an FT investigation shows co-operation is strongest over the gas that generates Syria’s electricity. Interviews with over a dozen Syrian energy employees have revealed agreements that are less about cash than about services — something they may find more valuable than money.

The business deals do not translate into a truce. The two sides continually attack one another’s employees and infrastructure. The regime points to these clashes as proof that such understandings do not exist. In a written statement, Syria’s Ministry of Oil and Natural Resources said: “There is no co-ordination with the terrorist groups regarding this matter.” But it acknowledged some of its employees work under Isis “for the sake of preserving the security and safety of these facilities”.

But others describe the fighting as part of a struggle for better terms, where neither seeks to destroy the other. “Think of it as tactical manoeuvres to improve leverage,” said the owner of one Syrian energy company, who met the FT but asked not to be named. “This is 1920s Chicago mafia-style negotiation. You kill and fight to influence the deal, but the deal doesn’t end.”

So Assad's regime and ISIS are literally out to kill each other, but death doesn't undo the deals made for a continued supply of energy from ISIS-controlled territory. What's more, ISIS is not only a self-styled state, but supposedly has its own HR department [!] recruiting energy sector workers. This is in keeping with the post's titular idea about state-owned enterprises. To be a legitimate state in their part of the world, ISIS must not only be a state but also have a national oil corporation (NOC):

Isis’ strategy has rested on projecting the image of a state in the making, and it is attempting to run its oil industry by mimicking the ways of national oil corporations. According to Syrians who say Isis tried to recruit them, the group headhunts engineers, offering competitive salaries to those with the requisite experience, and encourages prospective employees to apply to its human resources department.

A roving committee of its specialists checks up on fields, monitors production and interviews workers about operations. It also appoints Isis members who have worked at oil companies in Saudi Arabia or elsewhere in the Middle East as “emirs”, or princes, to run its most important facilities, say traders who buy Isis oil and engineers who have worked at Isis-controlled fields.

Occupying energy-rich regions was a deliberate part of ISIS strategy for obtaining a continued flow of funds for its operations. Let's just say though that corporate governance matters pertaining to employee treatment are...somewhat different from what we expect from modern corporations;

The pawns in this deadly game are employees of state-run energy companies and the private groups they contract. Instead of worrying over valves and pipelines, Ahmed spent much of his time at Tuweinan parsing a high-stakes mind game with his militant overseers. They beat workers regularly, and even killed one in front of his colleagues. “The worst part is knowing that once you’re there, you belong to no one,” he said. “To both the regime and to Isis, you become untrustworthy.”

Instead of being fired after offending your employers, you pay with your life with ISIS. If you're still curious, the FT also has a map showing where the oil goes for its most importance source of revenue.

The Pirate Bay folks go to jail; the site went to the big cloud server in the sky.

In the interest of, ahem, academic research, I've noticed that what was once one of the world's largest torrent sites has been inoperational for two weeks now. The Pirate Bay, we hardly knew ye. Whatever your views are of torrent sites, it is always interesting to follow the cat-and-mouse game between the authorities--usually Western trade or intellectual property agencies acting on behalf of copyright holders--and the torrent sites. So the Pirate Bay is (was?) one of the largest torrent trackers. That said, there are literally dozens more out there which feature largely the same content. Why is it, then, that the Pirate Bay has succumbed rather easily? After all, aren't the Swedes a bunch of libertarian, Julian Assange-loving folks?

On 9 December, Swedish authorities mounted a rather large raid on the Pirate Bay's facilities:

However, over in Sweden authorities have just confirmed that local police carried out a raid in Stockholm this morning as part of an operation to protect intellectual property. “There has been a crackdown on a server room in Greater Stockholm. This is in connection with violations of copyright law,” read a statement from Paul Pintér, police national coordinator for IP enforcement. Police are staying quiet on the exact location of the operation and the targets involved but the fact that the national police IP chief is involved at this early stage suggests something sizable.

In addition, expert file-sharing case prosecutor Fredrik Ingblad has commented on the raid, further adding weight to the incident. “There were a number of police officers and digital forensics experts there. This took place during the morning and continued until this afternoon. Several servers and computers were seized, but I cannot say exactly how many,” Ingblad told SR.

Some news from a few months back suggested the Pirate Bay acquired a greater degree of insulation from the authorities by migrating to cloud servers. Obviously, we now know that was not really the case. There has been a fairly large international dragnet to detain those affiliated with the Pirate Bay over the past few years. In terms of scale and scope, it strikes me as the cyber-equivalent of the Israeli intelligence agency Mossad tracking down and terminating every Palestinian believed to be with the Black September group that kidnapped Israeli athletes during the 1972 Munich Olympics, but I digress...

One by one the key players behind The Pirate Bay have been captured by police and forced to complete jail sentences previously determined by Swedish authorities. The most recently detained was Fredrik Neij, a key player in the operations of The Pirate Bay right from the very early days of the site.

After realizing that his fate in Sweden involved a 10 month jail sentence, Neij fled to Laos in Asia where he lived until recently with this young family. He traveled from Laos into bordering Thailand on many occasions but last month his luck ran out. On November 4, immigration police announced that Neij had been detained while crossing the border into Nong Khai, a city in North-East Thailand. What followed was a very public press conference in which a bewildered looking Neij was paraded before the media while flanked by several officers.

To no one's real surprise, the powers-that-be that have instigated, ah, tracking down the nefarious (or heroic depending on your point of view) TPB folks were major US media conglomerates:

But while the rest of the world had to wait until November 4 to hear the news, leaked emails obtained by TorrentFreak show that the Hollywood studios knew about things well in advance. In an email dated the day before Neij’s arrest was made public, the MPAA advised chiefs at Disney, Paramount, Sony, Warner Bros, NBC Universal and FOX of the Swede’s arrest. But things went deeper than that.

