They say money talks, and a new report suggests Canadian currency is indeed chatting, at least electronically, on behalf of shadowy spies.

Canadian coins containing tiny transmitters have mysteriously turned up in the pockets of at least three American contractors who visited Canada, says a branch of the U.S. Department of Defence.

Security experts believe the miniature devices could be used to track the movements of defence industry personnel dealing in sensitive military technology.

"You might want to know where the individual is going, what meetings the individual might be having and, above all, with whom," said David Harris, a former CSIS officer who consults on security matters.

"The more covert or clandestine the activity in which somebody might be involved, the more significant this kind of information could be."

The counter-intelligence office of the U.S. Defence Security Service cites the currency caper as an example of the methods international spies have recently tried to illicitly acquire military technology.

Nearly 1,000 'suspicious' contacts

The service's report, Technology Collection Trends in the U.S. Defence Industry, says foreign-hosted conventions, seminars and exhibits are popular venues for pilfering secrets.

The report is based on an analysis of 971 "suspicious contact reports" submitted in fiscal 2005 by security-cleared defence contractors and various official personnel.

"On at least three separate occasions between October 2005 and January 2006, cleared defence contractors' employees travelling through Canada have discovered radio frequency transmitters embedded in Canadian coins placed on their persons," the report says.

The report did not indicate what kinds of coins were involved. A service spokeswoman said details of the incidents were classified.

As a result, the type of transmitter in play — and its ultimate purpose — remain a mystery.

However, tiny tracking tags, known as RFIDs, are commonly placed in everything from clothing to key chains to help retailers track inventory.

Each tag contains a miniature antenna that beams a unique ID code to an electronic reader. The information can then be transferred by the reader into a computerized database.

Makes no sense

The likely need for such a reading device means the doctored coins could be used to track people only in a controlled setting, not over long distances, said Chris Mathers, a security consultant and former undercover RCMP officer.

"From a technology perspective, it makes no sense," he said. "To me it's very strange."

Then there's the obvious problem: what if the coin holder plunks the device into a pop machine?

"You give the guy something with a transmitter that he's going to spend — I mean, he might have it for an hour," Mathers said with a chuckle.

Harris speculates recent leaps in miniaturization could allow for a sophisticated transmitter capable of monitoring a target's extensive travels.

"I think we can be pretty darn confident that the technology is there for the sorts of micro-units that would be required to embed these things in a coin," he said.

"It's a brave new world, and greatly concerning on so many levels."

Passing the coin to an unwitting contractor, particularly in strife-torn countries, could mark the person for kidnapping or assassination, Harris said.

"You could almost, by handing a coin to somebody, achieve the equivalent of the Mafiosi's last kiss on the cheek."

The Defence Security Service report says employees of U.S. contractors reported suspicious contacts from individuals, firms or governments of more than 100 countries during the year.

Technologies that generated the most interest were information systems, lasers and optics, aeronautics and sensors.

A foreign approach often meant a simple request for information from the contractor.

Can contain built-in scanners

But the report also underscores clandestine means of acquiring secrets from U.S. employees, particularly those travelling abroad.

"It is important to recognize copiers and shredders can contain built-in scanners to copy the data."

Other common methods include placing listening devices in rooms, searching hotel rooms, inspecting electronic equipment and eavesdropping on conversations.

The report, which first came to light in a U.S. newspaper, has since been posted on the website of the Federation of American Scientists, an organization that tracks the intelligence world and promotes government openness.

