Shell, Rolls Royce reportedly hacked by Chinese spies

Britain's domestic intelligence agency is warning that cybercrime perpetrated by China is on the rise following hacking attacks against Rolls-Royce and Royal Dutch Shell.

The agency, known as MI5, recently sent letters to some 300 banks, accounting and legal firms warning that "state organizations" of China were plying their networks for information, according to the Times of London on Monday.

The U.K. government refused on Monday to confirm the letters. However, the reported correspondence comes just a month after the U.K.'s top domestic intelligence officer warned of "high levels" of covert activity by at least 20 foreign intelligence agencies, with Russia and China as the most active.

"A number of countries continue to devote considerable time and energy trying to steal our sensitive technology on civilian and military projects, and trying to obtain political and economic intelligence at our expense," said Jonathan Evans, director general of MI5, in Manchester, U.K., on Nov. 5.

"They do not only use traditional methods to collect intelligence but increasingly deploy sophisticated technical attacks, using the Internet to penetrate computer networks," he said.

The Times, quoting an unnamed source, reported that Rolls-Royce's network was infected with a Trojan horse program by Chinese hackers that sent information back to a remote server. Dutch Shell uncovered a Chinese spying ring in Houston, aimed at pilfering confidential pricing information for the oil giant's operations in Africa, the paper said, citing "security sources."

Representatives for both companies contacted in London on Monday did not return calls for comment.

The rise in hacking originating in China and Russia has been well-documented by security researchers. But its been harder to distinguish between state-sponsored hackers and those just operating in the same geographic region, said Graham Cluley, senior technology consultant for security firm Sophos PLC.

Some 30 percent of the malicious software created is written by Chinese, Cluley said. But about 17 percent of those programs are designed to steal the passwords of users who play online games rather than intended for industrial espionage, he said.

"It's not all James Bond," Cluley said.

Hackers are also tough to trace since they can often control networks of other computers, called botnets, which can be used to carry out commands and attacks.

Botnet investigations are time-intensive and difficult for law enforcement since the computers are often in different countries, requiring international legal cooperation.

Spying to gain an advantage over a commercial competitor is nothing new, and it's hard to definitively blame China for it, said Peter Sommer, who teaches information systems security at the London School of Economics and also wrote "The Industrial Espionage Handbook."

The job of an industrial spy has also become a lot easier with the advent of the Internet, Sommer said. About 90 of intelligence collected by agents is "open source," or already public information.

"You no longer have to get into buildings and try and meet people," Sommer said.

Public Web sites of companies are rife with e-mail addresses of employees who can be "spear-phished," or sent e-mail with a malicious software such as a keystroke logger. The hacker uses social-engineering tricks in order to get the worker to open the attachment, opening up access to a company's network.