Already there had been rumors in Thai media that “U.S. movie companies” had hired a law firm to track down Neij and that a house on the island of Phuket plus a bank account containing five million baht ($153,000) had been discovered. Emails seen by TF confirm the MPAA’s involvement, but also that they didn’t want that noticed in public.

What are the lessons for torrent sites here based on the Pirate Bay's example? I think the most obvious one is that having servers located in the West is just plain stupid. Even in Sweden where they are relatively relaxed about IP and copyright--Swedes are generally laid-back people--American pressure likely resulted in the major action against the Pirate Bay's facilities. Kickass Torrents with its Somali domain notwithstanding, moving one's top-level domain (TLD) to exotic places like Sint Maarten or Ascension Island doesn't seem to help that much.

Since the Pirate Bay episode has put into question the ruse of moving to a "cloud server," I guess two possibilities remain: First, you can try to hide the location of these servers as best as you can. Witness the private tracker site Demonoid being resurrected when I thought it had bitten the dust a few years ago. True, activity hasn't been what it was before the long closure, but hey, it's still there and that counts for something. Second, you can base your servers where the long arm of American law can't reach you. Given Russia's "New Cold War" with the West, the irony of it all is that sites like Rutracker.org with much of its tracked content being served up to foreigners will have staying power. Sure you may be hit by the odd Ukranian DDOS attack, but those things usually blow over quite quickly.

Make no mistake: even in the so-called "digital age," there is no "death of distance" as geography still matters--for torrent sites, at least.

Psst...got the latest episode of Doctor Who?

One of the more curious things that software copyright holders have to deal with is the global public's willingness to "steal" intellectual property despite being quite averse to stealing tangible (read: manufactured) goods. Why do folks show little guilt about the former but more with the latter? Are punishments for physical theft worse, is there a social taboo to such acts, or both? That such attitudes are widespread in the largest of consumer markets in the developing world may not be all that encouraging to software firms.

As a scholar of Internet governance and intellectual property, torrent sites have been a recurrent source of fascination for me [1, 2, 3]. Out of curiosity, the latest evolution I noticed was of the widely-known torrent site Kickass Torrents moving its top-level domain once again. What's .so? I looked it up and, to my unvarnished delight, it stands for Somalia. It is of course perfectly reasonable to say that there isn't really a country of "Somalia" but three contested regions of Somaliland, Puntland and Somalia. It's a failed state, after all. No matter; in cyberspace, there is such a (virtual) place:

With millions of unique visitors per day KickassTorrents (KAT) is one of the most used torrent sites. In recent months it has even rivaled The Pirate Bay in terms of traffic. Over the years KAT has moved from domain to domain on a few occasions, to evade law enforcement and pressure from the entertainment industries. Most recently the site had been operating from the Kickass.to domain. Starting today however, the site is serving its pages from the Somalian TLD Kickass.so.

In a game of cat and mouse, Kickass regularly rotates its top-level domain to avoid restrictions and censors. Recently Google began screening its search results more thoroughly. Therefore, Torrent Freak suspects this change is a way of temporarily avoiding Google's dragnet--until it catches up with the move at least:

“We are moving to kickass.so now. As you know we change our domain regularly. Nothing more has been changed for you, so don’t worry, you can use Kickass as usually, it’s automatically redirected,” the KAT team writes. Intended or not, the domain change will have some consequences on the anti-piracy front. For example, the site will become accessible again in most countries where it has been blocked previously.

In addition all the URLs that were blocked by Google through DMCA notices, more than 1.6 million, will become accessible again under the new domain. This also means that Google’s new downranking algorithm will be bypassed, at least temporarily. In recent weeks KAT has lost a significant amount of traffic due to Google’s new anti-piracy measure, so intended or not, that may be an extra incentive to keep the yearly domain rotations going.

The other obviously fascinating thing about Somalia is that it's been a haven for real-life maritime pirates during the past few years. Even if such piracy has been declining as of late, it's still got a reputation as a pirate's den. In either case--for software pirates or maritime pirates--the impetus for choosing Somalia in its virtual or not-so-virtual iterations is exactly the same: there are no real "authorities" to speak of policing cyberspace or lawless regions of a failed state.

A Reuters news article points us to a new study from Global Financial Integrity (GFI) on the level of illicit outflows from Brazil. GFI has produced reports for several other developing countries, but Brazil is of particular importance as a Latin American bellwether. Given the uncertainties surrounding developing countries in this region, questionable capital flows are of some interest:

The Brazilian economy lost at least US$401.6 billion in illicit financial outflows from 1960 to 2012. These outflows represent the proceeds of crime, corruption, and tax evasion, and have serious negative consequences for Brazil. Outflows were found to drain resources from the Brazilian economy, to drive the underground economy, and to exacerbate inequality.

Furthermore, the report found that illicit outflows are growing.  Annual average illicit outflows increased from US$310 million in the 1960s to US$14.7 billion in the first decade of the twenty first century before jumping to US$33.7 billion over the last three years of the study, 2010-2012.  On average, Brazil’s illicit outflows are equivalent to 1.5% of the country’s official GDP.

What I find curious with this and other GFI studies is that most outflows are attributed to trade misinvoicing. That is, the value of imports or exports is misreported by under- or over-invoicing their value. Through this channel money flows overseas since it is a way to work around foreign exchange and capital controls:

Trade misinvoicing is the major conduit of illicit financial flows from Brazil.  The report reveals that the vast majority of Brazil’s illicit outflows—92.7%, or US$372.3 billion of the US$401.6 billion in total outflows—were channeled through the misinvoicing of trade transactions. The remaining US$29.4 billion in the illicit outflows detected by GFI occurred via hot money outflows, such as unrecorded wire transfers.

