Economnic terrorism

ECONOMIC ESPIONAGE
ESSAY #1

A small Mississauga electronics safety equipment company is broken
into. Although filing cabinets and desks were rummaged through, nothing
was seemingly taken. An officer discovered the company had drawn up a bid
for $7 million dollar contract a day or so before the break-in. The contract in
question was for a foreign country. It was later discovered that the company
in question was known for its aggressive economic espionage. An iron ore
shipping company was also broken into. At first it was thought that the target
had been the firms computers. But, nothing was taken, it was assumed that
the burglars had been scared off. Within thirty minutes it was discovered that
the company was approaching its fiscal year end. staff eventually found that
most of the recent database backup tape was missing. A Quebec based
company with the laser-based system for inspecting materials used in, among
other things, the stealth aircraft, had three computers stolen. On their
harddrives were confidential codes for specialized software used by the
Canadian Armed forces. The above are all true examples of the modern
threat facing international business today known as industrial or economic
espionage. The end of the cold and economic pressures have increased the
risk of economic espionage. The collapse of the Soviet Union has left
unemployed KGB and other former communist bloc intelligence agents
selling everything from Russian night vision devices to completely assembled
and functional bugging devices. Even friendly western European
governments have been caught spying on private corporations based in the
U.S. and other countries, while industrial competitors sometimes hire private
companies to collect competitive intelligence from their corporate rivals(
Lester:96). What exactly is economic espionage? how prevalent is it? Who
does it? How do they do it? and what can we do to stop it. These are the
questions that will be looked at in the following pages.
First lets look at, what exactly is economic espionage. Espionage and
intelligence is no longer the exclusive domain of monarchs and governments,
it has become a must for modern international business. Large corporations
around the world particularly in western Europe and Asia now hire agents to
gather intelligence on their competitors and other countries. The goal of
economic espionage is to steal trade secrets, plans and confidential
procedures or anything to give your company or country a competitive edge
over another (Perry:1996). The areas that interest industrial spies the most
include radiation transfer technology, systems diagnostic and testing
software, traveling wave tubes, aviation technologies, microwave
monolithic integrated circuits, inferred signature measures software, radar
technologies, wet processing systems, information management and
processing, simulation technologies, physical security technologies, ram-jet
engine and ram-jet technologies.(Special Security news letter:1995).
Although this is not all of the areas that modern spies target, it will give you
an idea of the scope of the problem. Peter Schweiser author of the book
"Friendly spies" speculates that for the most part, modern industrial spies are
motivated by pure greed of money. If we look back in history we can see that
the majority of the spies that were caught, were motivated by the money.
John walker head of the notorious Walker spie ring, sold submarine secretes
to the Soviets for 17 years for one million dollars. Larry Wu-Tai Chin and
analyst of the CIA, passed secrets to China and was paid $180,000 over a
three year period. Richard Miller worked for the FBI and was to be paid 2
million dollars to pass counter-intelligence secrets to the Soviets, but he was
caught and was only paid one quarter of this amount. It is easy to see that
spying for friendly countries is a profitable business.
Is economic espionage really as bad as it is made out to be? Since
1985 economic espionage directed at American companies has increases 260
percent and the FBI's industrial espionage caseload has jumped to well over
five hundred investigations. Espionage is costing American companies well
over a 100 billion dollars a year in lost sales infact some sources put the loss
at 260 billion. In Canada that Number translates to 10 billion a year and
companies with overseas operations are estimated to lose 140 billion dollars
per year. It is hard to get accurate numbers when it come to losses due to
espionage for the simple reason that companies don't want to admit to being
victims, in fear of undermining the confidence of their suppliers and
shareholders (Lester:1996). The visible damage of economic espionage takes
the from of Lost contracts, jobs and markets, and overall a diminished
competitive edge. The companies that are hurt the most are the ones that
earn under 11 million dollars annually.
How do industrial spies go about collecting information. It is a well
known fact that modern spies have used all of the collection methods used
during the cold war for collecting information on industrial competitors.
Practitioners of modern espionage seldom use one method by itself, but
combine them into concerted collection programs. countries and corporations
have been known to turn legitimate transactions or business relationships
stealthy collection opportunities. Some of the methods of information
collection listed below are most often used for legitimate purposes. Including
them here is not to imply illegal activity, they are used to show as potential
elements of a broader, coordinated intelligence effort(Security
Online:1996:5).
