Economic Espionage

Conducting Business in the International Marketplace

June 1999

Editor's Note: A previous CSIS Liaison / Awareness Brief Economic Espionage: Clandestine Methods Used to Disadvantage Canadian Interests (April 1998), identified some economic espionage methodologies used to disadvantage Canadian interests. The purpose of this brief is to highlight some of the economic security issues that impact upon individuals and organizations who conduct international business. The vulnerability of Canadian businesspeople to acts of economic espionage can be reduced through timely information about the practice of economic espionage in the international marketplace and the adoption of personal security practices.

This brief is published as part of CSIS's national Liaison/Awareness Program. Through this program, the Service seeks to establish ongoing dialogue with organizations, both public and private, concerning the threat posed by those engaging in computer-based attacks against Canadian interests and by foreign government involvement in economic espionage.

Introduction

With the international political and economic scene in constant flux, the target of espionage has changed. Economic espionage has become a very real threat that can emanate from any country. Many countries can and do use their state apparatus, including their intelligence resources, in the name of national economic competitiveness. In some instances foreign governments facilitate this espionage by turning a "blind eye" to these activities. State-owned and controlled corporations have also been implicated in economic espionage activities. The target of these intelligence resources and intelligence gathering activities include government officials, trade delegations, business executives and scientists. The effectiveness of these espionage activities are increased when they are practised against unwitting persons abroad.

Traditionally, neither business nor government took stock of the damage caused by economic espionage. However, recent private and public accounts of overseas incidents have highlighted that the financial cost may be in the hundred of millions of dollars. Non-financial damage to business can include public embarrassment for a company, the tarnishing of a corporate image, loss of business confidence from partners or shareholders and a public misconception that a company is a security risk because it cannot protect its sensitive information. One of the long-term effects of economic espionage is an erosion of a country's research and development base. The cost to develop new ideas and bring them to fruition is capital intensive, and the loss of the resulting technology or research information surrounding just one project can be financially debilitating. Legal recourse can prove to be a lengthy and unrewarding experience that provides inadequate restitution. This can be particularly complicated, time-consuming and expensive if it is pursued through foreign jurisprudence.

Travelling

Overseas travel is a necessary component of everyday business for many companies. Business must seek out foreign markets and new buyers. Recognizing this fact, knowledge of some of the possible economic espionage scenarios one might face when travelling in a foreign country is helpful.

It is not always possible to know whether economic espionage is part of the business milieu of a country. Political and economic instability can aid in creating an atmosphere conducive to economic espionage. However, it is important to remember that all countries carry the potential for conducting economic espionage. Additionally, the level of sophistication available to industrialized countries in comparison to non-industrialized countries, rises dramatically.

Foreign countries have used their intelligence services to target the industrial and commercial companies of competing nations. Espionage is one venue toward gaining an effective advantage in the scientific and technological arena in addition to strengthening national economic interests. Public information has revealed that in some instance, countries gather this information on behalf of the state-owned corporations. Additionally, some state-owned corporations may practise economic espionage in their financial dealing at home and abroad.

Intelligence officers operating within the boundaries of their own country have the advantage of access to and cooperation amongst a wide network of local contacts. They also have enhanced knowledge of local geography and access to government support and resources when conducting clandestine targeting.

There are public statements that several countries maintain branches of their intelligence services to conduct economic espionage operations against foreign business and government personnel. Some of these statements include charges of collusion between the local telephone service and the national intelligence service. Many countries have the capacity to eavesdrop on transatlantic and transpacific communications, including phone and fax. Other means by which they can gain access to sensitive information is by covertly bugging and breaking into hotel rooms, hacking into computer databases, physically stealing computers, infiltrating personnel into companies, appealing to employee nationality, threats, coercion and bribery.

Any data can be targeted if it has an economic or strategic value. This can include sales data, client/supplier lists, technical drawings/details, research and development results, corporate planning documents, pricing documents or bidding strategies.

Travel Plans

When making plans to travel be aware that there is a possibility that a foreign intelligence service or a foreign interest, may have taken notice of your travel plans. Some countries monitor businesspeople of interest who travel overseas. Some competitors are interested in the overseas meetings that take place between businesspeople and prospective partners. Valuable information can be obtained through seemingly innocuous conversations that take place en route to a business destination. There are public reports of aircraft being bugged. Stewards may be overhearing conversations that they should not be privy to. An individual who takes an active interest in your company or its products may not simply be an overly inquisitive student or scientist. It is important to keep sensitive facts and details out of casual conversations with unknown individuals.

There are public allegations that some hotels and their staff have colluded with people committing economic espionage. In order to reduce the chance that your stay in a particular room might e the subject of unwanted attention, hotel arrangements can be made on your own and details kept confidential. If an unknown business contract is insistent on a particular hotel, or if you are unfamiliar with hotels in a particular city, it does not hurt to ask for two or three options.

