Photo: www.it-business.de
Michael Kilchling
ECONOMIC ESPIONAGE –
CAUSES AND CONSEQUENCES
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
1
Contents
• Introduction
• Two main areas of regulation
• Economic espionage in a comprehensive (wider) sense
– Legal & criminal-political aspects
– Criminological & victimological aspects
• Conclusions & perspectives for comparative research
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
2
Introduction
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
3
Introduction
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
4
Introduction
• Diffuse, ambiguous terminology
• Variety of patterns / scenarios and modi operandi (internal,
external)
• Intersection of crimes against state security (traditional
approach) and economic crime (modern approach)
• Intersection of conventional (physical) crime and cybercime
• Fragmented legal (penal) regulations
• Fragmented jurisdictions
• Political interests involved
• State control vs. self-control
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
5
Introduction
•
•
•
•
Incomplete, sometimes also incorrect statistical coverage
Scarce literature
No up-to-date empirical research
Some information about the impact of the threat can be
deduced from some studies on victimization of and
awareness in the ecnonomic sector (enterprises, businesses)
• Large dark field
• Double dark field
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
6
Two main areas of regulation
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
7
Two main areas
Economic espionage
Industrial espionage
• Corporate / business /
competitive espionage
• Industrial theft
• Commercial spying
• "Competitive intelligence"
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
8
Two main areas
Economic espionage
• Sponsored, supported or
orchestrated by governments
• Conducted by state
agencies or on behalf of
those
• Intended to reach political
gain (as positive or negative
stategy, or both)
• Focus on military or dual
use goods (not exclusively)
• International
• Crime against the state
(state security)
Industrial espionage
• Commercial background
• Conducted by business
actors or on behalf of those
• Intended to make economic
profit (direct or indirect, or
both)
• Focus on any kind of
information that can be
commercially exploited
• State agencies/governments
can be targets, too
• National or international
• Economic crime
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
9
Two main areas
Economic espionage
• Crime against the state
(state security)
• Traditional statutory regulations which are based on
different models / traditions
• Harsh statutory penalties
• Often separate jurisdiction
(e.g. attorney general,
special chambers/courts)
• Involvement of intelligence
agencies
• Prosecution guided by
political interests
• "Friendly spies"
Industrial espionage
• Economic crime
• Unlawful competition
• Business law, competition
rules
• Regulatory sometimes not
part of the (core) criminal
law
• Statutory penalties can be
more moderate
• Shares the general characteristics of prosecution in the
area of business crime
• No particular state interests
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
10
Economic espionage in a
comprehensive (wider) sense
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
11
Economic espionage in a
comprehensive (wider) sense
• Similar / identical modi operandi and aims:
» illegal obtainment of knowhow, information theft
• Same targets:
» owners / holders of intellectual property (e.g.,
manufacture secrets, ideas, techniques / processes, recipes, formulas, etc.), operational
information (e.g., customer datasets, pricing,
sales, marketing, research and development,
policies, prospective bids, planning, marketing
strategies, etc.), or any other valuable piece of
information
» includes the science sector!
• Different purpose / motivation:
» commercial benefit versus political advantage
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
12
Economic espionage in a
comprehensive (wider) sense
• From the perspective of the comprehensive approach, the
similarities of the crimes in both areas seem to be predominant
• Can (should) the differences in pupose and motivation still
justify the traditional split approach (separate regulation)?
• A variety of legal, criminological, victimological and criminalpolitical aspects to be considered:
– is the split approach still plausible (up-to-date)?
– is it justified from a legal and criminal-political point of view?
– is it relevant from the perspective of the victims?
– is it (i.e., the concrete purpose) recognizable in case of an
attack or an attempted attack?
– is it not even counterproductive, thus impeding effective
prosecution and control?
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
13
Legal aspects
• What is the specific interest of the state for treating a violation of
property rights of a company as a violation of state security?
• What is the legally protected value (legal good)?
– in a globalized economy
– in a europeanized economy
» EU member states lost sovereignty
» economic sector fully 'communitarized'
» national interests (as manifested by traditional
categories such as national economy, domestic
market, GDP, etc.) are no longer relevant
» national intervention may be justifiable as proxy
action in absence of EU institutions, but requires
adaption of the legal rules
• How to handle a spy attack against a multinational enterprise?
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
14
Legal & criminal-political aspects
• Procedural consequences of the split approach
– separate jurisdictions
– different investigative powers and responsibilities
– co-operation vs. self-interest of and competition between
actors / agencies
• Practical problems in unclear cases
– origin of attack unknown or unclear
– purpose / motivation unknown or unclear
– sometimes even the nature of a suspicious incident remains
unclear
• In lack of clear evidence investigations often dropped or
prosecutions dismissed
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
15
Criminological aspects
• Phenomenology / modi operandi
• Basic patterns
– extern vs. intern activities
– direct (theft of data or hard copies) vs. indirect attacks
(break into IT systems from outside)
• Technological development increased the risks of being
targeted
• Attacks difficult to recognize
• Rapid technological development is increasing the costs of the
business sector for prevention and self-control
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
16
Traditional spy equipment
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
17
Gadgeds with memory functionality
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
18
Gadgeds with memory functionality
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
19
Gadgeds with memory functionality
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
20
Criminological aspects
• As a consequence of the technical developments in the
phenomenology (i.e., the shift to internet-based modi operandi)
modern (expanded) definitions also include sabotage (USA)
• Today in fact, any cyber attack (or attempted attack) may be a
(hidden or undisclosed) act of spying
• Low clear-up rate
• High probability of incorrect statistical registration
• Leads to underestimated figures of economic espionage in
official records, e.g., police statistics
• Lack of realistic quantitative estimates
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
21
Criminological/victimological aspects
• Double dark field
– incidents remain unnoticed or their impact is underestimated
– even clear cases often remain unreported, based on internal
cost-benefit assessments in which the fear of reputational
damage or the fear that business secrets will be disclosed
during a public trial is often considered to outweight the
actual real costs
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
22
Victimological aspects
• Contemporary business-related victimization studies indicate a
rather high prevalence of inicidents and a low reporting rate
• It is further questionnable whether it makes a difference from
the perspective of the victimized commercial companies if a
theft has been initiated and/or conducted by a private
competitor or by a foreign intelligence service
• In the latter case investigations initiated ex officio may even be
considered as being in contradiction to the interests of a
victimized company
• Further disturbances might be caused by political influence on
prosecutorial considerations (e.g., friendly/unfriendly spies)
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
23
Conclusions & perspectives
for comparative research
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
24
Conclusions
• Systems of control and legislation in Europe are often outdated;
they still reflect patterns of the Cold War era
• The present systems can produce counterproductive practical
effects
• The split approach should be replaced by adopting a broader
general concept
• Modi operandi changed dramatically: shift to cyber crime
• Inaccurate official figures
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
25
Perspectives
for comparative research
• Comparative research is required
• There is an explicit need for
– Systematic analyses of the different models of control (both
preventive and repressive) which are currently implemented
in the Common European Economic Area (EEA)
– Empirical exploration of the bright and the dark fields of all
relevant modi operandi, independent of (current) legal
regulations and definitions
– Empirical exploration of the current state of self-control
practices: risk management (staff risks, organizational risks,
technical risks), generation of suspicion, reactions
– Identification of factors that hamper effective internal (interagency) and external (state and private actors) co-operation
in the control of economic espionage in the wider sense
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
26
Thank you for your attention.
Dr. Michael Kilchling
Senior Researcher
Max Planck Institute for Foreign and International Criminal Law
Department of Criminology
Günterstalstr. 73
D-79100 Freiburg i.Br.
Tel.: +49-761-7081-230
Fax: +49-761-7081-294
[email protected]
www.mpicc.de
Michael Kilchling | Sixth International Spring Course | Dubrovnik | March 2014
27