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Annual Report to Congress on
Foreign Economic Collection and Industrial Espionage
July 1995
Table of Contents:
I. Policy Functions and Operational Roles
II. U.S. Government Support to Private Industry
III. Options for Considerations
IV. Foreign Economic Threat
Introduction
Section 809 of the Intelligence Authorization Act for Fiscal
Year 1995 required that the President report to the Congress on
foreign industrial espionage targeted against US industry. The
Act defined foreign industrial espionage as "industrial espionage
conducted by a foreign government or by a foreign company with
direct assistance of a foreign government against a private United
States company and aimed at obtaining commercial secrets.'' The
Act required that the report address four issues:
a. The respective policy functions and operational roles of the
agencies of the Executive Branch of the Federal Government in identifying
and countering threats to US industry of foreign industrial espionage,
including the manner in which such functions and roles are coordinated.
b. The means by which the Federal Government communicates information
on such threats, and on methods to protect against such threats,
to US industry in general and to US companies known to be targets
of foreign espionage.
c. The specific measures that are being or could be undertaken
in order to improve the activities referred to in the above paragraphs,
including proposals for any modifications of law necessary to facilitate
the undertaking of such activities.
d. The threat to US industry of foreign industrial espionage
and any trends in that threat, including:
1. The number and identity of the foreign governments conducting foreign
industrial espionage.
2. The industrial sectors and types of information and technology
targeted by such espionage.
3. The methods used to conduct such espionage.
The National Counterintelligence Policy Board (NACIPB) on behalf
of the National Security Council, tasked the National Counterintelligence
Center (NACIC) to draft a community-based response to this Congressional
requirement. The NACIC solicited input from the relevant Executive
Branch agencies, including the Federal Bureau of Investigation (FBI),
National Security Division; the Central Intelligence Agency (CIA),
Counterintelligence Center; the Department of State, Bureaus of Intelligence
and Research and Diplomatic Security; the Director of Counterintelligence
and Security Programs in the Office of the Assistant Secretary of
Defense for Command, Control, Communication, and Intelligence; the
Defense Intelligence Agency (DIA); the US Army Intelligence and Security-
Command; the Naval Criminal Investigative Service (NCIS); the Air
Force Office of Special Investigations (OSI); the Defense Investigative
Service (DIS); the Personnel Security Research Institute; the National
Security Agency (NSA); the Department of Energy (DOE), Counterintelligence
Division; the Department of Commerce, Office of Export Enforcement;
the Department of Treasury, Office of Intelligence Support; and the
US Customs Service, Office of Intelligence. Input from each of these
agencies has been incorporated into this report.
This study describes the "defensive" measures that the US Government
applies to counter foreign collection of US economic-related intelligence
and information. It also lists the US targets of foreign economic
collection and the methods foreign governments and corporations
use to obtain US economic and technological information. including
at times US Government information that directly affects US industry.
This study does not address the concept of the US Government "offensively" collecting
foreign proprietary information and providing it to US firms, which
is against US policy.
To provide a full scope of foreign economic collection efforts
targeted at US firms, this report examines "foreign industrial
espionage" as specifically requested by Congress as well as other
types of collection efforts that potentially could be damaging
to US national and corporate interests. This report includes collection
efforts by foreign intelligence services, other government agencies,
and private firms, in two broad classes of economic collection
activities-espionage and illicit acquisition of proprietary information,
and other economic collection efforts. In distinguishing between
different types of collection activity, this report is not designed
to establish legal parameters for the activities described, nor
to characterize the actions and decisions of US law enforcement
and intelligence agencies with regard to counterintelligence (CI)
operations and investigations
Espionage and Illicit Acquisition of Proprietary Information.
Espionage and illicit collection activities represent attempts
by foreign governments and/or industry to acquire classified or
non-public information from US firms. Government-sponsored activities
are conducted by entities such as intelligence services, other
government agencies-such as foreign trade offices and S&T attaches-and
private corporations.
Other Economic Collection Efforts.
