An Alabama man has been sentenced to spend six months in prison for illegally accessing the personal information of over fifty women. For over two years, Kevin Maldonado engaged in a hacking technique called “phishing,” creating fake email accounts impersonating email providers and requesting numerous women to change their email passwords. He was then able to obtain passwords and access private information, including personal photographs. Maldonado then stored the stolen information on his personal computer. Maldonado pleaded guilty in February 2017 to computer intrusion, and was sentenced to six months in prison and three years of supervised release.

Although extensive, Maldonado’s phishing technique is a common strategy employed by hackers to gain personal information. Phishing scams are fraudulent email messages that appear to come from legitimate sources. In 2016, according to the FBI’s Internet Crime Complaint Center, there were more than 19,000 victims of phishing and related scams. Email users can guard against these scams by verifying information sent in emails, like the name of the company, sender and url links embedded in the email message. Personal firewalls and security software can provide even more protection if needed.

To view information from the SEC on protection from phishing scams, click here.

To view the U.S. Attorney’s press release click here.

On June 9, 2017, the U.S. Department of Health and Human Services (HHS), Office of Civil Rights (OCR) released a cyber-attack “Quick Response” checklist (the Checklist) for the benefit of HIPAA covered entities and business associates.

This checklist and the accompanying info-graphic is part of the ongoing HHS campaign to get out ahead of cyber-attacks in the healthcare sector. Rather than the HHS merely reacting to HIPAA-related fallout that can occur as a result of a breach, this checklist is meant to preemptively explain the steps for a HIPAA covered entity or its business associate to take in response to a cyber-related security incident. This preventative campaign by HHS has been spurred on by the increasing prevalence of cyber-attacks, particularly the May 2017 WannaCry ransomware attack in May 2017 which “rapidly affected numerous organizations across over one hundred countries.” The Checklist contains response, reporting, and assessment / notice requirements for covered entities and business associates.

1) Response: The entity must execute its response and mitigation procedures in addition to its contingency plan. See HIPAA Security Rule, 45 C.F.R. § 164.308(a)(6)−(7) (requiring the establishment of contingency plans and the entity’s response to and mitigation of security incidents). This requires that the entity immediately identify the problem, fix it, and mitigate any impermissible disclosure of public health information (PHI).

2) Report: The entity should report the crime to law enforcement agencies, which may include state or local law enforcement, the Federal Bureau of Investigations, or the Secret Service. This report should not include any PHI.

The entity should report all cyber threat indicators to federal and information sharing and analysis organizations (ISAOs), including the Department of Homeland Security, the HHS Assistant Secretary for Preparedness and Response, and private-sector cyber-threat ISAOs.

3) Assessment and Notice: If the breach affects 500 or more individuals, the entity must report it to OCR as soon as possible, but no later than 60 days after the discovery of the breach. The entity must also notify the individuals affected by the breach and the media unless a law enforcement officer has requested a delay in the reporting.

If the breach affects less than 500 individuals, the entity must notify the affected individuals without unreasonable delay, but no later than 60 days after discovery and OCR within 60 days after the end of the calendar year in which the breach was discovered.

If the PHI was encrypted or the entity determines through a written risk assessment that there was a low probability that PHI was compromised during the breach, this would not constitute a breach that would have to be reported to OCR.

In recent testimony to Congress, HHS officials testified that its cybersecurity push is meant “to engage the broader healthcare sector and ensure that IT security practitioners ha[ve] the information they need,” while additionally providing guidance and support regarding “how to manage cybersecurity incidents in this era of heightened consequences….” (See Congressional Testimony, Steve Curren, Division of Resilience in the Office of Emergency Management, HHS Office of the Assistant Secretary for Preparedness and Response). In the Checklist release, HHS specifically refers to HIPAA-related penalties, noting that “in determining the amount of any applicable civil penalty, OCR may consider mitigating factors,” including compliance with the actions encouraged by the Checklist. (See also 45 C.F.R. §160.408 (describing mitigating and aggravating factors in determining civil penalties)). The release of this “Quick Response” checklist follows the HHS establishment of the Health Cybersecurity and Communications Integration Center, demonstrating the serious commitment of the HHS to combating the occurrence and effect of these cybersecurity breaches.

For the official Checklist from the HHS on June 9, 2017, click here. For the HHS info-graphic that accompanied the Checklist, click here.

