•   *    ■■«'«?*■■;' 
>S>ti~  ?- 
23  AprllU946W^? 
Wa»0RA:«1Xnf 
7PCM: 
STTBJ2CT: 
Colonel  William  ff^  Qulnn 
Janes  H.  llurphy 
Heoonmendationa  for  Situation  of  1-2  Branch,   SS0. 
<  — 
and 
I.  The  1-2  Brunch,  Strategic  Services  Unit,  Is  presently 
ccniucti:^;  counter-intelligence  activities  In  areas  outside  the 
rasters  Btiiispbere.   Thear  activities  fare  directed  to  the 
acquisition  of  couater-lntolli^ence  inforcntion  essential  to  the> 
national  security  which  can  be  used  as  a  basis  for  action  by- 
a^prc;riate  c«;e:xcies  here  and  abroad  in  the  formulation  and 
execution  of  national,  policy  and  for-  the  protection  of  any  . 
claridoatlne  operations  conducted  on  bch&lf  of  the  American  gov- 
emn*nt.   Counter-intelligence  info  mat  ion  thst  is  produced  or 
cccrdlr^t«rd  through  X-2  activities  falls  into  two  generul 
classifications:   Infornxition  concerning  individuals  who  «rs 
iTed  in  intelligence  activities  ou  behalf  of  foreien  powers; 
inforr-^tlon  of  a  strategic  nature  concerning  the  organization. 
oi£  trdf  objectives  of  foreien  inte^llt:«^c«  services. 
II.  The  President's  Order  of  22  January  XSUd   establishing 
tie  1/itio^el  lntelllcer.ee  Authority  and  tho  CIG  £ives  (para  10} 
to  the  >f!U  and  the  Director  of  Central  Intelligence  the  responsi- 
bility for  fully  protecting  intelligence  sources  end  net hods  In 
t:\e  conduct  of  their  activitien.  An  essential  factor  in  the 
eierciae  of  this  responsibility  ia  the  oor.tlr.uad  functioning  of 
-^  ;:*:ve  u.irt  dr^cr-- naive  ce.-tr^l  counter-intelligence  service  as 
an  integral  part  of  the  national  intelli£ence  procraa.  The 
VJestlcn  iYiS  been  raised  as  to  whether  tho  American  Counter- 
Irt» lii.-er.ee  Service  responsible  for  external  areus  Is  best 
aiv+.z.   e  cer.tral  status  independent  of  other  operating  intelligence 
e^,*-eies,  or  by  the  transfer  of  its  Injtydit»te  control  to  one  of 
v-.£s«  a^e^cias,  in  particular  tho  Department  of  SttrCe  or  the 
7*i«r«i  £«r*cu  of  Invest ic^t ion. 
cr    entity 
The   piice^ent   of  the  X-2  Branch,    SSU,    as  a   function 
position  best   to   serve   the   interests  of  the) 
al-.c-xid  be   considered    in   relation   to    three   factors: 
in   a 
*  -V  - 
n«t«      > 
'■211^1  n^n
ffft-   00 If 50 
 
?-*«•  I 
4,      Tt-»-    r~t«    Srt--,:-    t»    trLai::;  Jt  j-*'-I**tij 
,»     »  •  »  •     « 
< .    -     Sir  .      -'...-     .    .  *     I  *      .-..«/      - 
*  •  »     »-*     »**»•'•     ^*  » 
«»:  t 
•  l£Z 
c  c  t 1  * : . :  * «  «  -  -   i *>*.«  :  l*".  1  ;.-*;•  - 
5r;-;>.    *♦    »i»---'.it*i    v".  *  t    •".    •  #»-ry 
.'.:»»?-.;:.':,    •'Ill     p^rrsl*     1'-    to 
,e  r 
-<     '      •     -    - 
t   S'.r  -  : :«    exist*.. 
:*  .  ^1  i  t .-   t<;   *-<.  ;jrt  er  - 
§«    for    • -i  c^    »^£ 
IV.      Altho^    it    **   *f.t::l;2t»i     -^t    e  =  r».    p-'»5«ct 
inteillsence   »£«--/    •'.:)    •--.':*.=-*    it?    ~T"-t:rrs,    t*-s«    rp*r»- 
tiers    *-iil    fc*    directed    itv.riJ    tr*    ,  »  r"  1  :  .1*:    :m!»    c»    t-.« 
fif^rlrtct    cor.cerr.*:.      tt;c-.ti*e*    C    -.  *r-*:i    ii>    rt  ,    cr    «»-•.-« 
tbctlcti    seed,    will    te   »j; 
...-,.  -v  ^j. 
-/ 
v  *  -  • .-. :  e    a  e  r-<  i  :  e    c:    fc?    ;*  r  t : 
ir    -*  *x 
•  tUt!  ls.^sd    positive    lz:-.  +  +c> 
fcrcec.       In   filler    ctee    t-'-t    t:*.'.-.'.-.:ti    *«    are    ;«.r  #■;-*!    will    *• 
of   tMe    liit^est    set'-rl'-/    t'.^iri:;-:*    s-.-'f    -111    m-.Jr«    «    r*xi*a 
•  ec-rltf   protac^lci.      Ir.    tr.;-    «-::.    a  :: '.»  i  *- '.e»    ».!•   CI-    »::i 
re^.lre   t^.e   cocstar-t   i- se  l£*  t.' -  <?   or   c    ::  •.-.-.  ^r-  i^"*>*.  1 1  :•'  -•   I*r"»ic« 
in=.tl lately   at    hcJri,    r--ll>    ::£•-'.:*.-:    of    t^.e    r--is   %r.i    pcl'cle* 
of  t!:t  CIC,  ani  eclinc  '-rit»r  ita  ir--*ilf.  e  • -ut*. or  i'-y  i-^  ccr.trcl. 
OrJ.y  In  t.Mi  *-ey  car.  tt*  :iw  ;r-t*:t  %-i  »-«-.r»  *.te  ev.sl'strt  cf 
hi.-test    ectelcn   ct.'ectlT-t. 
Tta    collecticc   cf   i-'-l  1 1-,-rz.  -t   --s:    te    — :'..r'.^    frc* 
ti:e   efforts  of   fore:©:: 
a-  -  •  *  -  -    <  - 
i    «er.:t    £-.—.::-.•    t:    fe*:    rt.s# 
e~  * 
y.\'.\'.f    «lz.Z    cz^r.'»r- 
—  -        r»       »  ••  • 
T-^^---*  « --    -eri-»i 
r    a  r  J.    are    r*:  •--.■!  1 1/ 
:  t 
'1*    i»--lr--^l 
.••    » 
Tie    clar.-iest  i  =  -    ;rc 
lstelli^enea   rut^elij 
ber.ef  Icial . 
Tdlue,    m.r.i    '-teas    ::.::??    :s"    -e    •'  ■■?' 
nr^^..rw    -.•/.*.    i-'   » - «  ^-    «-    eij'*.:--    t;    *~*!r    :.-l--=r-    -r--ter 
principally    for    pcai-.'.v^    '.;'.«: 
position   to    pr-vUe    a-e-iri:    i 
gence   operaticns.      It    is    fr«;. 
determine   t^e    pcter.t  i-1  i  t  «•«    r*   aiy    t-'a"   ?  " 
- 
there   are    tergeti   cf   £•:*.«»:    ir.*. -r««t^t-     -"*1 
co-ir.ter-intelllger.^e    §er^i  res  .,  -  aj: 
t-rsete    la    the    w-rli-^l-ie    Zez=  --!«' 
.-  :  •?  s    are    r  ft  •  -    Ir    • 
«t« 
1-     :  -  *z\  T-  i.T*.  • 
i  - 1 1 : « : :  7  :-•*. 
t  •  .       I  -    "•  *!  * :  t  i  r  r 
«      « 
» .  tn
jfrr,.  ***   . 
*¥<? 
P»«»     ) 
with  the  USSR.      The   Coaununlst   moveaent   at   a   political    part/ 
la  prLoearily  the   concern  of  a   positive-Intelligence   aer»loa; 
the  use  of'lta  aeabera  and   sympathizers   for   intelligence 
purpose*   and  subaorsion  la  the   concern  of  a    counter-intelligence 
agency.      Tha   sajae  linea  of  penetration  will    frequently   eerva 
to   produce   infcroation  invaluable  to   both.      A  Ilka    situation 
exists   Is  tha   Investigation  of  resurgent  Nazi   groups. 
Intelligence  on  atcaio  bonb  aotlvltlea   presents  a  sLmller 
duality-     Thua,    tha   effectiv6neee   of  both  positive  and    counter- 
intelligence activitiee   la  dependent   upon  the   closest   possible 
integration,  of  direction  both  at  head^uurtera  and   In  the  field. 
T.     Tha  responsibility  of  a  oeatral   oounter-intelllgence 
service  la  howevar  greater  in   acopa  t^an  tha   protection  of 
positive  intalligenoa  activities  carried  out   on  behalf  of  tha  CIG 
These  other  agencies  which  conduct   intelligence  activities  will 
also   ba  targets  of  foreign   Intelligence   services.     Tha  uost 
effective  protection  these  eger.ciee   can  have  will  come  as  a 
res^ilt  cf  advice  besed  upon  a   central   coordination  of  material 
tearing  on  tha   personnel,    activities   nnd  organizatione  of  lnlaalcs 
f-ret^n   iz.telll-.er.ee   services.      The  oont    effective   presentation 
cf   3'i-ch  advice    will   c^e    from  q    central    and    inpurtial   authority, 
rst;-;r  tLaa  e.s    froa   the   bias   of  a  particular   service. 
71.     Tie  acquiring  of  counter-intelligence  lnfomotioa 
thr-c<:«rh  clandestine   chennela   by  X-2   supplements   tha   oounter- 
ir:t<»lligenc*   coverage  afforded  by  personnel   reporting  to  tha 
Stete  £^:>crt£ieat,    the  Military  Intelligence  Servioe  and   tha 
Cfflce  of  Saval   Intelligence.      Undor  the  directive  of   the 
President,   the  National   Intelligence  Authority  la   charged  with 
the  C2.crdini.ticn  of  the   intelligence  activitiea   of   these  agencies 
i-cludlog   the  asaigrment   of   intelligence  priorities  on  a  strategl 
b«sit  Is.  accordance  with   the  denanda  of  national  aecurlty.     The 
placl^  of  tha  1-2  Brnncn,  Strategic  Services  Unit^  under  the 
direct   control   of  the  Central   Intelligence  Croup  provides  the 
3<rt:cntl   Intelligence  Authority  with  a   counter-Intelligence   task 
fcrz*  cf  -which   tna  activities  can  be   constuntly  directed  to: 
•'a      the   cc-^uirir^  of   inforrantion   considered   essentiavto 
s-^le-v^nt  th&t   received    froa  the  overt   sources   of  tK>s   State 
!>>artaerit,   HI2  and   ONI,    Lnd    (b)    concentration  on  broad   strategic 
cc--ter-ir.t»l  liberie  a   problems   as   required   by  the*  changing 
lit^rzstl^r.^l    situation.
£$ 
r*.  i  «     « 
*e "are*    j-jreau   of 
transferal   o?  the    ce.-ira*    r:_: 
Federal    Bureau   of    Ir.vest  i£*. 1 1 
character. 
«    —  * 
,«■_«- 
i    « 
Primarily, 
r« 
if     • 
charged    with   the    inv -at  !*•  t  irr.    ; 
the   United    States.      It    has    w.c?- 
t  »« 
for    cel- 
ls' 
•er.der.t    oour.ter-i."- tellies -ce 
allC 
t  -r^. 
respensibi 1  it j 
United   States,    ei 
ind*^< 
t   war-ttce    esergencj,    It    iras 
Intelligence    functions   vitM-   tie   c- 
been   urged    by   the   Bureau   tw.fct    its    iz 
wotlld   be   best    achieved    by   an    exte-.si 
all    territories    outside    the    western 
y. 
•9      < 
9!      w 
.  '  *  *  ~  •  r 
•  *    *  w  «f 
C   '.  T  •  - 
'.  :  -  s     * 
•  *  •  - 
i 
•  •  - 
- «  —  < «  - 
5  7  ~  •  r  • 
,  «   c  -  - 
r  *  - 
*  ■ 
»  -  • 
•  • 
Th e   question    is 
>-,   ^  %9     .«      acT.^ 
i---.e
vi"3  ->  o.i  C  « 
fl=d 
Quite  apart  fret  any 
of  paat  collaboration  between  the  F3I 
of  the  Arr^y  and  Eavy  —  for  vhici  refersr.ee 
those  authorities  —  It  1b  evident  thit  a  d 
counter-Intel  licence  functione  of  a  cer.' 
the  effe 
t iTeneas 
:e  s< 
8.w.0' 
...  _  i   *  _ servi; 
•  9 
be  aeds  to 
vc::e  c 
ace-  cy  fros  thnp 
of  lta  and  other  Aeericao  posit ive-intellir«-;e  services  ce:  only 
serve  to  deer- sse  the  efficiency  of  their  positive  intelligence 
activities. 
