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Economic Espionage and the Damage it Causes Companies

Economic espionage, corporate espionage, industrial espionage, commercial espionage: different commonly terms for the same general idea.

According to the Economic Espionage Act of 1996, legislated by the United States Congress, economic espionage is the theft or misappropriation of a trade secret with the intent or knowledge that the offence will benefit any foreign government, foreign instrumentality, or foreign agent.”

The United States Federal Bureau of Investigation (FBI) defines economic espionage as a:

“foreign power-sponsored or coordinated intelligence activity directed at the U.S. government or U.S. corporations, establishments, or persons, designed to unlawfully or clandestinely influence sensitive economic policy decisions or to unlawfully obtain sensitive financial, trade, or economic policy information; proprietary economic information; or critical technologies. This theft, through open and clandestine methods, can provide foreign entities with vital proprietary economic information at a fraction of the true cost of its research and development, causing significant economic losses.”

FBI

Espionage is a term associated with foreign interference or spying, but within this practice, that isn’t always the case. Domestic businesses can conduct economic espionage for their own monetary gain, or to use stolen trade secrets to assist research and development. I will elaborate on this later.

Economic espionage in the Modern Age

Gone are the days of simplicity in the espionage realm. That isn’t to say the practice was ever “simple”, but modern technology has summoned new storms agents must weather through.

For example, before the internet, analog was the standard. HUMINT, physical collection of materials, wiretapping… all the known covert operation tropes.

In their infancy, computers and the internet were reserved for a niche element of the population: the academic, scientific, medical, and government sectors. As known, both are almost a necessity in the modern world. The internet of things is global, and once un-affordable computers are now household items.

The commercial sector practically relies on these two technologies to function. Automation, cloud storage, vast networks and massive server rooms, all ways of modernizing business operations. There is a catch, however. With the internet of things comes vulnerabilities. Premium hunting grounds for an economic espionage practitioner.

Security expert Iosif Androulidakis writes:

“Industrial espionage is more common in high-tech industries like electronics, automotive, pharmaceutical, chemistry biology, aerospace, and energy. In these highly competitive industries, once data leakage occurs, there is very little that can be done to limit the impact, while losses can be overwhelming.”

Cyber espionage has become the leading practice underneath the economic espionage umbrella.

Methods to the Madness

Security expert Daniel J. Benny considers five conditions for the successful completion of economic espionage. It is paramount to understand these for effective counterintelligence operations against it:

  1. Motive – the practitioner’s motive may vary, ranging from monetary gain, to being driven by political, social, or religious beliefs.

  2. Opportunity – opportunity equates to the levels of access a practitioner has to protected information. A lack of security is arguably the most commonly exploited opportunity. That includes both physical securities, and cyber security.

  3. Rationalization – rationalization is the internal justification that a practitioner develops. That ranges from ideological leanings to the idea that a company can easily suffer an economic loss.

  4. Ability – ability is the means in which concepts like loyalty, moral values, and natural inhibitors, can be put aside by the practitioner.

  5. Trigger – the trigger that leads a practitioner into corporate espionage. This could be personal, such as being the victim of blackmail, or as an agent involved in a conspiracy, or working for outside actors, domestic or foreign.

Contrary to what you may believe, it isn’t always illegal. Ethically questionable? Sure. But not necessarily prison worthy.

For example, take trade shows. Employees conducting espionage on behalf of another company can use a trade show as a platform to gain access to information on their competitors. Of course, the way in which that is done can be the defining line between ethics and illegality.

When it comes to execution, there is an array of methods used by economic espionage practitioners:

  • Spearphising attacks.
  • Trojan horse attacks.
  • Keylogging devices (either digitally inserted on the target or physically inserted using a specialized device).
  • Man-in-the-middle-attacks.
  • Wiretapping (a bit archaic, but still possible with modernized means).
  • Social programming.
  • Covert cameras.

One of the most effective practices of corporate espionage is getting human agents embedded with a target company. This requires a “long game” mentality and is often done at higher levels (such as targeting tech companies, or companies that have sensitive research that gives them a marketplace advantage).

If successful, a practitioner works their way into the higher echelons of a company. Not necessarily leadership, but to a position that gives special access to compartmentalized areas. They can also cultivate relationships with co-workers, and use gained knowledge to conduct social programming (social media information, social security numbers, addresses, phone numbers, etc). In return, that information can be used to hack into systems or even blackmail.

Economic espionage case study: Renault Motors

When someone says economic espionage, China and Russia are usually the first countries to come to mind. For good reason, but they are far from the only ones.

In 2011, the French automobile manufacturer Renault was in the headlines. The claim? Economic espionage, at the highest levels.

Renault is a successful European car manufacturer, that is partnered with Nissan and 15% owned by the French state. At the time, they aspired of entering the electric car market. It is notable to add, that the electric car market is still young ten years later. Tesla is at the top of the food chain, with other companies desiring the ability to reproduce what they have mastered. In general, this is an example of “motive”.

The Renault scandal started with an anonymous tip, leading to an internal investigation conducted by the company’s private security team. That investigation revealed three possible conspirators. According to Reuters:

“On the afternoon of January 11, the three men were summoned separately to Renault’s headquarters. They were read short statements. In dismissal letters, dispatched to the men 48 hours after the meetings to conform to French law, the men were confronted with a range of allegations including leaking information and receiving bribes.”

Reuters

The three men were no mere peons in the company structure. Michel Balthazard was the senior vice president for advance engineering. Bertrand Rochette was Balthazard’s deputy. And lastly, Matthieu Tenenbaum was the deputy head of Renault’s electric vehicle program. The access these men technically had, guilty or not, is an example of opportunity.

Information on the company’s electric vehicle program was a main element of the charges, particularly the investment model. One may assume that the actual technology would be the target, but this shows the variety of valuable information achievable at this level of economic espionage.

The extent of the claimed espionage was never unearthed. In fact, it was the subject of controversy, with claims it was fabricated from the beginning.

Nevertheless, the scandal as it stands is an interesting case study in economic espionage, particularly in how it can theoretically happen at the highest points of the corporate ladder. The right motives, and opportunities, as well as support and effective implementation of tradecraft practices, equate to successful espionage.

In the words of Sun Tzu, “There is no place where espionage is not possible.

Author

Michael Ellmer

Michael served as an infantryman in the United States Marine Corps with tours to Iraq and Afghanistan. After leaving the Corps, he completed his undergraduate studies at Seattle Pacific University, majoring in communications. He is currently a graduate candidate at Brunel University, where he is pursing a master’s degree in Strategic Intelligence Analysis.

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