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CNBC Transcript: Adam Hickey, U.S. Deputy Assistant Attorney General

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Below is the transcript of a CNBC Exclusive interview with U.S. Deputy Assistant Attorney General Adam Hickey. The interview was first broadcast on CNBC's Squawk Box Asia on 23 September 2019. The interview took place at the Singapore Summit. If you choose to use anything, please attribute to CNBC and Nancy Hungerford.

Nancy Hungerford: Thank you for taking the time to speak to CNBC while you are here in Singapore and I know you've been meeting with members of the investment community taking a message here from the Department of Justice. Give us a better idea of what that message is that you're delivering?

Adam Hickey: There are a couple of parts to it. One is to think defensively because we realized from our work that our private sector is the target of intelligence services around the world. And so they need to prepare themselves and protect themselves and their assets. Second piece of that is to explain to them what the administration is trying to do to protect them. So the various measures we've taken whether it's the supply chain EO reforms to the (inaudible) process our prosecutions how we're doing our best to protect their IP and their interests so they can compete on a level playing field. And third part of the message is think about the rule of law because it matters if you're deciding where to build a factory where to invest whether the government there is going to protect your IP. Stand up for you if you're targeted. That's going to matter.

Nancy: And when you talk about that we automatically think of China. Reading through your briefs I understand you said that 80 percent of economic espionage cases you're looking at have links back to China. So are you trying to say don't build that factory in China or just be more careful about it when you do?

Adam: From the Justice Department perspective. I'm not a business man. So my job is to raise awareness about what has happened when companies have been targeted by Chinese intelligence services or their proxies. So probably be more careful. Certainly at a minimum. But depending on the factory you may decide that you want to build elsewhere because if something happens if an employee is recruited to steal a trade secret a different government may defend your interests better than the Chinese government will.

Nancy: Those cases we're talking about how do they compare to what we saw five years ago? I mean has there been a rise in those cases that are reported from China.

Adam: We're seeing an increase. Certainly from the victim reporting perspective. So I can't speak so much because we are not omniscient so we don't see everything we do know that more cases are being opened that implicate trade secret theft with a nexus to China and that may be because the victims are more attentive to what's happening which is a good thing. They may be more comfortable reporting to law enforcement which is a good thing. They may be fed up which is also a good thing.

Nancy: And the reason I ask that question is because I wondered whether or not there would be a decrease in these cases because of the trade talks that are taking place between the U.S. and China because often we hear President Donald Trump say that they're pushing on all issues of national security intellectual property transfer. They want to level the playing field and make business practices more fair in China. So is that showing up?

Adam: Well I can't say that we're seeing a decrease in our investigations. That's for sure. Not yet.

Nancy: Interesting. And do you hope that if there were to be a deal let's say on trade between the U.S. and China that they would also be in agreement between President Xi to change those practices.

Adam: So I think it's important that enforcement efforts are logically distinct from trade negotiations although as you've said the administration has argued that part of the unfairness that we confront in China is state sponsored intellectual property theft. That's my hope. I think we are engaged in a long term effort to protect American companies. These negotiations are part of it. Our investigations and prosecutions are another part of it.

Nancy: When you say that these issues are separate. I mean we've heard President Trump say that he could use Huawei bargaining chip in trade talks even as far say the case with Huawei CFO Meng Wanzhou could intervene in that as part of these discussions with China. Does that make your job more difficult?

Adam: Well what I know is we brought the case or the investigation began before this administration was elected. I know that the case continues and we continue to prosecute it and we'll continue to do our job as prosecutors and leave the trade issues to others.

Nancy: There is a lot of discussion here in Singapore about these issues too and I think just the broader business community about what's taking place with Huawei because it really hits the fact that this is so much more than a trade confrontation. It's all about technology. We've heard from Huawei's founder CEO on CNBC who says there is not a national security risk with our company in so many words that they will not give over data to the Chinese government. Would you say in response?

Adam: So Huawei as you pointed out is the subject of two prosecutions in the United States. So I'm not going to comment specifically on it as a company but here's what I will say generally about supply chain and telecommunications companies. It's going to matter where that company is located and whether they can be leveraged to comply with an intelligence service without regard to the rule of law. That has to be relevant. And we've seen how it can be relevant in other contexts. For example we've become concerned enough about Kaspersky and its location in Russia that DHS has issued a binding operational directive that federal agencies shouldn't be using it for antivirus protection. We charged a case last December alleging that two hackers were working in association with the MSS to breach managed services providers right to access intellectual property and other commercial information around the world. If you are looking for a smoking gun and you wait for it you might end up with a gunshot. So we have to be a little more savvy and look not only at whether there is a so-called back door, an intentional vulnerability, but also whether there's intent and capability of a government to leverage that company when it's in his interest to do so.

Nancy: That sounds to me more like you're taking a preemptive preventative step here. Do you have evidence today that shows that Huawei has been vulnerable already in a way that would compromise U.S. national security.