▼II-   It  is  therefore  recommended  that  the  Az-rican  counter- 
intelligence Service  responsible  for  operations  outside  the 
Western  hemisphere  ahould  be  accorded  a  status  directly  under 
the  Central  Intelligence  Croup,  and  that  the  closest  integration 
and  direction  of  both  clandestine  positive  intelligence  and 
counter-intelligence  activities  ahould  be  exercised  by  the  CIO 
In  order  that  these  organizations  cay  fcr-z   e  speclel  intelligence 
task  fores  for  the  National  Intelligence  Authority.   It  is 
presumed  that  If  this  country  is  engaged  in  hostilities,  special 
operations  an*  sa  enlerged  general  intelliGer.ee  force  '-'ill  be
/ 
Pa^e  6 
required  to  maintain  the  flow  of  intelligence  in  wj 
The  coordination  of  clandestine  positive  intelligei 
war  tlae« . 
    —     
r     ^.-.wjnca, 
count ar-int all lgence  and   apaclal  operations   In  war  tljae 
deadndt  tb     closest  possible  integration  and   central 
d< ruction  in  order  that   they  may  effectively   eervice   the 
demand*  and  re^uireaents  of  the  araed  forcea.     A  central 
•yaten  must  be  provided  which  la  adaptable  to  ail   oircumstancee. 
/
(Page  One) 
Page  2 
a.  That  the  branch  be  administratively 
associated  with  the  existing  agency  whose 
operations  it  may  best  support  as  a  primary 
function. 
b.  That  the  Branch  be  so  situated  that  it  may 
with  maximum  effectiveness  impartially 
serve  and  advise  other  American  agencies 
and  maintain  the  security  of  their  foreign 
activities  and  installations. 
c.  That  the  Branch  be  associated  with  an  agency 
whose  administrative  theory  and  operations, 
as  well  as  background,  will  permit  it  to 
continue  the  operations  peculiar  to  counter- 
intelligence and  the  purpose  for  which  such 
a  Service  exists. 
IV.    Although  it  is  anticipated  that  each  present 
intelligence  agency  will  continue  its  operations,  these  opera- 
tions will  be  directed  towards  the  particular  mode  of  the 
department  concerned.   Objectives  of  overall  import  or  general 
tactical  need,  will  be  approached  by  the  CIG  either  through 
an  established  positive  intelligence  service  or  by  particular  task 
forces.   In  either  case  such  activities  as  are  pursued  will  be 
of  the  highest  security  significance  and  will  require  a  maximum 
security  protection.   In  any  such  activities  the  CiG  will 
require  the  constant  assistance  of  a  counter-intelligence  service 
of  the  CIG,  and  acting  under  its  immediate  authority  and  control. 
Only  in  this  way  can  the  CIG  protect  and  ensure  the  attainment  of 
highest  echelon  objectives. 
The  collection  of  intelligence  must  be  protected  from 
the  efforts  of  foreign  intelligence  services  to  feed  false 
information,  or  penetrate,  or  to  neutralize. 
The  clandestine  procurements  of  positive  and  counter- 
intelligence mutually  complement  each  other  and  are  mutually 
beneficial.   Information  derived  from  counter-intelligence 
sources  in  the  field  is  frequently  of  high  positive  intelligence 
value,  and  these  sources  can  be  consciously  developed 
produce  such  information  in  addition  to  their  primary  counter- 
intelligence function.   Contrariwise,  sources  developed 
principally  for  positive  intelligence  sources  are  often  in  a 
position  to  provide  specific  information  vital  to  counter-intelli- 
gence operations.   It  is  frequently  difficult  initially  to 
determine  the  potentialities  of  any  given  source.   In  addition 
there  are  targets  of  mutual  interest  to  both  positive  and 
counter-intelligence  services.   An  outstanding  example  of  such 
targets  is  the  world-side  Communist  movement  and  its  involvement
(Page  Two) 
Page  4 
[First  Three-Quarters  of  Document  Excised] 
Federal  Bureau  of  Investigation.  The  problem  of 
transferal  of  the  central  counterintelligence  service  to  the 
Federal  Bureau  of  Investigation  is  somewhat  different  in 
character.   Primarily,  the  FBI  is  a  policing  organization 
charged  with  the  investigation  of  violations  of  the  laws  of 
the  United  States.   It  has  however  lately  been  given  a 
responsibility  for  counter-intelligence  operations  within  the 
United  States,  although  the  Army  and  Navy  are  also  conditioning 
independent  counter-intelligence  services  within  this  area.   As 
a  war-time  emergency,  it  was  also  charged  with  counter- 
intelligence functions  within  the  Western  Hemisphere.   It  has 
been  urged  by  the  bureau  that  its  domestic  responsibilities 
would  be  best  achieved  by  an  extension  of  its  franchise  to  cover 
all  territories  outside  the  Western  hemisphere. 
The  question  is  immediately  raised  as  to  the  ultimate