What I am more convinced of is that inequality relates to the amount of these capital outflows:

We also examined the link between economic growth, income inequality, and capital flight. While the lack of an unbroken series on the Gini coefficient prevented its inclusion in our model, regression analysis with a shorter time period (1970-2011) showed that worsening income inequality also seems to drive capital flight, although the relationship is only significant at the 90 percent level [marginal significance]. A possible explanation is that rising income inequality implies a larger number of high net worth
individuals (HNWIs). It is the HNWIs rather than the common man that can finance capital flight and take advantage of the world’s shadow financial system to shelter wealth.

As large as these outflows already are, note that others which are not so easy to capture may increase the sums involved:

Economic sources and methods cannot capture illicit financial flows in a comprehensive manner. The difficulty arises from the fact that we are in part trying to capture financial flows generated from purely illegal activities such as drug trafficking, bribery and kickbacks related to corruption, and arms or human smuggling, which are typically designed to evade detection by regulatory authorities and law enforcement. Such activities are often settled in cash, so that the parties to the illegal transaction cannot be traced. Hence, gap analysis of officially recorded data has inherent limitations in capturing illegal transactions.

This train of pain begins and ends in the United States.

I am not sure if there is a moral to recent events, but the number of children seeking asylum in the United States from gang warfare-torn countries El Salvador, Guatemala and Honduras has dropped in the last month. What to do with these young people has given rise to a fierce debate Stateside on an issue Obama would likely prefer not to deal with domestically at this point in time: immigration reform. With an ever-growing Latino population, the stakes are high for center-left politicians like him. Even so, the Tea Party brigade is hung up on antiquated notions of perpetuating white majority rule despite demographic trends showing they will be less than half the population by mid-century.

In the meantime, however, stricter enforcement coupled with disabusing would-be migrants of the delusional idea that the US was granting asylum have played their part in staunching arrivals. From the Arizona Republic:

The number of children and families apprehended by the Border Patrol in July crossing the U.S.-Mexican border illegally fell by more than half from June, according to Customs and Border Protection. The significant drop reverses the recent surge in unaccompanied children and families fleeing north from Central America, and analysts cited a combination of reasons including tougher anti-smuggling measures.

The decline is much sharper than the fall in overall Border Patrol apprehensions from June to July. And it is steeper than in past years — suggesting that it's not just hotter weather that is drying up the flow of migrants coming primarily from Honduras, Guatemala and El Salvador. "I don't think this is a seasonal shift," said Doris Meissner, a senior fellow at the Migration Policy Institute, a nonpartisan Washington think tank that deals with migration and refugee policies.

"I think it's a combination of factors: stepped up anti-smuggling efforts, the fact that Mexico is returning substantially larger numbers of people crossing their territory ... and the fact that the countries themselves have been making a huge effort to tell people that what the smugglers are saying is not true and that the journey is really dangerous," added Meissner, who served as a commissioner in the former U.S. Immigration and Naturalization Service.

Believe it or not, I do not enjoy bashing the United States for the heck of it. Given its far-reaching influence, however, it bears much culpability here. Why are there gang wars in these central American states that are driving young people to leave? Because the United States' admittedly failed "war on drugs" is causing violence to spread to its backyard. Why is demand so great for illegal drugs? Because United States residents (can't use "American" in this context) consume more of them than any other country on Earth:

The refugee crisis is now our problem, which is appropriate: The drug-linked violence that the children are fleeing is in large part our fault. Anti-drug policies in the U.S. and Europe have not succeeded in curbing drug use or in raising drug prices, but they have considerably increased crime and violence worldwide. It is time to shift the effort to focus on helping drug users at home rather than battling drugmakers and traffickers abroad...

Some in the U.S. may still consider the mission accomplished: at least we’ve sent the problem elsewhere. But if the point of banning domestic production was to reduce domestic consumption, the effort has been a miserable failure—with the side effect of 60,000 kids to care for. Because production can move to countries least able to control output and trade can flow through countries least able to control transport, even the most draconian attempts to reduce overseas supply to U.S. drug consumers have had a limited impact. The U.S.-backed Plan Colombia represented an immense effort to reduce cocaine production—the size of the country’s security forces expanded from 250,000 to 850,000 between 2003 and 2006. In response, farms became more productive, and production shifted to neighboring countries, more than offsetting the increase in drug seizures and coca plant destruction according to World Bank researchers. A U.S. inspector general report suggests attempts to wipe out poppy production in Afghanistan have been a similar failure.

The lure of the US market increases as even more regulations are put in place to combat drugs:

Efforts to control international trafficking–the transport of drugs from producers to drug sellers in the U.S.—have been a little more successful than efforts to control production. The spread between cocaine export prices in Colombia and import prices in Miami reflects a 2,100 percent markup (from about $1,000/kg to $23,000/kg). That associated potential profit margin is what helps fuel gang violence in Central America. But for all the violence of the drug wars in Mexico and Honduras, the big cost of drugs in the U.S. is still accounted for by domestic wholesale and retail distribution costs. The markup from wholesale to retail is about 700 percentnot too different from the markup for imported agricultural products in general. The drug war has considerably destabilized countries in Central and South America and cost tens of thousands of lives—and yet it hasn’t even worked to make drugs in the U.S. or Europe appreciably more difficult to obtain than legal imports.

Just as Prohibition-era gangsterism came to an end with legalizing alcohol, legalizing marijuana in the United States is long overdue to reduce incentives to smuggle drugs into the US for the chance at an exorbitant profit. In this case, the Yanks really should do so on behalf of the children who are victims of the trouble they inflict on neighboring countries.

Give them back the future your country took away, Barack.

Give a man no fish to catch...and he grabs an AK-47 & boards a skiff?