Foreign governments and industry also collect economic information
from US firms through standard business practices-such as mergers
and acquisitions, strategic alliances, and licensing agreements-as
well as gathering publicly available information. Although these
activities are an accepted element of the business world and are
largely peripheral to the scope of this report, a large body of
reporting indicates that these activities generate a considerable
portion of the technology and economic information obtained by
our competitors. They clearly do not constitute illegal behavior.
however. Open-source collection activities include, but are not
limited to, review of trade journals or corporate annual reports,
market surveys, and attending conferences and symposia. On some
instances, however, these types of collection efforts could be
precursors to illicit collection activities or indicate the intelligence
interest of foreign powers. For example, attempts by a foreign
government's intelligence service to persuade an employee of a
US firm to gather information from the firm's library could be
the first step in setting up a source that would eventually collect
proprietary document. Similarly, joint ventures and licensing agreements
provide ideal opportunities to gather non-public information from
US firms.
This report is divided into four sections, corresponding with
the four parts of the Congressional requirement. A classified version
of this report accompanies this document.
Report the respective policy functions and operational roles
of the agencies of the Executive Branch of the Federal Government
in identifying and countering threats to US industry of foreign
industrial espionage, including the manner in which such functions
and roles are coordinated
The US Government's primary methods for identifying and countering
foreign economic espionage and illicit acquisition of proprietary
information are CI operations and law enforcement investigations.
CI and law enforcement agencies monitor foreign intelligence collection,
ascertain how and against whom it is directed, and determine the
optimum remedy to counter the threat, either through CI methods
or criminal prosecution.
Cl efforts are directed at monitoring, penetrating, and neutralizing
foreign intelligence activities targeted against US national interests,
including economic and industrial interests. Law enforcement agencies
take advantage of CI information as well as develop their own information
through investigations. At times, these two communities have proceeded
separately without effectively coordinating their efforts. Section
111 of this study contains several Executive Branch options to
ensure better coordination and cooperation.
The FBI is the central US Government agency for collecting, analyzing,
and investigating foreign threats to US industry. Because of its
mission as both the US Government's primary CI agency with regard
to foreign intelligence activities within the United States and
in its role as the lead criminal investigative agency, the FBI
is able to use both types of remedies against economic and industrial
espionage. The FBI recently created two new investigative classifications-one
for cases in which there is alleged or confirmed foreign power
involvement and one for purely criminal cases-to better counter
the problem. Current internal FBI administrative reform is designed
to optimize the use of CI and law enforcement remedies.
The US Customs Service is the US Government's primary border
enforcement agency with responsibility for enforcing several categories
of laws that relate to illegal economic activities. For example,
Customs is responsible for enforcing the Arms Export Control Act
and the Export of War Materials Act, which involve munitions control
and trafficking activities. It is also responsible for the enforcement
of export controls of high-technology material and information
under the Export Administrations Act. Economic and industrial espionage
are often connected to trade sanctions and embargoes against designated
countries, strategic trade issues, and protection of intellectual
property rights, and thus fall under Customs responsibilities.
Each Department of Defense (DOD) military service has CI and
criminal investigative components that conduct Cl operations and
investigate foreign economic and industrial intelligence activities
as they relate to DOD programs and systems. Military services work
closely with the FBI when the activity involves violations of Federal
laws or intelligence activity targeted against US persons. The
information developed through this support is disseminated and
coordinated throughout the Cl and security programs communities.
CI and law enforcement investigative agencies rely on several
sources within the US Government for CI information and criminal
leads that they further develop through investigations and operations,
including the following:
- The FBI's Development of Espionage, Counterintelligence, and
Counter terrorism Awareness (DECA) Program provides an interface
with the US corporate community through which the FBI not only
conveys information but also obtains investigative leads from
corporations concerning foreign government and corporate attempts
to illicitly collect US economic and technological information.
- The CIA informs the FBI and other appropriate US Government
agencies when it learns, in the course of its broader
foreign CI and economic intelligence gathering activities,
about a to reign government or company targeting US industry.
For example, the CIA informs the FBI and/or the
Department of Justice of economic espionage information
acquired from foreign government sources. In addition,
the CIA informs the State Department and other appropriate
government agencies of instances of economic espionage
or state-supported unfair trading practices, such
as bribery of contracting officials. The CIA also
prepares analysis on countries engaging in economic
espionage and questionable trading practices for
dissemination to US Government policy makers and
throughout the Intelligence Community.
- DOE's Counterintelligence Division
manages a defensive CI program to identify
and counter threats of foreign economic
and industrial intelligence collection
activities against DOE personnel and
facilities. DOE collects information
through reports on foreigners visiting
DOE facilities and through debriefings
of DOE employees and contractors who
may have been targeted by foreign governments
or corporations. It furnishes this information
as CI leads to the FBI when there is
evidence of foreign intelligence targeting.
