It’s curious anomaly of the Kiwi busi-
ness psyche that companies will spend millions of dollars computerising their data storage, then put it all at risk for want of $900 shredder.
If there’s one sound that warms the heart of the security consultant, it’s the hum of paper shredder. These often-neglected pieces of office machinery should be the final repository for all those priceless secrets that come spurting out of computers of corporate New Zealand.
Far too often, paper nuggets lie scattered around boardroom tables or tossed into rubbish bins. This carelessness has led to these printouts becoming the lingua franca, or common language, of corporate espionage and their best storeroom is paper shredder.

Fraudulent conditions
As the economy starts to tighten, as it is now, accompanied by business confidence falling to low point, fraud starts to increase. People who can’t meet their car payments, mortgage payments turn to other methods to get cash. The solution is the company coffers. According to an international report on fraud, 65 percent of all respondents, including respondents from New Zealand, perceive fraud to be major problem in their companies.
In hindsight it’s often easy to identify the fraudulent employee. There are number of red flags. Things like the staff member who’s spending way beyond their means, too closely guards their interactions with vendors or suppliers, has personal financial problems, abuses drugs or alcohol, gambles, or never takes time off work.

Friendly fraudsters
People think that fraud is highly technical, space-age way of stealing money. Not so.
Anyone who can use PC can get into system and milk it, usually by fiddling invoices, or putting ghost-employees on the payroll.
We can paint an incongruous picture of the average fraudster. They usually work very late, everyone loves them, they are president of the social club and organise all the functions such as the yearly Christmas party. They never take “sickies” and invariably have holidays banking up over the years. One day the unforeseeable happens and they are laid flat by car accident or illness. An assistant opens the mail or accesses the database.
That’s when the boss discovers why the staff member never took days off. What unravels is trail of cash fiddling going back for years and amounting to tens – even hundreds – of thousands of dollars.

Topped by temp
Look at one of our recent case studies. The staff member – on this occasion trusted female accounts person – was away for week from her desk due to an illness in the family, which necessitated her going out of town for period. What was discovered by her “temp” replacement was crude fraud in which the woman was diverting debtors’ payments for her own use.
When called in by the company’s auditors, we found number of cheques that had been altered making the payee the woman’s local furniture retailer. When interviewed we found that she had over $98,000 in credit account at the furniture company. Instead of taking the altered cheques to the bank to cash she was giving them to source that was not scrutinising the cheques.
What is astounding is the fact that this offender had been fired from her last two jobs for similar frauds and had nine convictions for shoplifting. The company paid recruitment agency good money for the privilege of hiring this person. The simplest of reference checks, credit checks, criminal history checks could have prevented this person being hired.
Database dangers
At the other end of the scale is the highly sensitive area of company espionage. This, rarely, if ever, becomes public knowledge. Not only because of the embarrassment that often ensues but because it’s very difficult to prove.
The computer was supposed to create the paperless office but the opposite is true. Where once the company’s books were kept in handful of ledgers and locked in safe, now they’re in database that can be easily accessed by anyone with an access code.
When printed out, these long printouts are often thrown into rubbish bin. The trouble is that that’s exactly where the corporate spy looks first. The opposition has been secretly clearing out your rubbish skip for the past three weeks and now have the information they want – your quotes for $10 million construction project.

Bug talk
The prices of electronic bugging equipment have come down lot from five years ago. Now you can pick up wireless microphone for under $100 and have boardroom meeting wired for sound. There is much talk about laser microphones and hi-tech speech vibration machines but the reality is that these pieces of equipment cost fortune and are just not in abundant circulation in New Zealand.
The most ingenious of the bugs we found was in the company’s boardroom contained within videotape cassette. Placed alongside other nondescript videos, the item did not look out of place and the offender would just walk into the room before big meeting and turn it upside down to activate the listening device inside. We caught him eventually listening in to walkman. It turned out that it actually wasn’t walkman; he admitted that he was just getting the inside drop on the other managers and staff.

Take the loss and move on?
How real is the economic espionage threat? According to the American Society of Industrial Security (ASIS), cases of espionage directed at international organisations have grown 260 percent since 1985. In the United States, the costs of this crime have been estimated at US$50 billion per annum. If you include the theft of intellectual property that figure soars to US$240 billion year.
Traditional protection options are just not working as deterrents to economic espionage. Corporate security systems often fail because they are set up essentially to protect people and physical assets not the ephemeral information flooding the world’s new electronic highways.
Trusting that conventional resources will protect company’s trade secrets and operations from foreign espionage is out of date. It may actually border on managerial and fiscal irresponsibility.
An alarming number of companies seem to have resigned themselves to the loss of their trade secrets. This “take the loss and move on” approach is becoming increasingly unacceptable to shareholders, financial institutions, and insurance companies who must bear the losses.

Intelligence and
counterintelligence
There’s no one, easy solution to countering economic espionage. However, there are ways to approach the problem, and they focus on top management involvement.
Understanding the intelligence function and its role in modern economic warfare is essential to corporate survival. Countering economic espionage will increasingly demand that corporate leaders arm themselves with working knowledge of intelligence and counter-intelligence. Then, they must equip their companies with business intelligence and counter-intelligence systems.
Economic espionage is the frontline of new world economic war. It’s war that most companies from open, democratic, nations are ill-prepared to fight. An old business adage says, “Surprises end career.” Corporate leaders need to get up to speed, fast, on the grey people and grey areas of espionage.
Why not go and dust off that shredder today.

Daniel Thompson works for Auckland Investigations Limited. He has recently achieved Master of Science Degree in Security Management with the University of Leicester, United Kingdom.

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