Fisheries management does not top the list of attention-grabbing international studies topics, but maybe we should pay more attention to it. (Unless you're an environmental studies or geography studies major perhaps.) Increased patrolling in the Gulf of Aden by various international forces coupled with better-prepared transit by commercial vessels--don't hog the shoreline, don't overload the boat so its deck sags and is easy to get ahold of, increase speed through the danger area, etc. have done their part in reducing maritime piracy. That said, the danger still hasn't entirely gone away:

The World Bank noted that "piracy imposed a hidden tax on world trade [...] Piracy costs the global economy roughly US$18 billion a year in increased trade costs — an amount that dwarfs the estimated $53 million average annual ransom paid since 2005," the bank said in a 2013 report. "It's expensive, so the day when the shipping companies say 'That's enough,' the whole thing can kick off again quite quickly," warned [Eurocrat] de Poncins.

And given that attacks are becoming rare, ship owners and captains are starting to let their guard down, EU Naval Force officials say, reporting that ships are again navigating at slower speeds and sailing closer to the coast in order to save fuel. "We are becoming victims of our own success," said Lieutenant Michael Quinn of Atalanta, adding, however, that "the conditions on the Somali coast have not changed and industry must not relax."

The EU Naval Force's mandate applies only to the sea; it is not authorised to launch land attacks on the pirates who still control, notably in Puntland, large sections of the Somali coast. Clan militia, pirate networks, and criminal gangs share power in this country deprived of an effective government since 1991.

As long as the factors which drove piracy remain--lawlessness, civil breakdown and a lack of "legitimate" livelihoods--the problem cannot be entirely solved since there will always be those willing to risk being caught in the absence of other alternatives. One of the more intriguing arguments has been that these pirates were formerly fishers driven to hijacking vessels by large commercial (read: Asian and Western) vessels overfishing the Gulf of Aden. There is some geographic evidence that this area has been overfished [1, 2] and the argument goes like this:

In looking at the fisheries maps, I noticed that the coast of Somalia was one of those places where overfishing had taken place; in a subsequent conversation with a colleague I learned that one hypothesis about the Somali pirates was that they were unemployed fishermen, who had to find another way of earning a living now that they had no place available to catch fish. At the time, this was a hypothesis and not backed up with a scientific survey; advocates never really mentioned the threat of piracy as a reason why we shouldn’t overfish our oceans to the point of depletion.

The theory held my attention though, and after a little research I found a map of global shipping lanes and looked for other places where a confluence of routes brought cargo ships close to countries with weak legal structures.  West Africa matched the criteria, a region whose overfishing had been highlighted both on the overfishing maps as well as in the documentary, “The End of the Line.”

More formally, this is the "lack of fisheries management" (due to absent governance) argument:

The relatively small area in which fishing takes place means that most important fisheries resources can be considered as shared stocks. Many are truly highly migratory, for example the tuna and small shoaling pelagic species of the Region. However, overfishing by industrial trawlers in the Gulf of Aden nearshore waters during the 1970s and 1980s has depleted some valuable resources, such as cuttlefish and deep sea lobsters. These stocks have not fully recovered, due primarily to a lack of effective fisheries management. 

However, the World Bank report cited earlier (warning: large download) disagrees with this notion:

Somalis often argue that piracy started off as self-defense by impoverished fishermen against international fleets fishing illegally in their waters. Over time, even as piracy evolved into a much broader business and despite the fact that fisheries were never a leading economic activity in Somalia, this “Robin Hook” (Shortland 2011) interpretation has by now become a powerful legitimizing narrative...

Moreover, the analysis finds no evidence of overfishing. While illegal fishing has often been associated with overfishing and the depletion of stocks available to Somali fishermen, the data do not reflect that. It was found that high total tuna production in a given year does not presage low production the next year either for an individual fleet or in the aggregate. In fact, at the aggregate level there is solid evidence that high tuna catches in one year predict high catches the next year. If stock depletion were a major problem, the productivity of the fleets remaining in piracy-affected waters should be higher after the piracy surge because so many fleets moved to safer water. However, no productivity boost can be seen in the data.

I do not think the World Bank report's argument is conclusive. It basically goes like this: since years when the Gulf of Aden area experienced elevated catches were not followed by lean years, then these waters were not "overfished" to begin with. The World Bank is more concerned with flow-level data (# of fishes caught annually) when overfishing is more a stock-level phenomenon (# of fishes left in a particular marine area). True, there is a problem of data availability regarding the true level of stocks in the Gulf of Aden area given that few international organizations currently operate there since "Somalia" is largely a collection of warlord-occupied lands.

This much the World Bank and I could probably agree on, though: If "legitimate" livelihoods were to be had in Somalia, then many of these folks wouldn't resort to this kind of low-probability opportunism. Just as cutting the "supply side" didn't work in the war on drugs, so too is the piracy problem not solvable by focusing mostly on force.

...or is that iCoin? Referring to a post I made earlier on all you wanted to know about Bitcoin, I did not believe it could not come into widespread usage for two reasons. First, Bitcoin did not have the support of major financial institutions that (literally) held the important cards in debit/credit cards, money transfers, bank deposits and so forth. Second, without clear regulatory approval in the United States and other major consumer markets, establishments would be wary of transactions inhabiting the 'grey' area between what's legal and illegal.
I suppose that it was only a matter of time that the most innovative of major corporations, Apple, would be first out of the blocks in experimenting with virtual currency operations. More specifically, Apple is allowing virtual currencies to ply their trade amongst apps (and is not the virtual currency developer itself). Previously, it removed apps from the iTunes store that run Bitcoin presumably since it wasn't entirely sure of the legal ramifications. The knock-on effects here could be potentially huge. With Major Name Backing and an Established Track Record of introducing new product categories, Apple has sufficient clout to get financial institutions, credit card operators, and money transfer services to sit up and take notice. If someone can deal with possible legal entanglements down the road, it's certainly Apple who faced down the challenge of the Beatles franchise when it began selling music in 2003. From Bloomberg:

While Apple didn’t mention bitcoin specifically, its developer terms now allow for certain “approved virtual currencies,” without saying what those were. Apps that use the digital money must comply with state and federal laws wherever they’re designed to work, the terms say.

