Swiss spies knew about Crypto AG compromise – and kept it from govt overseers for nearly 30 years

Wider government only told of encryption machine nobbling a year after it ended

Swiss politicians only found out last year that cipher machine company Crypto AG was (quite literally) owned by the US and Germany during the Cold War, a striking report from its parliament has revealed.

The company, which supplied high-grade encryption machines to governments and corporations around the world, was in fact owned by the US civilian foreign intelligence service the CIA and Germany's BND spy agency during the Cold War, as we reported earlier this year.

Although Swiss spies themselves knew that Crypto AG's products were being intentionally weakened so the West could read messages passing over them, they didn't tell governmental overseers until last year – barely one year after the operation ended.

So stated the Swiss federal parliament in a report published yesterday afternoon, which has caused fresh raising of eyebrows over the scandal. While infosec greybeard Bruce Schneier told El Reg last year: "I thought we knew this for decades," referring to age-old (but accurate, though officially denied) news reports of the compromise, this year's revelations have been the first official admissions that not only was this going on, but that it was deliberately hidden from overseers.

Switzerland's Delegation of Management Commissions (DélCdG), an oversight body, said in a statement (in French or German only): "If the legal framework allowed the Swiss intelligence service and foreign intelligence services to jointly use a company located in Switzerland to seek information on foreigners, such collaboration had a great political significance, which is why the DélCdG considers that it is regrettable that the Swiss political leaders were not informed until the end of 2019."

The country's domestic spy agency, however, had known about the decades-long compromise – but only since 1993. Germany and America bought controlling shareholdings in Crypto AG all the way back in 1970, with the compromise operation running until 2018.

Professor Alan Woodward of the University of Surrey told The Register: "The Swiss seem to find themselves in a bit of a pickle. It appears that part of the government agencies knew, and benefitted from, what was undertaken by overseas intelligence agencies. However, whether the Swiss intelligence agencies were officially sanctioned to do this remains open to interpretation. Clearly people were worried about it as the records were sealed for such a long time."

Speculating about why the super-secretive arm of the famously secretive state might have wanted to keep this top secret strapped up and extra secret, Prof Woodward continued: "One might think that the Swiss intelligence agency saw the benefits of sharing the product of this operation too big a prize to take the risk of raising its profile within their government. I've seen nothing to say that they were breaking their own laws but it may have been a case of better not ask the question."

The revelations that the Swiss state itself knew about Crypto AG's operations may prove to be a diplomatic embarrassment; aside from secrecy and chocolate, Switzerland's other big selling point on the international stage is that it is very publicly and deliberately neutral. Secretly cooperating with Western spies during the Cold War and beyond, and enabling spying on state-level customers, is likely to harm that reputation.

Professor Woodward concluded: "If nothing else this whole episode shows that it's easier to interfere with equipment handling encryption than to try to tackle the encryption head on. But, it has a warning for those who would seek to give a golden key, weaken encryption or provide some other means for government agencies to read encrypted messages. Just like you can't be a little bit pregnant, if the crypto is weakened then you have to assume your communications are no longer secure."

Switzerland's parliament has until June 2021 to formally vote and approve the report, or to reject it. ®