Taxi drivers can be used as a source of information. Business discussions that take place in the back of a taxi are not necessarily secure. There is no guarantee that the driver is oblivious to the conversation or unknowledgeable about the language spoken. Some taxi drivers may be used to collect specific individuals from the airport or hotel for the specific purpose of overhearing or recording a sensitive conversation.

Transportation of Sensitive Documents

Many businesspeople carry sensitive documents and laptop computers with them when they travel. This can place their information in a vulnerable position. Documents can be photocopied or photographed when they are out of your possession. Laptop computers can have their files copied. Restaurants, hotels, foreign company offices, can all offer brief opportunities for documents or laptop computers to be compromised when left unattended.

The easiest solution is simply not to carry valuable information with you when you travel. If you must carry sensitive information with you, try to keep it small, concealed and easily stored on your person. Key information can be kept on a diskette or reduced to cue-card sized documents and enlarged later. Luggage checked onto an airline is vulnerable to interception. Unprincipled employees may search specific baggage for information or technology that they have been alerted to retrieve ahead of time. Packages sent overseas with commercial carriers can be the subject of interception by foreign interests practising economic espionage. Packages can arrive late, damaged or not at all. Packaging articles so that they cannot be tampered with is one option to detect and discourage targeting. Using a reliable and reputable carrier can also decrease the chance of tampering or interception. Sending bids by two independent carriers can reduce the possibility of a lost or delayed bid.

Business Contacts

Business contacts can come from all manner of sources. These contacts can be individuals met through trade shows or conferences, individuals introduced through business associates or simply individuals that have "cold called". It is always important to know a businessperson's bona fides. Unsolicited calls from contacts overseas should be researched and confirmed, including checking any references they provide. There have been examples of individuals from overseas "governments" appealing to Canadian business to provide business bank account numbers into which they could deposit money. Once the numbers are provided, the overseas "officials" take money from the account, not deposit money into it.

Businesspeople can be approached by foreign individuals at international trade shows on the pretext of purchasing their technology while in fact, the individuals are interested in gaining detailed information on the company's inner-workings, its technology or its R&D. Keep track of all information and technology brought to a show. Keep it secured when attending to other enquiries. Any inquiry or request of a suspicious or unusual nature should be noted. These instances can prove valuable in forewarning other businesspeople to potential harm.

Overseas travellers must assume that hotel and conference rooms, as well as foreign business offices, are not secure areas within which one can discuss or divulge sensitive information. These rooms do not provide adequate security for unattended documents or laptop computers. Phones can be tapped and rooms can be monitored, clandestinely entered and searched. Scraps of paper of information that might be casually dumped into the trash can be retrieved to provide information on evolving business deals or contacts. Hotel safes may also be accessible to foreign intelligence services.

Communications

Many countries have very powerful electronic interception capabilities. Satellite communications can be intercepted by countries who monitor international communications. A limited series of prearranged words and codes for use over the phone or fax can allow a discussion of business matters between an overseas employee and a head office, if the need arises. Encryption systems for fax information and overseas communications gives greater security than open communications; however, even the use of these systems does not offer complete security against foreign intelligence resources.

Computers

Computers and electronic communications have become a mainstay of the business and government workplace. Computers store, transmit, retrieve and interpret large quantities of information and technological data. Internet and World Wide Web are playing an increasingly important role in connecting up computer users on the information highway. As such, they are also a sensitive and vulnerable target. Information stored in computers can be remotely accessed and retrieved from around the world via international communications links. These links can be intercepted and deciphered. Hackers can enter public and private sector databases. Modern-day technology even permits the retrieval of information previously erased from a computer's memory.

Conclusion

The national economic strength of a country is gauged in part by the health of its corporations and their ability to succeed in the global marketplace. A nation's ability to promote and protect its economic strength is as essential as its ability to defend itself. It is for these reasons that some foreign nations and their state corporations may find it more convenient to use their intelligence resources in pursuit of economic espionage against specific companies and personnel.

It is conceded that the vast majority of business conducted by Canadians in the overseas marketplace happens without incident. However, it is important to recognize that as the economic stakes in business rise, so too does the temptation to cheat. This document is designed to aid in forewarning and forearming Canadian business against such a possibility.

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Comments on this brief are welcome, and should be directed to the National Coordinator, Economic and Information Security, Box 9732, Station "T", Ottawa, K1G 4G4, phone 613-231-0100, fax 613-842-1390. If you'd like to talk to CSIS regarding a particular security concern, please contact the local Economic and Information Security Coordinator at one of the CSIS offices listed below: