On July 19, 2018, the Federal Energy Regulatory Commission (FERC) issued a final rule (Order No. 848) directing the North American Electric Reliability Corporation (NERC) to develop and submit modifications to NERC Reliability Standards related to Cyber Security Incident reporting. FERC recognized that, under the current Cyber Security Incident reporting Reliability Standard, incidents are only required to be reported if they have compromised or disrupted one or more reliability tasks. FERC issued Order No. 848 to strengthen Cyber Security Incident reporting requirements.

The Commission’s directive consists of four elements:

  • Responsible entities must report Cyber Security Incidents that compromise, or attempt to compromise, a responsible entity’s Electronic Security Perimeter (ESP) or Electronic Access Control and Monitoring Systems (EACMS) associated with an ESP;
  • Required information in Cyber Security Incident reports should include certain minimum information to improve the quality of reporting and allow for ease of comparison by ensuring that each report includes specified fields of information;
  • The filing deadline for Cyber Security Incident reports should be established once a compromise or disruption to reliable BES operation, or an attempt to compromise or disrupt, is identified by a responsible entity; and
  • Cyber Security Incident reports should continue to be sent to the Electricity Information Sharing and Analysis Center (E-ISAC), rather than the Commission, but the reports should also be sent to DHS’s Industrial Control Systems Cyber Emergency Response Team (ICS-CERT). Finally, NERC must file an annual, public, and anonymized summary of the reports with the Commission.

FERC also suggested that NERC develop a flexible reporting timeline that reflects the severity of a Cyber Security Incident to help address the administrative burden of reporting attempted compromises.

NERC is required to develop modifications to the Reliability Standards within six months. The final rule will take effect 60 days after publication in the Federal Register.

To view FERC’s final rule, click here.

The Federal Financial Institutions Examination Council (FFIEC) has issued a joint statement providing guidance for financial institutions about the role of cyber insurance in risk management of informational technology systems. The FFIEC comprises the principals of the following: The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, and State Liaison Committee.

On April 10, 2018, the FDIC, as a member of the FFIEC, issued statement FIL-16-2018, applicable to all FDIC-supervised institutions. Similarly, on April 11, 2018, the Office of the Comptroller of Currency (OCC) issued a similar bulletin (OCC Bulletin 2018-8) on the FFIEC’s joint statement, noting that the joint statement applies to all institutions supervised by the OCC.  The joint statement and associated FDIC letter and OCC bulletin include the following highlights:

  • FDIC-supervised institutions are not required to maintain cyber insurance. However, cyber insurance could offset financial losses from a variety of exposures—including data breaches resulting in the loss of confidential information—that may not be covered by more traditional insurance policies.
  • Traditional general liability insurance policies may not provide effective coverage for all potential exposures caused by cyber events.
  • Cyber insurance does not replace a sound and effective risk management program.
  • Cyber attacks are increasing in volume and sophistication and that traditional general liability coverage insurance policies may not provide effective coverage for potential exposures caused by cyber events
  • Cyber insurance may help reduce financial losses from a variety of exposures, such as data breaches resulting in the loss of sensitive customer information.
  • Cyber insurance does not diminish the importance of a sound control environment; rather, cyber insurance may be a component of a broader risk management strategy.
  • As institutions weigh the benefits and costs of cyber insurance, considerations may include: (a) involving multiple stakeholders in the cyber insurance decision; (b) performing proper due diligence to understand available cyber insurance coverage; and (c) evaluating cyber insurance in the annual insurance review and budgeting process.

The FFIEC’s statement is not intended to contain new regulatory expectations, but instead to provide awareness of the potential role of cyber insurance in financial institutions’ risk management programs.  Financial institutions ultimately remain responsible for maintaining a control environment consistent with the guidance outlined in the FFIEC IT Examination Handbook.

Click here to see the FFIEC press release.

Click here to see the full 3-page joint statement.