Classic agent recruitment is an intelligence collectors best source. This
method provides a trusted member inside a company or organization who the
collector cans task to provide classified information. An information
collector's interest in recruiting personal is not limited to a high ranking
personal in a company or organization. It is true that researchers, key
business managers, and corporate executives are a good target for industrial
spies, but support personal such as secretaries, computer operators,
technicians, and maintenance personal are also targeted. The latter may
behave the best access to competitive information, and their low pay may
provide good ground for manipulation by intelligence agencies.(Security
On-line: issue 1)
Next spies use what is called us volunteers. The people that have the
easiest access to companies information is the companies own employees.
Employees who steal information from their companies exhibit the same
motivations as the typical spie or thief, illegal or excessive use of drugs or
alcohol, money problems, personal stress, and just plain greed.
industrial spies will use ordinary surveillance and simple break and
enter to gain access to sensitive information. Companies have reported break
and enters were only laptops and disks were stolen when items of much more
value were close by. Some countries pursuade hotel operators to give their
spies access to visitors rooms and luggage. during these break-ins known as
"bag ops" luggage is searched for sensitive information and any useful
documents are copied or simply stolen.(Security On-line: issue 1)
Specialized technical operations constitutes the largest part portion of
economic espionage. This type of collection includes computer intrusion,
telecommunications targeting and intercept, and private-sector encryption
weaknesses. Corporate telecommunications especially international
telecommunications provide a highly vulnerable and lucrative source for
anyone interested in obtaining trade secrets or competitive measures because
they are so easily accessed and intercepted. Due to the increased use these
links for computer transmission and electronic amil, intelligence collectors
find telecommunications interception cost-effective. For example, foreign
intelligence collectors intercept facsimile transmissions through
government-owned telephone companies, and the stakes are large,
approximately half of all overseas transmissions are facsimiles. innovative
hackers connected to computers containing competitive information evade
the controls and access companies information. In addition many American
companies have begun using electronic data interchange, a system of
transferring corporate bidding, invoice, and pricing data electronically
overseas. many foreign government and corporate information collectors find
this information invaluable.(Security On-line: issue 1)
Another tactic used in the world of corporate espionage is economic
misinformation. Some governments use misinformation campaigns to scare
their domestic companies and potential clients away from dealing with US
companies. The press and governments agencies often discuss foreign
economic and industrial intelligence activities, often in vague non-specific
terms. The issue has been to paint foreign competitors or countries as
aggressive and untrustworthy, even if the accuser has no proof of any
collection activity. Some countries have widely publicized their efforts to set
up information security mechanisms to protect against their competitors
penetration attempts, and frequently the United States id mentioned as the
primary threat.(Security On-line: issue 1)
Tasking foreign students studying in the US and other countries.
Some governments task their students studying in a different country to
aquire information on a variety of economic and technical subjects. In some
cases the students are recruited before they start their studies, others are
approached after and are recruited or pressured based on loyalty, fear for
their countries government or intelligence service. In some cases, at an
intelligence collectors request, foreign graduate students serve as assistance at
no cost to professors doing research in target areas. These students then have
access to the professors research and learns the applications of the
technology. As an alternative to compulsory military service one government
has an organized programs to send interns abroad, often with the specific
task of collecting foreign business and technological information.(Security
On-line: issue 1)
As well as recruiting students studying abroad, information collectors
will task foreign employees of North American firms and agencies. The
information collector will recruit or task compatriot employee in A North
American firm to steal information. Although similar to the clandestine
recruitment used by intelligence agencies, often no intelligence service is
involved, only a competitive company or non-intelligence government
agency. The collector then passes the information directly to a foreign firm or
the government for the use in it research and development activities.(Security
On-line: issue 1)
Debriefing of foreign visitors to North American countries is another
method collectors use. Some countries actively debrief their citizens after
travel in North America, asking information acquired during their trips
abroad. Sometimes this debriefings are heavy handed, with foreign scientists
describing them as offensive. In some countries, they are simply and
accepted part of traveling abroad.(Security On-line: issue 1)
Recruitment of emigres, ethnic targeting is another way information is
collected. Frequently, intelligence collectors find it effective to target persons
of their own ethic group. Persons working for the Us military and research
and development who have access to classified technology. Several countries
have found repatriation of emigre and foreign scientists to be the most
beneficial technology transfer methodology. One country, in particular,
claims to have repatriated thousands of ethnic scientists back to their home
country from the United States. Ethnic targeting includes attempts to recruit
and task naturalized US citizens and permanent resident aliens to assist in
acquiring secret information. Frequently, foreign intelligence collectors
appeal to a persons patriotism and ethnic loyalty. Some countries collectors
resort to threatening family members that continue to reside in their home
country.(Security On-line: issue 1)
Information collectors will also use what is refereed to as elicitation
during international conferences and trade fairs. Events such as international
conferences on high-tech topics, trade fairs, and air shows-attract many
foreign scientists and engineers, providing foreign intelligence collectors with
concentrated group of specialists on a certain topic. Collector target these
individuals while they are abroad to gather any information the scientists or
engineers may posses. Sometimes depending on the country and the specific
circumstances these elicitation efforts may be heavy handed. Intelligence
collectors sometimes try to recruit scientists by inviting them on all expense
paid trips abroad for conferences or sabbaticals. The individuals are treated
royally, and their advice sought on areas of interest. When they return to
their country, collectors recontact them and ask them to provide information
on their areas of research. (Security On-line: issue 1)
Commercial data bases, trade and scientific journals, computer bulletin
boards, openly available US government data, corporate publications are
another source. Many collectors take advantage of the vast amount of
competitive information that is legally and openly available in the United
States. Open source information can provide personality profile data, data on
new research and development and planned products, new manufacturing
technics, and competitor strengths and weaknesses. Most collectors use this
information for its own worth in their business competition. However, some
use openly available information as leads to refine and focus their clandestine
collection and to identify individuals and organization that posses desired
information.(Security On-line: issue 1)
Foreign government use of private-sector organizations, front
companies, and joint ventures is the next way collectors use to gather
intelligence. Some foreign governments exploit existing non-government
affiliation organizations or create new ones-such as friendship societies,
international exchange organizations, import and export companies, and other
entities that have frequent contact with foreigners to gather intelligence and
to place intelligence collectors. They conceal government involvement in
these organizations and present them as merly private entities in order to
cover their intelligence operations. These organizations spot and assess
potential foreign intelligence recruits with whom they have contact. Such
organizations also lobby US government officials to chanfe policies the
foreign governments consider unfavorable.(Security On-line: issue 1)
Corporate mergers and acquisitions. Several countries use corporate
mergers and acquisitions to aquire technology. The vast majority of these
transactions are made for legitimate purposes. Sometimes though they are
made to specifically to allow a foreign company to aquire North American
technology without spending their own resources on research and
development. According a 1994 US government document entitled " Report
on US critical technology Companies" 984 foreign mergers and acquisitions
of US critical technology companies occurred between January 1st 1985 and
October 1st 1993. All but a handful of these mergers and acquisitions were
friendly, and four countries accounted for 68 percent of them. Of the total 60
percent of them involved US companies involved in advanced materials,
computers including software, peripherals, biotechnology, areas relative US
professional and scientific instrumentation, communications equipment,
advanced manufacturing, and aircraft and spare parts. (Security On-line:
issue 1)
The next way information is collected is refered to as headhunting or
hiring competitors employees. Foreign companies typically hire
knowledgeable employees of competing US firms to do corresponding work
for the foreign firm. At times, they do this specifically to gain inside
technical information from the employee and use it against the competing US
firms.(Security On-line: issue 1)
Corporate technology agreements is another way information collectors
assemble technological information. Some foreign companies use potential
technology sharing agreements as condiuts for receiving propriety
information. In such instances, foreign companies demand that, in order to
negotiate an agreement, the North American company must divulge large
amounts of information about its processes and products, sometime much
more than is justified by the project be negotiated. Often the information
requested is highly sensitive. In some of these cases, the foreign company
either terminates the deal after receipt of the information or refuses to
negotiate further if denied the information.(Security On-line: issue 1)
Foreign companies will often use the favorable research climate in
North America. Foreign countries will sponsor research activities at the
North American university and research centers. Generally everyone benefits
from the finished research. At times, however, foreign governments or
companies use the opportunity as a one sided attempt only to collect research
results and proprietary information at the North American facility. Foreign
intelligence services also use these efforts to insert intelligence officers who
act solely as information collectors. (Security On-line: issue 1)
Hiring information brokers, consultants. Information brokers scour the
world for valuable information. What they can not obtain legally or by guile
some information brokers will purchase. The broker then verifies the data,
puts it into a usable and easily accessible format, and delivers it to interested
clients. The following example, that was printed in the Asian Wall Street
Journal in 1991 and illustrates this type of activity. The ad was followed by a
phone number in western Europe.
" Do you have advanced/privileged information on any type of
project/contract that is going to be carried out in your country?
We hold commission/agency agreements with many large
European companies and could introduce them to "your"
project/contract. Any commission received would be shared with
yourselves."
Some countries frequently hire well connected consultants to write
reports on topics of interest and to lobby North American government
officials on the countries behalf. Often, the consultants are often high ranking
US government officials who maintain contacts with their former colleagues.
They exploit these connections and contract relationships to acquire protected
information and gain access to other high level officials who are currently
holding positions of authority through whom they attempt to further aquire
protected information.(Security On-line: issue 1)
Fulfillment of classified US government contracts and exploitation of
department of defense sponsored technology sharing agreements. At times,
classified government contracts are awarded to companies that are partially or
substantially controlled by foreign governments. Although the US
governments security agencies closely monitor these contracts, they still
provide foreign governments with unauthorized access to information.
Traditional allies of the US are most likely to use this method, since
non-allies seldom are included in such contracts.(Security On-line: issue 1)
The last method of information collection we will look at tasking
liaison officers at government to government projects. During joint research
and development activities, foreign governments routinely request to have
on-site liaison officers to monitor progress and provide guidance. Several
allied countries have taken advantage of these positions as cover for
intelligence officers assigned with collecting as much information about the
facility as possible. Using their close access to their US counterparts
conducting joint research and development, particularly in the defense arena,
liaison officers have been caught removing documents clearly marked as
restricted or classified. (Security On-line: issue 1)
Now that we have looked at how foreign countries and companies go
about collecting information from North American companies. The FBI
investigations reflect that 23 countries are currently engaged in espionage
against North American countries. France is one of the countries that we will
look at.
The French currently commit 200 full-time agents world wide. These
agents are known as the " General de la Securite Exterieure" and concentrate
on the soft business targets. The other full-time group in the French
intelligence service is the "Service 7". This group of spies is also known as
the action unit. They carry out all of the operations that require a deft
hand,IE break-ins, buggings and covert operations. These full-time agents
are only part of the story, France also has part-time information collectors
called "Honorary correspondents". This group of people includes a large
number of corporate officials living overseas. Some of these people work for
money, but others see it as part of their jobs. An example of this type of
information collectors a man by the name of Pierre Marion. Pierre was a Air
France representative who lived in Japan. His job was to collect information
about Japanese social circles particularly as it related to Japanese political
officials.
For its size no other country in the world has the intelligence capability
of South Korea. The Korean intelligence service is called the "National
Security Planning Agency" and is active around the world providing a variety
of intelligence and espionage services to Korean interests. South Korean
agents operate in North Korea, China and the Soviet Union, but the United
States and Japan is were they are most active. US intelligence sources have
bee heard to say that the NSP is more effective than Israelis Mossad. The
NSP has a technically proficient agents, enormous financial resources, and a
well-organized group of informers. An example of an operation the South
Koreans carry out is called " Operation Laughing Bird". This operation was
conducted in Japan and was designed to gather technological information to
support South Korean industry. It was put into action in 1981. It included
more than 200 agent. These agents engaged in electronic eavesdropping, the
planting of moles and agents, the use of organized crime syndicates in Japan
and the recruitment of Japanese and American workers to act as agents.
Israel is the next country that we will look at. The Israeli economic
espionage collection agency is called the " LAKAM", and is one of Israel's
most effective intelligence organizations> LAKAM is an Hebrew acronym
for Israeli Defense Minuister's Scientific Liaison Bureau. Its agents operate
in United States, Japan, France, Germany, Italy, Great Britain, Switzerland,
and Sweden. LAKAM's biggest operation is in the US. Their agents operate
out of the Israeli ambassy in Washington as well as two other shops, in Los
Angeles and the other in New York. Theri operations in these cities are
believed to include thirty five full-time agents with a several dozen informers.
companies that benefit the most in Israel include aerospace, chemical
producers, and electronics firms. In addition to regular agents the Israelis use
dee cover agents posing as business people and scientists traveling to the
United States. Most of the time the agents are in direct contact with the
Prime Minister through the telephone and telex, but if it is something that is
extremely sensitive diplomatic pouches are used to transport it.
