Espionage
Geopolitics
Research Security
The Evolution of Espionage: From Cold War Politics to Modern Day Business
When we think of the secretive world of Espionage, what comes to mind are the thrilling spy stories of the Cold War where the CIA and the KGB represented the “secret” front line. As an ever-evolving and adaptive field, espionage has infiltrated the economic realm to continue shaping global dynamics covertly. With private businesses becoming increasingly linked to the geo-political context we find ourselves in, economic espionage has now taken the lead as an economic threat for organisations, and a national security threat to states. But how has espionage truly changed? What is the role of insiders in economic espionage? And how can businesses protect themselves and the national security interests of their country from compromise?
Whilst the art of espionage has been an asset for thousands of years, it became the forefront of conflicts and political affairs throughout the late years of World War II and the subsequent Cold War. Indeed, traditional espionage revolved around gathering political and military information, spreading disinformation, carrying out assassinations, and catalysing regime changes.
Economic Espionage: How History Informs Today’s Threat Landscape
We all know the cases of Aldrich Ames and Robert Hanssen, but the example which can best outline traditional economic espionage is the Russian infiltration of the Manhattan Project. The Soviet “Atomic Spies”, including Klaus Fuchs, as they became known, penetrated the Manhattan Project, passing on incredibly valuable information about the design of the nuclear warheads to the USSR. Ultimately, the secrets obtained through the infiltrated, self-motivated, and coerced insiders allowed the USSR to develop their replica of the atomic bomb sooner and cheaper than it would have otherwise. This allowed the USSR to e maintain its competitiveness in the post-war order and helped establish the nuclear stalemate that would define the Cold War and is still an essential part of different geopolitical conflicts.
Another relevant example is that revolving around Adolf Tolkachev: As outlined by the CIA, the ideologically motivated “Billion Dollar Spy” provided American intelligence services with information regarding air missile technology and fighter aircrafts. It is estimated that this information provided a massive competitive advantage, saving the U.S. more than $60 billion in R&D when adjusted for today’s inflation. As these examples illustrate, economic espionage has always been an alluring strategy to gain an upper hand, but as we will see, the subjects of economic espionage have changed dramatically.
Indeed, whilst the dramatic nature of clandestine operations targeting military and political branches of nation-states during the Cold War period has inspired many staples in the media, today’s reality in the realm of espionage has changed dramatically. As the Dutch Intelligence Agency AIVD has stated, the greatest threat to Dutch economic security emanates from Chinese corporate takeovers, espionage and insiders. Similarly, FBI Director Christopher Wray stated that the “greatest long-term threat to our economic security, and by extension, to our national security… is the counterintelligence and economic espionage from China”.
Economic Espionage in the 21st Century: Implications for Business and National Security
These statements drive the targeting of businesses to the front line of New Ag Espionage. Even if less breathtaking than the Cold War, contemporary economic espionage still represents an attractive avenue to make technological advances and increase competitiveness for states and their businesses. With the increasingly intertwined relationship between economic security and national security (the semiconductor industry represents a telling example), private entities are proprietors of technology and knowledge sought by both commercial competitors and nation-states.
In a nutshell, Economic espionage concerns obtaining sensitive financial, trade, or economic policy information: proprietary economic information: or critical information. Economic espionage can equip businesses and state-controlled entities with the knowledge and proprietary economic information to develop technologies for fractional costs, inflicting significant economic damage on the victim organisation. As of 2017, the U.S. Intellectual Property Commission estimated that Intellectual Property theft is costing more than $225 billion annually. This is also ignoring the reputational cost that businesses may incur when they become victims of economic espionage. Indeed, perceptions that organisations cannot safeguard their sensitive information, or that of their clients, can have long-lasting consequences on future customers, partners and crucially, investors.
The Insider Risk: The Role of Employees in Economic Espionage
Although many threats originate from external sources, such as cyberattacks or covert operations which gain access to organisations’ proprietary information, businesses cannot discount the role that insiders play in facilitating economic espionage, both wittingly and unwittingly. In fact, technological advancements have revolutionised the threat landscape and subsequently the tactics of economic espionage. Enhanced access and increased connectivity expand the exploitable vulnerabilities and facilitate hackers and external actors to infiltrate networks from remote. Data abundance and the digitisation of business have created new targets for economic espionage, whilst also increasing the access to data which insiders can provide competitors and adversaries with. Insiders are those with privileged access to sensitive information and thus represent an access point that competitors can leverage and benefit from.
But how are insiders leveraged by external competitors? Whilst some insiders are ideologically motivated or have clear personal predispositions, intelligence agencies are developing increasingly ingenious ways to coerce and leverage insiders to their advantage, something known as social engineering. This can include both something as simple as a phishing e-mail, to a complex coercion of an individual by clandestine operatives. Building on the Moinian case below, Chinese clandestine operatives took advantage of financial and personal stressors Moinian was experiencing, including a divorce, and mounting financial obligations. Canadian Security Intelligence Services have also highlighted the use of LinkedIn as a recruitment tool of labour for Chinese intelligence officers.
Such developments allow us to consider how espionage tactics have changed.
Economic espionage may then seem like a mirror of the East vs West Cold War dynamics, we have also seen divergent cases against this status quo. France, for example, has been publicly fearful of U.S. economic espionage, especially following the case of Gemplus, and as we will explore shortly, China has been committing economic espionage on regional neighbours such as South Korea. Indeed, the contemporary high-profile cases of economic espionage are countless, and many revolved around socially engineered or intentional insiders, including:
- Shapour Moinian, Insider Espionage for Chinese authorities: Moinian sold crucial aviation-related proprietary information from an unnamed defence contractor to Chinese authorities. Whilst the effective cost of this insider act is hard to estimate, the Chinese government obtained technological advances for a fraction of the cost which the research and development would have cost them.
- Murray JR. Insider Espionage for Russia: Rowe Jr. attempted to share the proprietary knowledge of an unnamed military contractor with a supposed Russian agent, who was instead an undercover agent of the FBI. In this case, the FBI and the military contractor noticed the personal predispositions early enough to ensure that Murray Jr. did not compromise and damage the organisation and American national security.
- Samsung Electronics Semiconductor theft: Former executive arrested and indicted for leaking leading technologies on design and fabrication plant blueprints to build a copycat in China. The incident has cost Samsung $230 million, with South Korea introducing new intellectual property laws to protect national economic interests and national security.
- Edward Schulz – Dupont: Trade secrets regarding DuPont’s Kevlar Research and Development, and manufacturing processes, were sold to a South Korean company (Kolon Industries) that sought to enter the market with reduced resources and compete with DuPont. Kolon Industries was ordered to pay $85 million in fines, and $275 million in restitution, whilst Schulz was sentenced for conspiracy to steal trade secrets.
Additionally, it’s important to underline that Insider Risk Programmes should be designed with GDPR and other relevant regulations in mind. Privacy is not being compromised; it’s being safeguarded.
Safeguarding Against Espionage: Steps Towards Robust Business and National Security
But what countermeasures can organisations implement to protect their proprietary information, maintain their competitiveness, and contribute to national security resilience? The answer lies in adopting a holistic approach to insider risk management. This approach involves implementing a comprehensive program that integrates technical and physical security controls, fosters a positive security culture, and provides rigorous training.
