Data Breach Laws

Recently California updated their data breach notification law.  The enhancements includes providing breach victims with specific information on what was breached, the details of the incident, and how to defend against identity fraud. If you have any customers or members who are California residents, this applies to you.

A federal data breach notification law seems to be nearing as well. Such a law would supersede the existing 46 state laws already in existence and potentially simplify breach notification procedures.

I have included some links and exerts below to existing state laws in Georgia and Tennessee (two states we frequently do business in). It appears that Alabama has not enacted specific data breach notification legislation. Notice that at the very bottom of the TN legislation it exempts any person that is covered under Title V of the GLBA. In 2005 an FIL was produced to interpret GLBA with regards to incident response and notifications of breach.

Georgia (search for 10-1-910)

§ 10-1-910.  Legislative findings


   The General Assembly finds and declares as follows:

   (1) The privacy and financial security of individuals is increasingly at risk due to the ever more widespread collection of personal information by both the private and public sectors;

   (2) Credit card transactions, magazine subscriptions, real estate records, automobile registrations, consumer surveys, warranty registrations, credit reports, and Internet websites are all sources of personal information and form the source material for identity thieves;

   (3) Identity theft is one of the fastest growing crimes committed in this state. Criminals who steal personal information such as social security numbers use the information to open credit card accounts, write bad checks, buy cars, purchase property, and commit other financial crimes with other people's identities;

   (4) Implementation of technology security plans and security software as part of an information security policy may provide protection to consumers and the general public from identity thieves;

   (5) Information brokers should clearly define the standards for authorized users of its data so that a breach by an unauthorized user is easily identifiable;

   (6) Identity theft is costly to the marketplace and to consumers; and

   (7) Victims of identity theft must act quickly to minimize the damage; therefore, expeditious notification of unauthorized acquisition and possible misuse of a person's personal information is imperative.

Tennessee (search 47-18-2107)

47-18-2107.  Release of personal consumer information.

  (a) As used in this section, unless the context otherwise requires:

   (1) "Breach of the security of the system" means unauthorized acquisition of unencrypted computerized data that materially compromises the security, confidentiality, or integrity of personal information maintained by the information holder. Good faith acquisition of personal information by an employee or agent of the information holder for the purposes of the information holder is not a breach of the security of the system; provided, that the personal information is not used or subject to further unauthorized disclosure;

   (2) "Information holder" means any person or business that conducts business in this state, or any agency of the state of Tennessee or any of its political subdivisions, that owns or licenses computerized data that includes personal information; and

   (3)  (A) "Personal information" means an individual's first name or first initial and last name, in combination with any one (1) or more of the following data elements, when either the name or the data elements are not encrypted:

         (i) Social security number;

         (ii) Driver license number; or

         (iii) Account number, credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual's financial account; and

      (B) "Personal information" does not include publicly available information that is lawfully made available to the general public from federal, state, or local government records.

(b) Any information holder shall disclose any breach of the security of the system, following discovery or notification of the breach in the security of the data, to any resident of Tennessee whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person. The disclosure shall be made in the most expedient time possible and without unreasonable delay, consistent with the legitimate needs of law enforcement, as provided in subsection (d), or any measures necessary to determine the scope of the breach and restore the reasonable integrity of the data system.

(c) Any information holder that maintains computerized data that includes personal information that the information holder does not own shall notify the owner or licensee of the information of any breach of the security of the data immediately following discovery, if the personal information was, or is reasonably believed to have been, acquired by an unauthorized person.

(d) The notification required by this section may be delayed, if a law enforcement agency determines that the notification will impede a criminal investigation. The notification required by this section shall be made after the law enforcement agency determines that it will not compromise the investigation.

(e) For purposes of this section, notice may be provided by one (1) of the following methods:

   (1) Written notice;

   (2) Electronic notice, if the notice provided is consistent with the provisions regarding electronic records and signatures set forth in 15 U.S.C. § 7001; or

   (3) Substitute notice, if the information holder demonstrates that the cost of providing notice would exceed two hundred fifty thousand dollars ($250,000), or that the affected class of subject persons to be notified exceeds five hundred thousand (500,000), or the information holder does not have sufficient contact information. Substitute notice shall consist of all of the following:

      (A) E-mail notice, when the information holder has an e-mail address for the subject persons;

      (B) Conspicuous posting of the notice on the information holder's internet website page, if the information holder maintains such website page; and

      (C) Notification to major statewide media.

(f) Notwithstanding subsection (e), an information holder that maintains its own notification procedures as part of an information security policy for the treatment of personal information, and is otherwise consistent with the timing requirements of this section, shall be deemed to be in compliance with the notification requirements of this section, if it notifies subject persons in accordance with its policies in the event of a breach of security of the system.

(g) In the event that a person discovers circumstances requiring notification pursuant to this section of more than one thousand (1,000) persons at one time, the person shall also notify, without unreasonable delay, all consumer reporting agencies and credit bureaus that compile and maintain files on consumers on a nationwide basis, as defined by 15 U.S.C. § 1681a, of the timing, distribution and content of the notices.

(h) Any customer of an information holder who is a person or business entity, but who is not an agency of the state or any political subdivision of the state, and who is injured by a violation of this section, may institute a civil action to recover damages and to enjoin the person or business entity from further action in violation of this section. The rights and remedies available under this section are cumulative to each other and to any other rights and remedies available under law.