- DIS
systematically
collects
Cl information
developed
through
personnel
security
interviews
and industrial
security
inspections.
The Counterintelligence
Office
analyses
this
information
and,
when
appropriate,
provides
it as
Cl and
criminal
investigative
leads
to agencies
such
as the
FBI,
US Customs
Service,
and the
military
services.
Report
the
means
by
which
the
Federal
Government
communicates
information
on
[industrial
espionage]
threats,
and
on
methods
to
protect
against
such
threats,
to
US
industry
in
general
and
to
US
companies
known
to
be
targets
of
foreign
espionage.
US
Government
agencies
identify
and
counter
foreign
economic
espionage
and
illicit
efforts
to
acquire
proprietary
information
from
two
distinct
but
integrated
approaches:
Cl
and
law
enforcement.
As
a
subset
of
those
approaches,
and
taking
advantage
of
the
information
that
the
respective
communities
develop,
the
US
Government
also
counters
those
activities
through
awareness
training.
Awareness
programs
are
designed
to
provide
government
and
private
audiences
with
the
foreign
threat
information
they
need
to
better
protect
classified
and
proprietary
economic
information
from
illicit
collection.
US
Government
contractors
receive
the
vast
majority
of
threat
information
that
flows
from
government
to
industry.
Recipients
include
contractors
for
the
National
Aeronautics
and
Space
Administration
(NASA),
CIA,
and
the
Departments
of
Defense,
Energy,
and
State.
The
primary
US
Government
programs
that
pass
threat
information
to
non-government
affiliated
corporations
are
the
FBI's
DECA
Program;
the
State
Department's
Overseas
Security
Advisory
Council
(OSAC);
and,
on
occasion,
the
CIA's
National
Resources
Division.
NACIC,
which
recently
completed
a
survey
of
the
Cl
needs
of
US
industry,
also
has
implemented
initiatives
to
work
with
these
various
programs
to
provide
more
timely
or
relevant
threat
information
to
the
private
sector.
After
obtaining
information
indicating
that
a
specific
US
company
is
being
targeted
by
a
foreign
intelligence
service
or
government,
the
US
Intelligence
Community
(USIC)
shares
it
with
the
FBI
which
may
inform
the
US
company
about
the
threat.
The
FBI
may
brief
appropriate
personnel
in
the
company
about
the
threat
and
work
with
them
to
counteract
that
threat.
Information
of
a
more
general
nature
also
is
shared
with
the
State
Department's
OSAC
representatives
for
passage
to
the
private
sector.
The
NACIC
will
join
forces
with
OSAC
to
share
threat
information,
particularly
on
the
US
technology
targeted
and
collection
techniques
used
by
foreign
governments.
The
following
tabulation
lists
the
awareness
and
briefing
programs
within
each
US
Government
agency
that
provides
threat
information
to
private
sector
companies:
Federal
Bureau of Investigation
The
DECA
Program
is
the
FBI's
public
voice
and
educational
medium
for
communicating
foreign
threat
information,
especially
the
economic
espionage
threat,
to
the
private
sector.
The
DECA
Program
has
been
in
place
for
over
20
years
and
has
been
an
integral
part
of
the
FBI's
foreign
CI
program.
DECA
coordinators
in
each
of
the
FBI's
56
field
offices
have
regular
liaison
with
companies
located
in
the
field
offices'
territories.
The
DECA
coordinators
furnish
briefings,
videotapes,
pamphlets,
and
other
materials
to
help
the
private
sector
understand
and
recognize
foreign
economic
espionage
threats
directed
at
them.
The
content
of
briefings
and
material
provided
is
tailored
to
the
specific
needs
and
concerns
of
each
company.
The
DECA
coordinators
also
discuss
the
various
methods
employed
by
foreign
governments
to
accomplish
their
intelligence
collection
goals.
During
fiscal
years
1993
and
1994,
the
FBI
briefed
almost
20,000
companies
totaling
nearly
a
quarter
of
a
million
personnel,
in
addition
to
briefings
at
academic
institutions,
laboratories,
and
state
and
local
governments.
The
DECA
Program
is
a
national
effort
with
management,
direction,
and
analytical
support
from
FBI
Headquarters.
As
needed,
FBIHQ
provides
field
offices
with
information,
materials,
and
speaker
support
to
facilitate
a
specific
request
or
need.
It
relies
on
dynamic
and
direct
communication
between
the
DECA
coordinator
and
executives,
security
directors,
and
personnel
in
US
corporations.