The change signals that Apple is warming up to virtual currencies after previously blocking programs like Blockchain.info from its App Store. Bitcoin is the most popular digital currencies, which governments are struggling to determine how to regulate because they exist only as software. “This is a sign that the ecosystem is maturing and gaining credibility,” Bill Lee, an investor in bitcoin wallet BitGo, said in an e-mail. “To be clear, I still think bitcoin is in its infancy as a technology, but its acceptance is becoming more and more mainstream.”

Bitcoin entrepreneurs were already predicting an explosion of activity. “Get ready for a plethora of bitcoin iOS apps!” bitcoin venture capitalist Adam Draper said in an e-mail. “Very exciting news!”

Unlike the Bitcoin fanboys, I's be especially wary about the proviso that these virtual currencies would only be permitted to ply their trade on Apple devices if they complied with state and federal laws. Again, this is murky legal territory that may allow Apple to (again) suspend their operations should they run into legal entanglements. Also keep in mind that this is a very limited Amerocentric framing: aren't virtual currencies also used internationally to transfer money and settle transactions?

My guess is that the legal issues that need to be hammered out will be international to meet anti-money laundering and counter-terrorist finance (AML-CTF) that were put into place largely at the American's behest after the September 11 attacks. If you are interested in the technical details of AML-CTF compliance, CGAP wrote a paper in the similar context of mobile wallets sometime back. These problems are not insurmountable, however. The Bitcoin fanboys may not have sufficient clout to sort out the legal aspects of virtual currencies, but Apple with its hundreds of billions in cash sitting around certainly can. AS I said, 'Applecoin' has potential, not necessarily Bitcoin.

BTW, the app store review guideline in question is 11.17 under 'Purchasing and currencies':

Apps may facilitate transmission of approved virtual currencies provided that they do so in compliance with all state and federal laws for the territories in which the app functions

"Our insatiable demand for illegal drugs fuels the drug trade...[c]learly, what we have been doing has not worked and it is unfair for our incapacity...to be creating a situation" - Hillary Clinton.

Americans have obviously inflicted hardships on the rest of the world with next to no concern about others' well-being. Militarization in the "War on Terror," for instance, has polarized many and radicalized more than a few who would otherwise remain neutral as the United States takes a heavy-handed approach by playing the role of Globocop. Another somewhat lesser-known but equally unsuccessful Yanqui effort has been the "'War on Drugs" as the world's top consumer of hallucinogenics believes that it's a supply-side problem and not a demand-side one as their addled population breeds conflict in Latin America and beyond. Unfortunately, the American policing paradigm remains the world's most influential one. From the US-Mexican border to the hinterlands of Southeast Asia's Golden Triangle, the knock-on effects of American drug addiction are being felt worldwide. 
My erstwhile employer LSE IDEAS has a new report that sheds light on alternatives to the enforcement-based Globocop approach favored by certain North Americans. As I would argue, a lot of the problem stems from the demand-side; not enough Yanquis just say no to drugs as recreational substances and their consumption Stateside is a red, white and blue activity. (Ditto for Western Europeans and other addicted peoples.) Aside from reducing demand, there is also a more science-based approach to weaning these addled folks off their addictions once and for all. We may never cure these endlessly distracted Yanquis of their other addictions to debts 'n' fats, but hey, taking away the needle may mitigate the damage done. Below is the introduction to the LSE IDEAS report, followed by signatures from no less than five Nobel Prize winners in economics as well as our usual cronies. Heck, even Jeff Sachs has signed on for good measure so I guess nearly everyone with a conscience is on board for this effort to address matters on a human scale:

It is time to end the ‘war on drugs’ and massively redirect resources towards effective evidence-based policies underpinned by rigorous economic analysis. The pursuit of a militarised and enforcement-led global ‘war on drugs’ strategy has produced enormous negative outcomes and collateral damage. These include mass incarceration in the US, highly repressive policies in Asia, vast corruption and political destabilisation in Afghanistan and West Africa, immense violence in Latin America, an HIV epidemic in Russia, an acute global shortage of pain medication and the propagation of systematic human rights abuses around the world.

The strategy has failed based on its own terms. Evidence shows that drug prices have been declining while purity has been increasing. This has been despite drastic increases in global enforcement spending. Continuing to spend vast resources on punitive enforcement-led policies, generally at the expense of proven public health policies, can no longer be justified.

The United Nations has for too long tried to enforce a repressive, ‘one-size-fits-all’ approach. It must now take the lead in advocating a new cooperative international framework based on the fundamental acceptance that different policies will work for different countries and regions. This new global drug strategy should be based on principles of public health, harm reduction, illicit market impact reduction, expanded access to essential medicines, minimisation of problematic consumption, rigorously monitored regulatory experimentation and an unwavering commitment to principles of human rights.
-------------------
[signed]

Professor Kenneth Arrow, 1972 Nobel Prize in Economics.
Luis Fernando Carrera Castro, Minister of Foreign Affairs, Guatemala.
Nick Clegg, Deputy Prime Minister of the United Kingdom of Great Britain and Northern Ireland.
Professor Paul Collier, CBE, University of Oxford.
Professor Michael Cox, LSE IDEAS.
Alejandro Gaviria Uribe, Minister of Health and Social Protection, Colombia.
Professor Conor Gearty, London School of Economics.
Aleksander Kwasniewski, President of the Republic of Poland (1995 – 2005).
Professor Margot Light,LSE IDEAS.
Baroness Molly Meacher, UK House of Lords.
Professor Sir Christopher Pissarides, 2010 Nobel Prize in Economics.
Professor Danny Quah, LSE IDEAS.
Professor Dani Rodrik, Institute for Advanced Studies, Princeton.
Professor Jeffrey Sachs, Columbia University.
Professor Thomas Schelling, 2005 Nobel Prize in Economics.
George Shultz, US Secretary of State (1982 – 1989).
Professor Vernon Smith, 2002 Nobel Prize in Economics.
Dr Javier Solana, EU High Representative for Common Foreign and Security Policy (1999 – 2009).
Baroness Vivien Stern, UK House of Lords.
Professor Arne Westad, LSE IDEAS.
Professor Oliver Williamson, 2009 Nobel Prize in Economics.

Even the mightiest go down sometimes.

Longtime readers will know I have an interest in torrent sites as examples of the vast possibilities for intellectual property violation in the Internet age. Unsurprisingly, the United States--strongest enforcers of IP worldwide due to its creative industries' vast output--has lobbied governments the world over to shut down these torrent sites. I've previously written about the travails of Demonoid, which, at its height, was the world's top private tracker site. Despite moving its servers around the world and using all sorts of top-level domains to escape Uncle Sam, it was eventually brought down. (The Demonoid story would make a great true-to-life thriller, actually.) You know, Demonoid has come back up again, but the reborn site's content is but a shadow of what it had at its peak.

Thus, my theory of torrent site longevity is now largely based on a single metric: How insulated is the site from American pressure to discontinue intellectual property "theft"? By this measure, my pick would be Rutracker.org, a Russia-based site whose authenticity is undoubted since its text is in Cyrillic. Russia being the land of Edward Snowden's asylum and Crimean-invading macho men, you can bet your bottom ruble that Russian authorities would be the among the least likely to crack down on this torrent site at the behest of Westerners. Ironically given its activities, Rutracker.org has even trademarked its name [!]

That's not to say Rutracker.org is invulnerable. For a few weeks now, Russian sites have been hit by DDOS attacks, presumably over their annexation of the Crimean peninsula. I guess it was inevitable that these attacks would hit Rutracker.org, and that has now happened. Ukranian news sources further suggest that the attacks are emanating from Ukraine. Whatever the source, Rutracker.org is definitely down as Russian media confirms.

A lot of the highbrow (no porn, please) content that Demonoid used to track has since moved to Rutracker.org. Ultimately, I suspect that the vast majority of Rutracker.org users are not Russian. The only real reason folks use the site is that Russia appears immune to Western pressure to disband Rutracker.org. Then again, if the Russians figure out that it's mostly Westerners using the site, they probably may be less averse to shutting it down.

At any rate, expect Rutracker. org to be among the last torrent sites standing after the current DDOS attack blows over.

UPDATE: Rutracker.org is back up as of 1500 GMT, 4/7/20214

[On a personal note, dear readers, rest assured that our thoughts and prayers are with those affected by the lost Malaysia Airlines flight. Alike the missing Boeing 777, the airline has a sterling safety record, making things all the more mysterious.]

One of the more notable bits of news in surrounding the mysterious disappearance of MH370 is the absence of two European passengers who were supposed to be on board the flight but were actually not since their passports had been stolen:

[A]fter the airline released a manifest, Austria denied that one of its citizens was aboard the flight. The Austrian citizen was safe and sound, and his passport had been stolen two years ago, Austrian Foreign Ministry spokesman Martin Weiss said.

Similarly, Italy's foreign ministry confirmed none of its citizens were on Flight 370, even though an Italian was listed on the manifest. On Saturday, Italian police visited the home of the parents of Luigi Maraldi, the man whose name appeared on the manifest, to inform them about the missing flight, said a police official in Cesena, in northern Italy. Maraldi's father, Walter, told police he had just spoken to his son, who was fine and not on the missing flight, said the official, who is not authorized to speak to the media. Maraldi was vacationing in Thailand, his father said.

The police official said Maraldi had reported his passport stolen in Malaysia last August and had obtained a new one. But U.S. law enforcement sources told CNN that both the Austrian and Italian passports were stolen in Thailand.

It's all very curious. You would think that it would not be so easy to fly using illicitly obtained documents for obvious reasons: First, security has obviously been tightened post-9/11. Second, new biometric technologies--fingerprint protection and facial images--have come into widespread use to prevent exactly the kind of identity theft we have just observed. Europe has been at the forefront of implementing biometric technologies. What's more, while there is a problem authenticating the passport holder's identity when a passport is lost, this should not be a problem when the passport is stolen since the biometric information is all there:

However, chipbased e-passports have the same problem as conventional passports in authenticating the passport owner in the event the passport is stolen or lost.

Using deductive logic, matters become elementary, my dear. The likely reason why people still steal travel documents is because authorities are one step behind in preventing their use once stolen. That is, actual enforcement has not caught up with the promises of these new biometric technologies. Hence the notion of "crime entrepreneurs":

Most crime entrepreneurs are not the diabolical creative geniuses described by the mass media, but mobile risk takers responding to changing opportunities and law enforcement by trial and (custodial) error. This may imply that individual changes usually take place gradually: smugglers change commodities, e.g. from smuggling hard drugs to smuggling soft drugs on a larger scale; some smugglers enter organized cross-border fraud, mainly fiddling the VAT system or EC regulations or they broaden their trade to neighbouring branches while stil] using the same skills and social networks. Those who had been fencing stolen passports for forgery noticed that these documents were also valuable to those engaged in the smuggling of illegal immigrants.

Otherwise, it is certainly a researchable question what the extent of passport theft is in the face of clear lapses in enforcement.

UPDATE: Authorities now suggest that the two flyers using stolen passports were Iranian, but with no terror ties.

Say what you will about the original premise that the 2002 invasion of Afghanistan was to force Osama bin Laden out of hiding from his Taliban protectors, but the aftermath of all that has not been very positive. Afghanistan remains a very poor nation, and the persistence of the Taliban threat speaks volumes about the West's inability to provide a superior vision of the country's future. That is the political aspect of it.

Meanwhile, the economic aspect is not promising, either: despite untold millions spent on eradicating opium over more than a decade, 2013 will be a bumper crop:

Opium poppy cultivation in Afghanistan rose 36 per cent in 2013, a record high, according to the 2013 Afghanistan Opium Survey released today in Kabul by the Ministry of Counter Narcotics and UNODC. Meanwhile, opium production amounted to 5,500 tons, up by almost a half since 2012.

Calling the news "sobering", Yury Fedotov, Executive Director of UNODC, stressed that this situation poses a threat to health, stability and development in Afghanistan and beyond:  "What is needed is an integrated, comprehensive response to the drug problem. Counter-narcotics efforts must be an integral part of the security, development and institution-building agenda".

The area under cultivation rose to 209,000 ha from the previous year's total of 154,000 ha, higher than the peak of 193,000 hectares reached in 2007. Also, two provinces, Balkh and Faryab, lost their poppy-free status, leaving 15 provinces poppy-free this year compared with 17 last year.

While respect is due to the UN Office for Drugs and Crime (UNODC) for taking on drugs and crime in such a difficult situation, I honestly believe that the West has largely given up on Afghan security, let alone the country's development. After sinking billions into the place with little to show for, Western publics have signaled their armed forces to head for the exit. UNODC's diagnosis is sound, but how exactly do you reconcile so many rival warlords? Moreover, what livelihoods are possible other than this one at the current time?

The link between insecurity and opium cultivation observed in the country since 2007 was still evident in 2013; almost 90 per cent of opium poppy cultivation in 2013 remained confined to nine provinces in the southern and western regions, which include the most insurgency-ridden provinces in the country. Hilmand, Afghanistan's principal poppy-producer since 2004 and responsible for nearly half of all cultivation, expanded the area under cultivation by 34 per cent, followed by Kandahar, which saw a 16 per cent rise.

Across the country, governor-led eradication decreased by 24 per cent to some 7,300 hectares. Badakhshan, the only poppy-growing province in the north-east, witnessed a 25 per cent increase in cultivation despite the eradication of almost 2,800 ha. During the 2013 eradication campaigns, the number of casualties rose significantly, with 143 people killed this year compared with 102 fatalities in 2012.

It's a sad situation (full report here), but the time is at hand when Afghans themselves will need to deal with the insecurity, fragmentation, and lack of the development on their own. Perhaps only when they realize that no one will be left to blame for their situation can progress really be made. Then again, the Taliban would welcome retaking the reins of power.

News site Torrent Freak, "[t]he place where breaking news, BitTorrent and copyright collide" believes so, at least. Coming from the Philippines, I've always wondered whether to be proud or ashamed that the world's top torrent sites have had .ph top-level domains [TLDs] at one time or another. I recall the now-defunct private tracker site Demonoid being "located" in the Philippines. Sometime later, the world's second largest torrent site, Kick Ass Torrents also "moved" to the Philippines [KAT.ph].

As someone with--ahem--professional interest in the operation of torrent sites as working examples of the underground economy, the recent disappearance of KAT.ph intrigued me. Despite the Philippine passage of the Data Privacy Act in the middle of last year, it was curious to me how KAT.ph continued to operate with impunity after adopting its Philippine domain in April of 2011. But lo and behold, Philippine music industry figures supposedly argued that they were being hurt by KAT.ph's nefarious activities and the government was compelled to shut down the URL only yesterday...

Yesterday the torrent site ran into trouble with its KAT.ph domain, and there were signs suggesting the domain was no longer in control of the original owners. Over the past few hours more details have emerged, and the Government of the Philippines has now confirmed that the domain name has been seized on copyright grounds.

The seizure is the result of a complaint filed by the Philippine Association of the Recording Industry and several individual music labels. The complaint stated that KickassTorrents was causing “irreparable damages” to the music industry, and a local court agreed to suspend the site’s domain. “The complaint alleges that the registrant of KAT.ph is violating intellectual property rights by making copyrighted music available for download to its users,” the dotPH registry informed TorrentFreak. 

To be clear, the Philippine industry complaint was filed in December 2011, but Philippine authorities were only able to act after a court order was issued to do so...

Early this week the Philippine Intellectual Property Office issued a temporary restraining Order directing the dotPH registry to suspend the KAT.ph domain for 72 hours. The order, signed by the IPO Bureau of Legal Affairs, will become final if the domain owners don’t appeal. According to dotPH, the company that maintains the database of PH domain names, the music industry first complained about KickassTorrents in 2011.

However, the company said at the time that it would only take action following a court order. “dotPH was initially contacted by the complainants’ lawyers in December of 2011 with a demand to take down the domain, and dotPH agreed to cooperate if provided with an order from a court or appropriate authority,” TorrentFreak was informed. “dotPH received the restraining order earlier this week and subsequently suspended kat.ph in compliance with IPO’s directive,” the registry adds. 

As with most of these things where "Internet," "intellectual property" and "enforcement" are mentioned, there is natural suspicion that the United States is involved in pressuring the Philippines via inclusion in the US Trade Representative's watch list. To be clear, the Philippines has long been on this list, but more for the piracy of fake DVDs as opposed to "hosting" a rogue site (KAT.ph). There were earlier hopes that the Philippines would be struck off the 2013 edition after cracking down on physical distribution of pirated media, but officials were disappointed when it was not. See here:

The government expressed surprise and disappointment over the decision of the United States Trade Representative (USTR) to retain the Philippines on its watch list of countries that violate intellectual-property rights (IPR) due to concerns over Internet piracy.

