A KGB counterespionage dictionary, written for training purposes during the Cold War, describes "false-flag recruitment" as recruitment of an individual where the recruiting agent pretends to be something he isn't: an agent for another country's intelligence or counterespionage service, a member of a political party, an executive with a particular company or corporation, etc. It's used in cases where the recruited individual can provide help in some espionage or counterespionage operation, but would never agree to work for the recruiting agent's own country.1
The 1979 CIA assessment of Israel's intelligence services , reports that Mossad is expert at false-flag recruitment, and uses it extensively. In one known pitch used by the Israelis, the Israeli recruiter pretended to be associated with a fictitious NATO intelligence organization, and used this cover to recruit Europeans for espionage work in Arab countries.2
Victor Ostrovsky's book, By Way of Deception, opens with an elaborate Mossad false-flag recruitment pitch directed at an Iraqi nuclear scientist working on the design and construction of Iraq's nuclear power plants. The scene is Paris. An Israeli katsa masquerading as a wealthy English businessman, induces the Iraqi to see him as a friend, with the help of an attractive blond Israeli woman, also provided by Mossad. Once the katsa gains his trust, he introduces him to another Mossad katsa, this one posing as the director of a German firm that wants to sell nuclear power plants to third world countries. The Iraqi agrees to use his expertise to help in return for a generous payment, and voilà , he's been recruited by Mossad. At this point, he's the willing agent of the katsa posing as the company director, who, using one pretext or another, can ask him anything about his work.3
1 Контрразведывательный словарь., Форма вербовки агента, Высшая краснознаменная школа Комитета Государственной Безопасности при Совете Министров СССР им. Ф. Э. Дзержинского. 1972.
2 "What Begin and Reagan Didn't Want You to Know ", Counterspy , May-June, 1982, 44.
3 Victor Ostrovsky and Claire Hoy, By Way of Deception (New York: St. Martin's Press, 1990), 1-28