Adam: So I'd refer you to a couple of things I'd refer you to our indictments as our allegation of what Huawei has done so far. And second I refer you to the experience of other nations with Huawei whether they've put out public reports analyzing the cybersecurity or vulnerabilities of its code.

Nancy: Speaking of other nations I mean this is a sensitive issue too especially in a place like Singapore that worries about being caught in the middle of this US China confrontation. Do you think Singapore understands it's receiving the message you're taking when it comes to saying perhaps be careful about using language to the extent that they won't use Huawei in its 5G infrastructure

Adam: Well again I'm a prosecutor so I'm not going to comment on a particular case or particular company that we're prosecuting. But part of the point of being here is to bring that message directly of what concerns us and how we're reacting as a government. We hope our likeminded nations that value the rule of law that value telecom security will think carefully about the choices they make as they roll out fiber networks.

Nancy: You are involved with the China initiative as well the Department of Justice. This is the DOJ program that looks at many things but one thing you've looked at is the "Made In 2025" push China has put forward. You've raised some concerns there. Some in China may say the U.S. just doesn't want us to compete. They don't want to see us challenge them in certain industries like robotics like the aircraft manufacturing side. Is that fear. Is it a competitor here?

Adam: No. And thank you for asking that actually. We expect other nations will want to become self-sufficient in critical technologies. That's what we'd expect of a responsible government. The issue isn't that China has set out to do that. It's that part of their industrial policy part of the way they try to accomplish that is state sponsored theft or creating an environment that rewards or turns a blind eye to it. So in addition to economic espionage which is the term we use when the theft is intended to benefit the government we've got dozens of other cases that have some nexus to China where we would get no assistance if we asked for records or to investigate the theft or the like. So it's a broader legal environment that that encourages and rewards IP theft. That's the complaint that the Department of Justice has.

Nancy: And you are not to be seen as part of the 'Made in China 2025' push.

Adam: So of the 10 industries identified in the 'Made in China 2025' initiative since it was announced in 2015, we've charged cases I believe in eight of those 10 sectors IP theft cases.

Nancy: How do you respond to those whether they're in China or elsewhere in the United States who kind of shrug these threats off? Perhaps people you've met in the business community and say "hey I'm sure U.S. does the same thing in China and other parts of the world when it comes to economic espionage", because perhaps they think that's part of the game.

Adam: Well I would say there hasn't been a case of that that they could point to. I mean we've said quite clearly we don't conduct intelligence collection to benefit economically our companies our sectors and I'm not aware of a single case that substantiates that. In terms of shrugging it off, maybe some years ago but in my conversations with the business community I detect increasing sobriety about the nature of these risks and an understanding that they could be existential for a company right at the cutting edge technology that's working on now if it's lost, could have pretty grave effects on the company's longevity. So I detect more receptivity to our message

Nancy: And that makes sense for companies not to worry about their own IP. What about the technology companies in the U.S. that may be inadvertently providing a conduit for China to either recruit people in the U.S. to hack into systems. Tell me a bit more about your conversations with the big tech giants in the US. Are you finding them a collaborative player in your efforts?

Adam: I think they are savvy about what the threats are and I think that most companies that provide these services certainly do not want to be the vector through which their clients are compromised. But the MSB case is an example of one where whether their best efforts or not they were compromised in some cases and that had significant consequences for their clients. So it's a matter of continuing to raise awareness on that front. You have to know who your vendors are. If you trust your vendors have access to your network you're putting a lot of faith in them.

Nancy: And of course economic espionage is one issue. But I wonder if you have a view to election risks in terms of hacking as we get closer to this 2020 election. Is the system still vulnerable?

Adam: So every state is responsible for conducting its own elections and securing their own systems. But I will say I think we've made a lot of progress since 2016. We understand the threats better. We've organized ourselves better to share information with both states and social media providers so the full spectrum of malign foreign influence can be addressed. And I think we've done a lot of hard thinking about how to react if we see something. How to prioritize this as an issue? So I think we're much better prepared now than we were a few years ago.

Nancy: The social media giants are working with you in this regard in the way that you are satisfied with. Would you like to see them do more?

Adam: So I would describe it as an evolving relationship. We've made more progress with some than with others. I'm not going to name any one of them. There's more work to be done. Some of them have invested considerably in addressing this problem. Some of them are more open to working with us. Well, we continue to work with them as best we can.

Nancy: One other issue I'm curious to ask you about given that there's so many bankers, financial, business leaders that are here meeting at this summit. How worried are you about the financial sector being exposed not just to hacked information but something that really hurt the system?

Adam: The integrity of the data in other words. Yeah. So the bright spot there is I think in terms of industries that identify the threat and are putting resources into addressing it and repelling it. The financial sector is probably one of the leading ones in United States. So they get it.

Nancy: You are seeing them there they are putting in the appropriate measures?

Adam: As far as I can tell yes. I'm not the Department of Treasury. But from what I can tell yes.

Nancy: Okay fantastic. That's very interesting. Thank you so much for taking the time to speak to CNBC.

Adam: Pleasure to be here. Thank you for having me.

END

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