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Economic Espionage: China: The Risk to Corporate America

Friday, October 4, 2019   (0 Comments)
Posted by: Lisa Richter
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Economic Espionage: China: The Risk to Corporate America

Patty Perkins Kenney, Special Agent, St. Louis Division of the Federal Bureau of Investigation within the U.S. Department of Justice, first spoke about the organizational structure of the FBI that includes a counterintelligence squad located in St. Louis to addresses economic espionage and the theft of trade secrets. Protecting America’s trade secrets is their mission.

Special Agent Kenney first explained that China, Russia and other countries have intelligence agencies challenging American power, using trade intelligence to grow their military as well as economic capabilities. China was profiled as a primary economic threat.

The U.S. economy is losing $250-$260 billion per year from loss of trade secrets to China. The majority of the 10 largest global companies are now Chinese in contrast to the beginning of this century when the majority were U.S.-owned companies.

China has a strategy to become most dominant economic power through:

1. Joint ventures and research partnerships with the U.S. and other countries

2. Front companies that the Chinese government sponsors

Traditional intelligence collectors are intelligence officers and their recruits. Non-traditional collectors (Chinese or from other countries) now include businesspeople, researchers, computer and cyber security hackers, employees at joint venture companies, STEM graduate students, post-doc researchers and diplomats. Economic espionage now occurs in many more and varied environments.  

China has a government-funded talent development program for scientists, professionals and government employees to take research from U.S. federally funded programs and our private sector companies and university research programs back to China. While the Chinese military gets 7-8% of China’s GDP, the country’s talent program budget is twice as large.

Example of theft of trade secrets: China tried to steal seeds from U.S.-based agricultural companies which failed. But ChemChina bought the Swiss-owned Syngenta seeds and pesticides group in 2016, the largest ever foreign purchase by a Chinese firm.

Chinese citizens who engage in economic espionage activities are unable to say no to their government when asked to turn over competitive intel information, trade secrets from joint partnerships and research work in and with U.S companies. The safety of their families is in jeopardy if they do not cooperate with the government.

What is the U.S. doing about economic espionage? There are two steps that companies and individuals can do to help the U.S. government protect our vital economic assets:

1. Identify our most valuable intellectual property assets that need to be protected

2. Engage with the FBI’s office that works with the private sector and have 2-way dialogue about threats, indicators and vulnerabilities.

Special Agent Kenney ended her presentation by suggesting steps to protect your company (large or small)  from economic espionage:

·       Train employees on security policies and protocols

·       Know who you’re hiring

·       Encourage easy, non-threatening ways for employees to report suspicious behavior

·       Ensure that security and IT personnel are talking to each other and working together

·       Establish VPNs (Virtual Private Network)

·       Cybersecurity begins with strong physical security; protect data on one’s devices.

·       If you are part of a small company, hire a private security consultant to advise you.

A final point was about the importance of preventing social engineering, a big risk to companies. Social engineering is when someone wants a piece of information about someone and someone in the company unwittingly divulges it. The example given is when someone from outside a company contacts the receptionist by phone asking to get an email address. That person whose email is divulged is then vulnerable to receiving an invoice from the outsider which the company may pay. Other examples of how individual consumers’ privacy and assets can be defrauded by social engineering are shown on this YouTube video. 

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