OTTAWA—Canada’s electronic espionage agency warned the Liberal government in 2016 that foreign states have developed more sophisticated methods to mask their presence in Canada’s private sector.

The Communications Security Establishment (CSE) told Defence Minister Harjit Sajjan in October 2016 that “foreign state actors” are adapting their methods to hide their involvement with — and in some cases, control over — Canadian businesses.

In a heavily-censored report, obtained by the Star under access to information law, the CSE said those state actors “use increasingly more refined covers” and “complex financial structures” in order to mask their “actual influence and intentions” in Canada’s private sector.

The report notes that in 2016 the CSE was called on to provide intelligence for a number of government reviews “triggered by foreign investment transactions that potentially pose threats and risks to Canada’s national security.” The number of reviews the agency assisted with is censored from the documents.

Canada’s intelligence community has recently become more vocal about national security concerns posed by foreign influence and interference in Canada, including in the Canadian economy. The Canadian Security Intelligence Service, the CSE’s sister agency, listed foreign influence as one of the key national security threats facing the country in a public report released last month.

According to CSIS, economic espionage activities in Canada have focused on the theft of proprietary information and “leading-edge” technologies, with a number of states continuing to gather “political, economic and military” information within Canada.

It’s difficult to put a dollar figure on those losses for Canadian businesses, according to former CSIS intelligence analyst Jessica Davis. But Davis said the threat is not simply economic.

“Economic espionage is far greater an existential threat to Canada than the threat posed by, for instance, terrorism,” Davis told the Star.

“Economic espionage involves lost jobs, lost revenue, lost tax revenue and a reduced competitive advantage (for Canadian businesses) … (It’s) also a long-term, strategic threat, but one that can be difficult to quantify because the results may not be felt for years or decades.”

“And by then it will be too late.”

Davis, who now runs the consulting firm Insight Threat Intelligence, said there are a “wide range of tools” hostile countries can use to mask their presence in Canadian companies, many cribbed from criminal operations — including using third parties or hiding the beneficial ownership of a company or trust. Countries also target Canadian intellectual property and trade secrets through traditional human espionage as well as hacking.

The former Conservative government tightened takeover rules for foreign state-owned enterprises after approving the $15.1 billion takeover of Calgary-based Nexen Inc. by Chinese oil company CNOOC Ltd. in 2012.

“To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead,” former prime minister Stephen Harper said in December 2012.

In 2011, approximately 20 per cent of all takeovers reviewed by Industry Canada involved state-owned enterprises — compared to nearly zero in 2008.

The CSE declined to say how many Investment Canada Act reviews the agency has been asked to participate in since 2016, when they flagged the issue for the Liberal government. The agency also declined to say if the number of reviews has been increasing, decreasing or remaining stable over that time.

“Although CSE can be called upon to advise the government of Canada on matters related to the (Investment Canada Act), we are limited in the information we can discuss publicly due to intelligence and security concerns, as well as proprietary considerations,” wrote CSE spokesperson Evan Koronewski in a statement.

In a speech to the Economic Club of Canada last December, CSIS Director David Vigneault told the crowd that the agency has seen state-sponsored economic espionage “across many sectors of our economy.”

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“Hostile foreign intelligence services or people who are working with the tacit or explicit support of foreign states gather political, economic, commercial, or military information through clandestine means here in Canada,” Vigneault’s speech read.

“Some do it to tilt the playing field in their favour and undermine the principles of fair competition. Others just want to steal your ideas and use them to get rich.”