Economic Counterintelligence

Louis J. Freeh Director of the FBI before the House Judiciary Committee Subcommittee on Crime testified concerning ECONOMIC ESPIONAGE on May 9, 1996. He said:

The development and production of proprietary economic information is an integral part of virtually every aspect of United States trade, commerce and business and, hence, is essential to maintaining the health and competitiveness of critical segments of the United States economy. The theft, misappropriation, and wrongful receipt, transfer, and use of United States proprietary economic information, particularly by foreign governments and their agents and instrumentalities, but also by domestic malefactors, directly threatens the development and production of that information and, as a result, directly imperils the health and competitiveness of our economy.

The FBI has developed an Economic Counterintelligence Program. They, however, do not hold a monopoly on the Counter Intelligence of Economics. To start with the INTELLIGENCE REFORM AND TERRORISM PREVENTION ACT OF 2004, TITLE VII, Subtitle G requires the Secretary of Treasury to convene an inter-agency council to develop policies to be pursued by the United States regarding the development of common international anti-money laundering and combating the financing of terrorism standards.

The NSA and CIA like-wise work to exploit the money trail of the enemies of the USA.

The impact of economic espionage against the US is hard to measure. During the FBI director’s testimony, he stated:

Neither the U.S. Intelligence Community as a whole nor the FBI specifically has systematically evaluated the costs of economic espionage. The U.S. private sector has recently made some efforts to estimate its losses to economic espionage and other foreign economic intelligence operations; however, to date, these cost estimates have generally been based upon small, unrepresentative samples of the U.S. business community and have tended to emphasize companies with holdings in the United States rather than overseas. Understandably, U.S. industry is reluctant to publicize occurrences of foreign economic and industrial espionage. Such publicity can adversely affect stock values, customers' confidence, and ultimately competitiveness and market share. Nevertheless, in the last few years, there have been a number of studies and estimates, which have attempted to quantify the scope and impact of economic espionage

Should the FBI have sole responsibility for the CI of espionage? Referring to the current mission of the FBI, its has established as its highest priority the prevention of terrorist attacks on the US. It appears that unless the terrorists intend to conduct espionage to effect their terror, the FBI will not place economic espionage as a top priority. The Treasury Department on the other hand is primarily concerned with money, money laundering and other related activities. They, however, appear to lack CI skills and operational experience in dealing with foreign spies or terrorists.

There remains a responsibility on private companies to prevent exploitation of intellectual data and property as well. More recently, industries are developing better encryption and security standards to combat the threat. According to these sources, the threat they and we face, is real:

• In 1992, a survey by the American Society for Industrial Security found that all types of commercial espionage during 1991-92 resulted in major losses to U.S. firms in the following areas: pricing data ($1 billion), product development and specification data ($597 million), and manufacturing process information ($110 million).
• In 1982, the U.S. International Trade Commission (ITC) estimated that piracy of U.S. intellectual property rights in five selected industrial sectors cost the nation's business $6 billion to $8 billion in annual sales and cost U.S. citizens 131,000 jobs. In 1987, ITC estimated worldwide losses to all U.S. industries at $23.8 billion. (Using the 1982 average loss ratio of $7 billion = 130,000 jobs, this would constitute a loss of about 450,000 U.S. jobs.) The last ITC study, conducted in 1988, estimated that U.S. companies lost from $43 billion to $61 billion in 1986 alone from foreign intellectual property right infringement.
• The October 1995 issue of FOCUS magazine, in a discussion on the loss of U.S. intellectual property, estimated that the unauthorized copying and counterfeiting of medicines by Argentina, Brazil, India and Turkey alone is costing U.S. drug firms more than $1.5 billion annually.

Due to the nation’s focus on terrorism, combating economic espionage has taken a back burner. I believe that our nation still faces this threat. I also believe that a national effort is required by all in the intelligence community as well as those in the private sector. The FBI, because it already has a program in place and has historic expertise in crime fighting should be the point of contact for all info regarding economic espionage. They should, however, work closely with the Treasury Dept as well as with others in the IC.

The FBI may be in a position to address espionage issues here in the US, however, many US companies are located overseas. This creates a jurisdictional dilemma with the CIA. If congress authorizes the FBI to handle all cases of this type, and require the CIA to cooperate, they may be able to work overseas as well.

Where should economic intelligence stand on our list of priorities? Good question. Right now, the nation is focused intently on combating terrorism. Putting threats into perspective is difficult. We have to look at what could happen vs. the likelihood that it will and the cost involved preventing it.

The likelihood of dieing in a terrorist related incident in the US is astronomically low. Most will die of heart disease. Yet, we focus on the tragic news events and sensationalize the car crashes and plane crashes. Perhaps for the same reasons, we do not publicize the economic espionage attacks because they are boring or do not involve blood and gore. What is more important, human life or money? Perhaps we should prioritize our nation’s defense based on that.