Over a dozen lawsuits have been filed by users and investors against Facebook after it was revealed last month that Cambridge Analytica, a political research firm, obtained personal information on millions of Facebook users. Cambridge Analytica obtained the data through a personality test app linked to Facebook accounts. Many of the lawsuits claim the information was used to create profiles and target audiences for purposes of categorizing voters in the 2016 presidential election. Most of the lawsuits accuse Facebook of failing to protect users’ personal information despite stating in its privacy policy that Facebook users own and control personal information posted on Facebook. Some of the lawsuits go beyond allegations of privacy violations and accuse Facebook of negligence, consumer fraud, unfair competition, securities fraud and racketeering. On March 16, Facebook announced that it was suspending Cambridge Analytica for violating Facebook’s policies on data gathering

Starting April 9, Facebook will begin alerting users whose data may have been harvested by Cambridge Analytica. As part of this process, the company plans to post a link at the top of users’ news feeds that will allow them to see which apps are connected to their Facebook accounts and what information those apps are permitted to see. Additionally, Facebook CEO Mark Zuckerberg is scheduled to testify before U.S. Congress on April 10 and April 11. Zuckerberg will appear before the Senate Judiciary and Commerce committees on April 10 and the House Energy and Commerce Committee on the morning of April 11. Zuckerberg’s testimony will hopefully shed more light into how this alleged violation occurred and its broader implications on data privacy in general.

 

 

On Wednesday, March 28, 2018, the Alabama Data Breach Notification Act of 2018 (SB318) was signed into law by the Governor, making Alabama round out the roster of 50 states with data breach notification laws.  (South Dakota’s data breach notification was signed by its governor on March 21, 2018, making it the 49th state.)  The new law will be effective on June 1, 2018.  Below is a more detailed summary of the Alabama law:

Definitions.

The Alabama law defines a security breach as the “unauthorized acquisition of data in electronic form containing Sensitive Personally Identifying Information (“Sensitive PII”).  As is typical, a breach does not include either: (a) good faith acquisitions by employees or agents unless used for unrelated purposes; (b) the release of public records not otherwise subject to confidentiality or nondisclosure requirements; or (c) any lawful investigative, protection or intelligence activities by a state law enforcement or intelligence agency.

“Sensitive PII” is defined to include: (a) an Alabama resident’s first name or first initial and last name in combination with one or more of the following regarding the same resident:

  • A non-truncated SSN number or tax identification number;
  • A non-truncated driver’s license number, state ID number, passport, military ID, or other unique identification number issued on a government document;
  • A Financial account number, including bank account number, credit card or debit card, in combination with any security code, access code, password, expiration date, or PIN, that is necessary to access the financial account or to conduct a transaction that will credit or debit the financial account.
  • Any information regarding an individual’s medical history, mental or physical conditions, or medical treatment or diagnosis by a health care professional.
  • An individual’s health insurance policy number or subscriber identification number and any unique identifier used by a health insurer to identify the individuals.
  • A user name or email address, in combination with a password or security question and answer that would permit access to an online account affiliated with the covered entity that is reasonably likely to contain or is used to obtain Sensitive PII.

Notification Requirements.

  • Notification to Individuals. If a covered entity determines that an unauthorized acquisition of Sensitive PII has or is reasonably believed to have occurred, and is reasonably likely to cause substantial harm, it shall notify affected individuals as expeditiously as possible and without unreasonable delay but no later than 45 days after the determination of both a breach and a likelihood of substantial harm. A federal or state law enforcement agency may request delayed notification if it may interfere with an investigation.  If an entity determines that notice is not required, it shall document the determination and maintain the documentation for at least 5 years.
    • Format and Content. Written notice can be by mail or email, and must include: (1) the estimated date or date range of the breach; (2) a description of the Sensitive PII acquired; (3) a general description of actions taken to restore the security and confidentiality of the personal information; (4) steps an affected individual can take to protect himself or herself from identity theft; and (5) contact information for the covered entity in case of inquiries.
    • Substitute Notice. Substitute notice can be provided if direct notice would cause excessive cost relative to the covered entity’s resources, if the affected individuals exceed 100,000 persons, or if there is a lack of sufficient contact information for the required individual to be notified.  Costs are deemed excessive automatically if they exceed $500,000.  Substitute notice may include both posting on the website for 30 days and using print or broadcast media in the major urban and rural areas where the individuals reside.   An alternative form of substitute notice may be approved by the Attorney General.
  • Notification to Attorney General. If the affected individuals exceed 1,000, the entity must notify the Attorney General as expeditiously as possible and without unreasonable delay, but no more than 45 days from receiving notice of a breach by a third party agent or upon determining a breach and substantial likelihood of harm has occurred. Notice must include: (1) an event synopsis; (2) the approximate number of affected individuals in Alabama; (3) any free services being offered by the covered entity to individuals and instructions on how to use them; and (4) contact information for additional inquiries.  The covered entities may provide supplemental or updated information at any time, and information marked as confidential is not subject to any open records or freedom of information laws.
  • Notification to Consumer Reporting Agencies. If the covered entity discovers notice is required to more than 1,000 individuals at a single time, it shall also notify, without unreasonable delay, all consumer reporting agencies.
  • Third Party Notification. Third party agents experiencing a breach of a system maintained on behalf of a covered entity shall notify the covered entity as expeditiously as possible and without unreasonable delay, but no later than 10 days following the determination (or reason to believe) a breach has occurred.