Today, on June 1, 2017, China’s new cybersecurity law, entitled the “Network Security Law”, goes into effect.  The law was passed in November 2016.  It now becomes legally mandatory for “network operators” and “providers of network products and services” to: (a) follow certain personal information protection obligations, including notice and consent requirements; (b) for network operators to implement certain cybersecurity practices, such as designating personnel to be responsible for cybersecurity, and adopting contingency plans for cybersecurity incidents; and (c) for providers of networks.

The law focuses on protecting personal information and individual privacy, and standardizes the collection and usage of personal information. Companies will now be required to introduce data protection measures, and sensitive data (e.g., information on Chinese citizens or relating to national security) must be stored on domestic servers.  Users now have the right to ask service providers to delete their information if such information is abused.  In some cases, firms will need to undergo a security review before moving data out of China. One of the challenges is that the government has been unclear on what would be considered “important or sensitive data”, and which products may fall under the “national security” definition.

Penalties vary, but can include (1) a warning, injunction order to correct the violation, confiscation of proceeds and/or a fine (typically ranging up to $1 million Chinese yuan (~$147,000); (2) personal fines for directly responsible persons up to $100,000 Chinese yuan (~$14,700); and (3) under some circumstances, suspensions or shutdowns of offending websites and businesses and revocations of operating permits and business licenses. Such sanctions would take into account the degree of harm and the amount of illegal gains. (Fines could include up to five times the amount of those ill-gotten gains).

While draft implementing regulations and a draft technical guidance document have been circulated by the Cyber Administration (China’s internet regulator) the final versions of these documents are still forthcoming.  These documents are expected to clarify obligations regarding restrictions on cross-border transfers of “personal information” and “important information”, including a notice and consent obligation. They may also include procedures and standards for “security assessments”, which are necessary to continue cross-border transfers of personal information and “important information”.  Under the draft regulation, “network operators” would not be required to comply with the cross-border transfer requirements until December 31, 2018.  It is expected that the final draft will contain a similar grace period.

Although large multinational corporations are typically accustomed to adapting to new laws and regulations in various countries and are already accustomed to tight internet and content controls in China, there remains concern about the potential cost impacts as well as the enforcement risk of the ambiguous language.  It is also unclear on whether the new law may alienate small or medium sized businesses otherwise looking to enter the Chinese market.  While Beijing is touting the law as a welcome milestone in data privacy, companies both large and small are concerned that the law is both vague and exceptionally broad, thus potentially putting companies at undue risk of regulatory enforcement unrelated to cybersecurity.

For an official press release from the state run website, China Daily, on May 31, 2017, click here.

Target Corporation has reached an $18.5 million settlement with 47 states and the District of Columbia to resolve the investigation into the retailer’s 2013 data breach, officials announced on May 23, 2017. The 2013 data breach incident triggered various state consumer protection and data breach laws when hackers accessed consumer data for over 110 million Target customers. In response, state attorneys general from across the country joined in an investigation led by Connecticut and Illinois. The investigation has culminated in the largest multistate data breach settlement to date.

In November 2013, hackers breached Target’s gateway server using stolen credentials from a third-party vendor. The hackers were able to access a customer service database, install malware on the system, and capture consumer data. Customer payment card accounts for more than 41 million and contact information for more than 60 million, including full names, telephone numbers, email and mailing addresses, payment card numbers and verification codes, and encrypted debit PINs, were compromised in the breach.

Notably, Target has agreed to much more than the monetary payments to the states. Through Target’s compliance with the settlement agreement, various state attorneys general project Target will set industry standards for secure credit card processing and customer data maintenance. According to the settlement terms, Target must adhere to several requirements, including: (1) developing, implementing, and maintaining a comprehensive information security program within 180 days designed to protect customer personal information; (2) employing an executive or officer responsible for implementing and maintaining the information security program; (3) developing and implementing policies and procedures for auditing vendor compliance with its information security program; (4) maintaining encryption protocols and policies; (5) complying with the Payment Card Industry Data Security Standard (“PCI DSS”) with respect to its payment card system; (6) segmenting its payment card system from its larger computer network; (7) deploying and maintaining controls to detect and prevent the execution of unauthorized applications within its point-of-sale terminals and servers; and (8) adopting improved, industry-accepted payment card security technologies, such as chip and PIN technology.