(i) The provisions of this section shall not apply to any person who is subject to the provisions of Title V of the Gramm-Leach-Bliley Act of 1999, Pub. L. No. 106-102.

Chris

On SOC1, SOC2, & SOC3 reports

Just about all of our client financial institution make heavy use of third-party service providers to perform critical business functions. Prior to June 15th, 2011 these service providers usually had a SAS 70 performed in order to provide assurance on controls existing at their facilities. The SAS 70 standard now has been replaced the SSAE 16 standard (SOC 1 Report) or Trust Services Reviews (SOC 2) report. 

I won't get into all the reasons of the evolution, but one driving force behind the change was the need for a report that could demonstrate assurance on the controls present in a third-party service provider yet not disclose all of the sensitive details of the control environment. Therefore, the AICPA and the CICA jointly formed a SOC 3 Report that only contains the CPA opinion and some other major relevant information. It leaves out the listing of controls and the results of each test on their operating effectiveness. Unlike the SOC 1 and SOC 2 Reports that should only be given to existing customers the SOC 3 Reports can be provided to prospective clients or posted on a Website. I have been on the look out for these reports to see what type of traction they are gaining. I have posted two links below.  If you happen to see anymore please email and let me know.

DNSSEC SysTrust Certification

Zixcorp SysTrust Certification

-Chris

Intrusion Response

On August 9th, 2011 I attended the GFIRST7 conference in Nashville, TN.  An intriguing session that I sat in on was presented by John Ritchie from the state of Oregon's incident response team. Mr. Ritchie and his team created a live Linux CD that would help incident responders quickly answer four key questions about malware infections:

• How did this get here?
• Where did it come from?
• How long has it been here?
• What data has been stolen?

While Mr. Ritchie does not work directly with the financial services industry what he has done is extremely applicable to how financial institutions should handle computer intrusions. Section 501(b) of GLBA is fundamentally about protecting the non-public personal information of financial institutions customers. To support this premise, consider what the FFIEC Information Security Booklet section on 'Intrusion Response' has  to say about the purpose of an IR program:

 The goal of intrusion response is to minimize damage to the institution and its customers through containment of the intrusion, the restoration of systems, and providing assistance to customers.

Financial Institutions must also file a SAR based on the following definition of a "computer intrusion" that gains access to a FI to:

a. Remove, steal, procure, or otherwise affect funds of the institution or the institution’s customers;

b. Remove, steal, procure or otherwise affect critical information of the institution including customer account information; or

c. Damage, disable or otherwise affect critical systems of the institution.

All of this guidance assumes that a FI can determine when an intrusion has occurred and the extent of non-public customer information that was at risk. However, a common response I see to malware infections is "wipe it and forget it." That is the hard drive of the infected machine is usually re-imaged and put right back into production. Very little attempt is made to determine the answer to any of the four questions that Mr. Ritchie seeks to answer with his incident response team. With this type of response how does the FI know if customer information was compromised?  How does it know if it needs to contact its primary regulator, file a SAR or alert its customers of a data breach (required in some states and maybe coming soon to a piece of federal legislation near you).

The point of me writing this blog post is that FI's simply can't sweep malware infections under the rug and be compliant with the current guidance on intrusions. Obviously, full scale forensic investigations are not practical.  However, at a minimum for every infection an incident report should be filed that answers the four questions above.

-Chris

Yet another wire fraud attempt

Packet Storm pointed to an article from The Tribune in San Luis Obispo, California. It detailed how a hacker using a phishing email that appeared to come from NACHA exploited a system in the city of Atascadero and subsequently attempted fraudulent wire transfers to the tune of $83,000. Fortunately, the transfers were caught be employees of a credit union that was receiving some of the funds.

-Chris

FFIEC Authentication Guidance

It has been a long time coming. The FFIEC Guidance on Authentication has arrived. What is the takeaway? Below are bullet point lists of the Dos and Don’ts for financial institutions. Some of this is new and some of it is a reinforcement of the 2005 Guidance.

Dos

• ·        Review and update risk assessments as new information becomes available, prior to new electronic financial services, or at least every twelve months.
• ·        Monitor customer authentication and electronic transactions to other parties for suspicious behavior or anomalies.
• ·        Place controls on administrative functions of business accounts.

Don’ts

• Count challenge questions that place cookies on a customer’s computer as “multi-factor” authentication.
• Use out-of-band authentication then turn around and input it through the same device that initiates the transaction.
• Leave your customers, especially business customers, in the dark when it comes to their liability for fraudulent transactions and how to protect their accounts.

These do not constitute a comprehensive list, but more of the major points I took from the updated guidance. I have read quite a bit of commentary on the guidance; some of it was positive but most was negative. There are those who think that it did not go far enough. Most of the discussions turned into an ethical debate on who should be responsible for losses, particularly losses to small businesses given the amount of fraud SMBs have suffered recently.

Here are a few things I think we all can agree on.

1. Deposits, particularly demand deposits, can make financial institutions money. The customer nor the bank want those deposits to leave the FI.
2. If money is siphoned out of an account, no matter who is liable, those funds are gone for good and chances are the business will take their banking relationship elsewhere.
3. If the business customer takes the FI to court there will be only one winner… the lawyers.
4. FIs are in the best position to protect the accounts. They should know the risks better and be better at leveraging controls across all of their online accounts.

Therefore, I think it is wise for FIs to take it upon themselves, as a matter of good business practice, to implement robust controls.

-Chris