Enforcement

  • Enforcement Authority. Violating the notification provisions is an unlawful trade practice under the Alabama Deceptive Trade Practices Act (ADTPA), and the Attorney General has exclusive authority to bring an action for penalties. There is no private cause of action.  The Attorney General also has exclusive authority to bring a class action for damages, but recovery is limited to actual damages plus reasonable attorney’s fees and costs.  The Attorney General must submit an annual report.
  • Penalties. Any entity knowingly violating the notification provisions is subject to ADTPA penalties, which can be up to $2,000/day, up to a cap of $500,000 per breach.   (“Knowing” means willfully or with reckless disregard.)  In addition to these penalties, a covered entity violating the notification provisions shall be liable for a penalty of up to $5,000/day for each day it fails to take reasonable action to comply with the notice provisions. Government entities are subject to the notice requirements, but exempt from penalties, although the Attorney General may bring an action to compel performance or enjoin certain acts.

Other Requirements

  • While enforcement authority is limited to notification violations, the statute also instructs entities to take “reasonable security measures”, provides guidance on conducting a “good faith and prompt investigation” of a breach, and requires covered entities to take reasonable measures to dispose of Sensitive PII. It is unclear how these provisions might be enforced, except potentially to determine if a notification violation was willful or with reckless disregard.
    • Reasonable Security Measures”. Covered entities and third party agents must implement and maintain reasonable security measures to protect Sensitive PII, and the law provides guidance on what elements to include.  It also provides guidance on what an assessment of a covered entity’s security measures might consider and emphasize.
    • Breach Investigation. A covered entity shall conduct a “good faith and prompt investigation”, and the law lists considerations to include in the investigation.
    • Records Disposal. A covered entity or third-party agent must take reasonable measures to dispose of or arrange for the disposal of records containing Sensitive PII when they are no longer to be retained, and the law includes examples of such disposal methods.

On February 21, 2018, the Securities and Exchange Commission (SEC) published a release entitled “Commission Statement and Guidance on Public Company Cybersecurity Disclosures” (“Release”).  Designed to assist public companies in preparing disclosures concerning cybersecurity risk and incidents, the release expands upon the SEC’s previous guidance in 2011 to emphasize particular areas, including board oversight, disclosure control and procedures, insider trading and Regulation FD. In addition, the release addresses two topics not developed in the 2011 guidance: (1) the importance of cybersecurity policies and procedures, and (2) the application of insider trading prohibitions in the cybersecurity context.