Target has one year to obtain a third-party security assessment and report and provide the report to the Connecticut Attorney General’s Office.

A copy of the full settlement is available here.

On March 10, 2017, the White House Office of Management and Budget (“OMB”) released its 2016 Federal Information Security Modernization Act (“FISMA”) Annual Report to Congress. The FISMA Report describes the current state of Federal cybersecurity. It provides Congress with information on agencies’ progress towards meeting cybersecurity goals and identifies areas that need improvement. Additionally, the report provides information on Federal cybersecurity incidents, ongoing efforts to mitigate and prevent future incidents, and progress in implementing adequate cybersecurity programs and policies.

According to the FISMA report, agencies reported over 30,899 cyber incidents that led to the compromise of information or system functionality in 2016. However, only sixteen of these incidents met the threshold for a “major incident” (which triggers a series of mandatory steps for agencies, including reporting certain information to Congress). The report categorizes the types of agency-reported incidents. The largest number of reported incidents (more than one-third) was “other,” meaning the attack method did not fit into a specific category or the cause of the attack was unidentified. The second largest was loss or theft of computer equipment. Attacks executed from websites or web-based applications were the third most common type of incident.

Despite these incidents, the report notes that there were government-wide improvements in cybersecurity, including agency implementation of:

  • Information Security Continuous Monitoring (“ISCM”) capabilities that provide situational awareness of the computers, servers, applications, and other hardware and software operating on agency networks;
  • Multi-factor authentication credentials that reduce the risk of unauthorized access to data by limiting users’ access to the resources and information required for their job functions; and
  • Anti-Phishing and Malware Defense capabilities that reduce the risk of compromise through email and malicious or compromised web sites.

Federal agencies will look to continue these cybersecurity improvements in 2017.

To view the Report, click here.

On January 10, 2017, NIST issued an update to the NIST Cybersecurity Framework (v.1.1).  After reviewing public comment and convening a workshop, NIST intends to publish a final version of this Version 1.1 in the fall of 2017.

Key updates the framework include:

  • Metrics.  A new section 4.0 on Measuring and Demonstrating Cybersecurity to discuss correlation of business results to cybersecurity risk management metrics and measures.
  • Supply Chain.  A greatly expanded explanation of using the framework for supply chain risk management purposes.
  • Authentication, Authorization and Identify Proofing.  Refinements to the language of the Access Control category to account for authentication, authorization, and identify proofing.  A subcategory has been added, and the Category has been renamed to “Identity Management and Access Control (PR.AC) to better represent the scope of the Category and corresponding subcategories.
  • Explanation of Relationship between Implementation Tiers and Profiles.  Adds language on using Framework Tiers in Framework implementation, to reflect integration of Framework considerations within organizational risk management programs, and to update Figure 2.0 to include actions from the Framework Tiers.

More detail on the changes can be found in Appendix D.  NIST seeks public comment on the following questions:

  • Are there any topics not addressed in the draft Framework Version 1.1 that could be addressed in the final?
  • How do the changes made in the draft Version 1.1 impact the cybersecurity ecosystem?
  • For those using Version 1.0, would the proposed changes impact your current use of the Framework? If so, how?
  • For those not currently using Version 1.0, does the draft Version 1.1 affect your decision to use the Framework? If so, how?
  • Does this proposed update adequately reflect advances made in the Roadmap areas?
  • Is there a better label than “version 1.1” for this update?
  • Based on this update, activities in Roadmap areas, and activities in the cybersecurity ecosystem, are there additional areas that should be added to the Roadmap? Are there any areas that should be removed from the Roadmap?

A redline version of the framework can be found by clicking here.  A clean version of the Framework may be found by clicking here.

AftDeveloping new programer surveying nearly 200 regulated financial institutions to obtain insight into the industry’s efforts to prevent cybercrime and meeting with a cross-section of those surveyed, as well as cybersecurity experts, to discuss emerging trends and risks, as well as due diligence processes, policies and procedures governing relationships with third party vendors, the New York State Department of Financial Services (NYDFS) recently released its proposed cyber security regulation.  The proposed regulation, titled “Cybersecurity Requirements for Financial Services Companies”, if implemented, would be a first-in-the-nation provision that requires a mandatory cybersecurity program for financial institutions.

Continue Reading New York Department of Financial Services Proposes Cybersecurity Requirements