In
addition,
the
program
periodically
publishes
a
foreign
intelligence
threat
information
journal
titled
DECA
Notes.
Both
classified
and
unclassified
versions
of
DECA
Notes
and
DECA
briefings
have
been
given
to
US
corporations
throughout
the
United
States.
Department
of State
State
Department's
OSAC
is
a
joint
venture
by
the
Department
and
US
businesses
to
interact
on
overseas
security
problems
of
mutual
concern,
including
foreign
economic
threats.
OSAC
is
administered
under
the
State
Department's
Bureau
of
Diplomatic
Security
(DS).
Over
1,400
private-sector
organizations
participate
in
its
activities
and
receive
information
and
guidance.
As
part
of
the
growing
emphasis
on
the
threat
to
US
business,
OSAC
established
a
Committee
for
Protection
of
Information
and
Technology
that
seeks
to
improve
the
government-industry
partnership.
OSAC
also
oversees "Country
Councils" in
selected
foreign
cities
that
consist
of
US
embassy
security
officers
and
other
post
officials
working
with
security
managers
of
US
private-sector
enterprises
to
exchange
unclassified
security
information
in
a
timely
fashion.
There
are
Country
Councils
in
25
foreign
cities,
with
five
more
planned
for
1995.
Country
Councils
enable
OSAC
to
pass
threat
information
to
industry
and
to
gather
information
from
US
corporations
concerning
threats
to
US
economic
security.
Government
and
business
representatives
have
joined
with
OSAC
to
produce
a
series
of
publications
providing
guidance,
suggestions,
and
planning
techniques
on
a
variety
of
security-related
issues,
including
a
booklet
titled
Guidelines
for
Protecting
US
Business
Information
Overseas,
the
latest
version
of
which
was
published
in
November
1994.
To
exchange
threat
information
as
expeditiously
as
possible,
the
State
Department
created
the
OSAC
Electronic
Bulletin
Board
(EBB).
The
EBB
is
an
unclassified
on-line
system
available
to
OSAC
member
companies
that
serves
as
the
focal
point
for
the
exchange
of
information
between
the
Department
of
State
and
the
US
private
sector.
More
specifically,
DS's
Office
of
Intelligence
and
Threat
Analysis
(ITA)
uses
the
EBB
to
provide
US
corporations
doing
business
abroad
with
timely,
unclassified
security
related
information.
US
firms
supplement
ITA's
information
by
voluntarily
submitting
accounts
of
security
or
crime
incidents
affecting
their
own
or
other
US
overseas
operations.
The
EBB
currently
contains
over
42,000
individual
reports
of
various
types
of
threats
overseas.
Central
Intelligence Agency
The
CIA
provides
information
to
the
FBI
for
use,
as
appropriate
and
in
accordance
with
memoranda
of
understanding
and
executive
orders,
in
the
DECA
Program.
On
occasion,
the
CIA
briefs
US
corporate
officials
directly
concerning
the
foreign
intelligence
threats
facing
US
companies.
The
CIA
has
presented
these
briefings,
which
describe
the
ways
various
countries
conduct
economic
intelligence
collection
against
the
United
States,
to
individual
corporations
and
at
industry-wide
conferences,
often
with
FBI
participation.
The
briefings
cover
foreign
economic
activities
worldwide,
focusing
on
intelligence-gathering
techniques
used
by
specific
countries.
The
CIA
plans
to
offer
another
briefing
on
commercially
available
technical
gear
used
by
foreign
services
to
conduct
economic
espionage
against
US
companies.
As
appropriate,
CIA
coordinates
with
other
US
Government
agencies,
specifically
the
FBI,
before
notifying
a
US
company
that
it
is
the
specific
target.
CIA
also
is
participating
extensively
in
planning
and
implementing
an
array
of
activities
under
the
auspices
of
the
NACIC's
new
interagency
Awareness
Working
Group
(see
below).
These
programs
are
designed
to
inform
and
assist
US
companies
that
are
actual
or
potential
targets.
Department
of Defense
The
Defense
Intelligence
Agency,
under
its
Defense
Information
Counter
Espionage
(DICE)
program,
conducts
briefings
at
conferences
attended
by
government-affiliated
contractors
and
provides
current
threat
information
for
training
courses
for
DOD
contractor
personnel.
The
subjects
of
these
briefings
include
economic
intelligence
collection
activities
by
friendly
countries
and
threats
of
illicit
technology
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