The Real-Life SPECTRE | The $500 Billion Economic Espionage Problem

Posted by Luke Bencie on Tuesday Dec 27, 2016 7:45 pm

Ask most Americans what they know about the word “espionage” and they might answer something about the CIA battling the KGB during the Cold War, maybe a tuxedo-clad James Bond drinking martinis, or big brother spy satellites reading license plates from space. All kidding aside, most Americans are unaware of the serious problem which the FBI labels as the “second greatest threat (behind terrorism) to the US homeland.” So what is this menacing threat? I am, of course, speaking of economic espionage from hostile foreign entities - essentially the real-life SPECTRE!

Just like the fictional SPECTRE from the classic (and most recent) James Bond films, hostile foreign intelligence services (FIS), hacktivists, business competitors, and cyber-criminals have gotten into the act of stealing billions of dollars-worth of American intellectual property and business intelligence (IP/BI) for their own staggering financial gain.

While most Americans probably recognize that governments spy on each other for national security reasons, it may surprise them to know that the theft of military secrets has been supplemented by governments stealing secrets which pertain to corporate investment plans, competitive bidding strategies, research and development formulas, and other business related areas. If you were to take a poll of all the Fortune 500 CEOs in the United States, and asked what keeps them up at night, you might be surprised to discover that economic espionage ranks very high among their most worrisome concerns. In fact, one out of every four cases that the FBI is currently investigating involves economic espionage!

According to the Economic Espionage Act of 1996, economic espionage is defined as the theft or misappropriation of a trade secret with the intent of knowledge that the offense will benefit any foreign government, foreign instrumentality, or foreign agent. As such, it should come as no surprise that countries such as China, Russia, France, Iran, Cuba, Israel, Japan, and India are commonly alleged to have involvement with the theft of valuable U.S. business secrets. Most of the time these countries deny any involvement with economic espionage activities, however on some occasions they are caught “red-handed” or simply boast about their successes. One of the most notable cases (or myths – depending upon who you ask), involved the admission from retired director of the French intelligence service (Direction Generale de la Secuirite Exterierure – DGSE) Pierre Marion. Marion, on more than one occasion confessed publicly to installing audio devices in the business class cabin of Air France flights to listen in on the conversations of American businesspersons.

To justify the action, Marion was quoted as saying:

“This espionage activity is an essential way for France to keep abreast of international commerce and technology. Of course, it was directed against the United States as well as others. You must remember that while we are allies in defense matters, we are also economic competitors in the world.”

In 2013, I released my first book entitled, Among Enemies: Counter-Espionage for the Business Traveler. While performing research on global espionage cases, my conclusion was that $300 billion dollars-worth of American intellectual property and business intelligence (IP/BI) was stolen annually by hostile foreign intelligence services (FIS), economic competitors, and “private collectors” (i.e., cyber thieves/hackers selling stolen information to the highest bidders). Later that same year, the US Congress released their own findings from the IP Commission on the Theft of American Intellectual Property, which was led by former Director of National Intelligence, Denis Blair, and former Ambassador to China, Jon Hunstman. The study concluded similar findings that the US was losing $300 billion annually. At the writing of this article (December 2016), the FBI reports that the number has now increased 40% to $500 billion. In fact, Forbes Magazine – citing Juniper Research – claimed that increased levels of hacktivism, coupled with bigger targets of opportunity, will push that figure up to $2.1 trillion by 2019!

So Where Does it End? Protecting Against Economic Espionage

Self-preservation in the competitive corporate arena has always been about survival of the fittest. Now, however, it is not just about having the best product, the smartest employees, or most financial resources. Economic espionage has become such an equalizer that smaller international firms can skip the expensive R&D phase and simply cheat their way into the market. Although the FBI and other US Government agencies, such as the Office of National Counterintelligence Executive (OCNIX), are doing their best to educate the business community about the threats of espionage, the onus will still fall on the individual companies in the future.

Only through internal employee training programs, which focus on the importance of adhering to enhanced counter-espionage policies and procedures, will valuable IP/BI stay out of foreign hands. Sorry James Bond, but it looks like you will need help from the private sector if you’re going to stop these SPECTRE-like organizations from committing economic espionage in the coming years.

Luke Bencie is the Managing Director for Security Management International, LLC a global intelligence advisory firm located in the Washington DC area. He is also the author of Among Enemies: Counter-Espionage for Business Travelersand Global Security Consulting: How to Build a Thriving International Practice. He can be reached at lbencie@smiconsultancy.com.

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