Next lets turn our attention toward Germany. Germany's intelligence
service is called the Bundesnachrichtendienst (BND). Since the 1960's the
Germans have been actively involved in spying on the US, France, Great
Britain, and Italy. The BND regularly monitor telecommunications of
foreign corporations bases in Germany. he BND is very active in the US.
German agents have cultivated mole or spies in Us high-tech firms. The
BND is gathering extensive information in the fields of economy, technology
and industry.
These United States is not completely innocent in the world of
espionage. Now that the cold war is over the CIA officials have latched onto
the idea of collecting economic data to justify the inflated budget of the
agency. Dozens of US corporations from fortune 500 companies to small,
high tech firms, are secretly assisting the CIA, allowing the agency to place
full-time officers from its operations division into corporate offices abroad.
Serving under what is refereed as "nonofficial cover" (NOC), CIA officers
pose as American businessmen in friendly countries, from Asia to Central
America to Western Europe. Once there, they recruit agents from the ranks
of foreign officials and business leaders, pilfer secrets, and even conduct
speacial operations and parliamentary activity (Dreyfus:95:1). Proof that the
United States is engaged in this type of espionage happened in 1995 when
the French government demanded that four business officials leave the
country because they were allegedly caught gathering French economic and
political secrets. Three businessmen were posing as American diplomats and
the fourth was operating under a business cover( Time: March 6:1995).
As stated above Espionage is not the exclusive domain of governments
anymore. Some corporations have intelligence organizations that rival that of
a small country. other companies that do not have intelligence organization
of their own retain or hire private investigators when espionage is required.
An example of the use of company spies happened in July 1989. A du pont
chemical plant was the site of an well planned espionage scheme. Visitors
from a German chemical company were visiting the plant. One of the
visitors, while looking over a table accidentally dip the tip of his tie into a vat
of chemicals. Company officials at first were very apologetic and offered to
replace the tie. The visitor insisted o keeping the tie because it was from his
family. Only after an experienced company security official protested to
company leaders that the accident was probably a scheme to obtain a
chemical sample did the company insist on keeping the
tie(Scheizer:1993:253).
Lastly we will look at some of the ways that companies can protect
themselves against economic espionage. The following was taken from a
paper written by Kevin d. Murray A certified protection professional called
"10 Spy-Busting Secrets".
According to Murray, espionage is preventable if you know the
vulnerabilities, you can take the proper precautions. Murray presents a list of
the top ten ways to fight back against economic espionage.
The first thing Murray examines is what is called trash trawling. this is
simply digging through garbage. This activity is legal. The simple
counter-espionage tactic for this is to reduce that availability of what he
refers to as puzzle parts. companies must encourage destruction of waste
paper by purchasing shredders appropriate to the needs of the company, Use
crosscut destruction for high level security, computer paperwork and large
volume waste require a central bulk shredder. do not leave confidential
papers in a box under desks for later shredding shred it now, Do not entrust
wastepaper destruction to paper recycling vendors destroy it before recycling.
The big shredder purchasing mistake is buying just one shredder for everyone
to use. Some people are to busy to be bothered. Murray recommends the
use of several convenient desk-side shredders.
Bugs and wire tapping is the next area examined by Murray.
Electronic spying is the most devastating spy trick there is. A common
mistake is saying"Oh I'm just being paranoid" when you suspect electronic
surveillance. Murray recommends not discussing your suspicions with others
unless they have a real need to know, do not discuss your suspicions in the
suspect areas, don't attempt a do-it yourself solution, don't waste money
buying spybuster toys, seek professional guidance without delay. Contrary to
what is seen on television and in catalogs, detection of bugs and wiretaps is
equipment and knowledge intensive work. Expect a professional sweep team
to have about $100,000 dollars invested in their equipment as well as an
extensive background in security, investigations, telecommunications and
electronics. These types of professionals will not be found in the yellow
pages, you must contact a corporate security professional for a
recommendation.
The drop by spies is the next area of interest. Check and photocopy
credentials and work orders of anyone performing technical work in or
around your offices. Verify the work was actually requested and most of all
necessary. This included telecommunications technicians, office equipment
repair persons, paper recycles, cleaning crews, electricians etc. Have
someone that represents the interests of your company accompany these
individuals while on your property. Outsider contractors and unauthorized
company employees should never br allowed to roam free unescorted. One
professional snoop brags openly that any building can be entered at any ti