[Intellectual Property Office of the Philippines (IPOPHIL) Director General] Blancaflor noted the “changing requirements” of the USTR for removal from the watch list of IPR violators. “The USTR has no intention of removing the Philippines from the watch list. Every year the requirements change and vary. How can we be removed if the requirements keep changing?” he asked. “Two years ago it was massive counterfeits. We addressed that with record-breaking volume of seizures. We were not removed then. Last year the US complained that we did not pass the Internet treaty law. We passed it on March 22,” Blancaflor said.

Anyway, back to TorrentFreak on US pressure for Philippine action against KAT.ph:

While the case is presented as a local action aimed at preventing piracy of original Filipino music, it wouldn’t be much of a surprise if U.S. forces have also been applying pressure. In its latest Special 301 Report the U.S. Government listed the Philippines on its copyright “watch list,” demanding further action against so-called rogue sites.

“The United States looks to the Philippines to take important steps to address piracy over the Internet, in particular with respect to notorious online markets,” the Office of the United States Trade Representative wrote in its report.

I suspect the Philippine authorities are still keen on having the country removed from the watch list given the efforts it has undertaken in passing the aforementioned law and continually raiding vendors of pirated DVDs. With legal backing through a court ruling to seize KAT.ph, its fate was pretty much sealed given the changing nature of American IP requests..

In the broader scheme of things, however, does it really matter? KAT is now operating with another TLD, business as usual. So, the US may have successfully bullied Philippine authorities, but the piracy goes on unabated as most users will eventually find the new site. And if that's taken down eventually, well, the game just moves on and on across even more TLDs. Montenegro, perhaps?

Pssst...is that a 720p or a 1080p? Here's one last story whose implications run in the billions and billions that involves home entertainment as we come to the end of the holiday season. (Oh, the sacrifices I have to endure alike watching a digitally enhanced Mariah Carey moping around in a Santa outfit with Justin Bieber.) Call it fortuitous timing, but our old Sony CRT TV finally conked out prior to start of the holiday season. Gone. Kaput. Off to the see the Great Mother Cathode Ray Tube in the Sky. As its replacement, we bought a brand spanking new LG 42LS5700 for a low, low price. Its feature set blows anything twice the price from three years ago out of the water--resolution enhancement, 120 Hz, Internet TV with Flash player...you name it, Lucky-Goldstar has it.

Much to the chagrin of the software industry, piracy has become more difficult to control with the advent of torrents as invented by Bram Cohen. Back in the day when pirated physical media still played a large role, it was much easier to single out shady fly-by-night types who had machines that spewed copies by the thousands in unmarked warehouses in city centres. With the advent of torrents, it has become much more difficult to prosecute everyday people, AKA normal consumers like you and me. Industry associations are made to look especially bad by injudiciously suing teens in ill health and many others besides.

Fortunately for the almighty consumer, the hardware industry does not have similar objections to pirated TV series and films as I've found out after buying the LG. Why are prices going down rapidly to our benefit? It's because global shipments are already in decline. To no one's surprise, the world's most dominant players in this space are LG nee Lucky-Goldstar and Samsung. The competition is cutthroat, and they're supposedly the only two who make money selling LED TVs. For all their consumer appeal, let's just say LG and Samsung are not exactly the most scrupulous of operators, having bilked consumers via price fixing for years and years and being cited for doing so by various authorities.

With many watchdogs now monitoring their price fixing propensities, we are fortunate in that prices are tumbling and features are increasing as they seek to maintain a competitive advantage. One of the things I've found out--from intellectual curiosity about the workings of smart TVs, of course ;-)--is that the latest generation of units pretty much play whichever format you throw at them--WMA, MPEG, WMV-HD, MKV. Name your (perhaps less-than-legit) source and the TV will play it. While it isn't as foolproof playing these kinds of sources as the incomparable (and free) VLC, let's be realistic here. With three USB ports to mess around with, you can go knock yourself out with a lifetime's worth of high-quality video entertainment sources without paying a single cent for software. H.264 compression is your friend with video quality that outshines DVD (720p outdoes it) or nearly equals Blu Ray (1080p) standard as long as you can sacrifice some audio quality.

As you may have guessed, co-option of video piracy is no accident; LG has been demoing their TVs' abilities to play pirated movies for a number of years now. As I said, they're in the hardware business, not the software business. So, if their customers want to mess around with XviD and DivX, who's to tell them not to? While Korea's entertainment industry is burgeoning, let's just say that the K-Wave has yet to take over the world. Moreover, their software industry and its association have not exactly reached a scale substantial enough to take their piracy concerns to the likes of industrial giants LG and Samsung. (BTW, there is a K-Wave paid channel on my Smart TV which I obviously haven't tried yet.)

Real trouble over conflict of interest is for TV makers with substantial entertainment production holdings. I am of course referring to poor old Sony which long ago lost its TV street cred to the Korean duo. The loss of its brand equity to the likes of Apple in audio and LG/Samsung in video is well-documented, but I think that an underinvestigated consideration is that Sony has software interests in both audio (Sony Music Entertainment was formerly Columbia Records plus Bertelsmann) and video (Sony Pictures Entertainment was formerly Columbia/Tri-Star Pictures) software. Sony's longstanding love of proprietary formats aside, it has been slow to cotton up to playing newer formats favoured by software pirates to their (financial and market share) loss. While Sony has begrudgingly introduced TVs that play file formats Korean makes have no trouble with, let's just say playback issues are still plentiful.

As longtime buyers of LGs and Samsungs, I guess it's just desserts that we now have more features to play with given how long they've been manipulating flat screen prices. Bastards.