The SEC’s Release covers the following major points:

Disclosure Guidance

  • Scope of Risk Disclosure Include Potential Incidents. The SEC stated it is critical that public companies take all required actions to inform investors about material cybersecurity risks and incidents in a timely fashion, including those companies that are subject to material cybersecurity risks but may not yet have been the target of a cyber-attack.
  • Weighing Materiality in Disclosure Obligations. In determining disclosure obligations, “companies generally weigh, among other things, the potential materiality of any identified risk, and, in the case of incidents, the importance of any compromised information and of the impact of the incident on the company’s operations.” Materiality may depend on the “nature, extent, and potential magnitude, particularly as they relate to any compromised information or the business and scope of company operations” and the range of harm incidents could cause, including harm to a company’s reputation, financial performance, customer and vendor relationships, and potential litigation or regulatory investigations or enforcement actions.  This includes regulatory actions by state and federal authorities as well as non-US authorities.
  • Timing and Content. The Release acknowledges the challenge of determining the appropriate timing for disclosures, as companies must have time to understand the incident’s scope and determine how much to disclose.
  • Risk Factors. The Release cites Regulations S-K and Form 20-F as requiring companies to disclose the most significant factors that make investments in the company’s securities speculative or risky. Companies should disclose cybersecurity-related risks if they are among such factors, including risks that arise in connection with acquisitions.  The Release states it would be helpful for companies to consider the following issues, among others, in evaluating cybersecurity risk factor disclosure:
    • The occurrence of prior cybersecurity incidents, including their severity and frequency;
    • The probability of the occurrence and potential magnitude of cybersecurity incidents;
    • The adequacy of preventative actions taken to reduce cybersecurity risks and the associated costs, including, if appropriate, discussing the limits of the company’s ability to prevent or mitigate certain cybersecurity risks;
    • The aspects of the company’s business and operations that give rise to material cybersecurity risk and the potential cost and consequences of such risks, including industry-specific risks and third party suppliers and service provider risks;
    • The costs associated with maintaining cybersecurity protections, including, if applicable, insurance coverage relating to cybersecurity incidents or payments to service providers;
    • The potential for reputational harm;
    • Existing or pending laws and regulations that may affect the requirements to which companies are subject to relating to cybersecurity and the associated costs to companies; and
    • Litigation, regulatory investigation, and remediation costs associated with cybersecurity incidents.
  • Content of Disclosure. Companies are not required to include disclosure that would provide a “roadmap” for how to breach a company’s security protections — such as technical information about systems, networks or devices — or other potential vulnerabilities in such detail as would make such assets more susceptible to an incident. However, the Commission does expect companies to disclose cybersecurity risks and incidents that are material to investors, to make appropriate disclosures timely and sufficiently prior to the offer and sale of securities, and to take steps to prevent officers, directors, and other insiders from trading securities until investors have been appropriately informed.  Companies should watch for situations in which they need to correct or update prior disclosures as additional information is learned.  In meeting their disclosure obligations, companies may need to disclose previous or ongoing incidents in order to place discussion of risks in the appropriate context.  For instance, if a company previously experienced a material denial-of-service attack, it likely would not be sufficient to merely disclose that there is a risk that a denial-of-service incident may occur.  Instead, the company may need to discuss the occurrence of that incident and its consequences as part of a broader discussion of the types of incidents that pose particular risks to the company’s business and operations.

Policies and Procedures

  • Board Oversight. Under current Item 407(h) of Regulation S-K, companies must disclose the board of directors’ role in the risk oversight of the company, and the Release suggests specific discussion of the nature of its role in cyber risk management, especially if cyber risks are material to the company’s business.  The Release indicates that disclosing a company’s cybersecurity risk management program and how its board engages with management on cybersecurity issues “allows investors to assess how a board is discharging its responsibilities in this increasingly important area.”  As a response to this release, companies may wish to consider broadening or deepening their board’s engagement with these issues.
  • Disclosure Controls and Procedures. The SEC stated that it is “crucial” for a public company to have disclosure controls and procedures that provide an appropriate method of discerning the impact of such matters on the company and its business, financial conditions, and results of operations, as well as a protocol to determine the potential materiality of such risks and incidents.  These controls and procedures must ensure senior management is promptly made aware of important cybersecurity issues to enable informed disclosure decisions regarding the substance of any issues and to facilitate appropriate officer certifications and disclosures regarding the effectiveness of the controls and procedures.  Companies should “identify cybersecurity risks and incidents, assess and analyze their impact on a company’s business, evaluate the significance associated with such risks and incidents, provide for open communications between technical experts and disclosure advisors and make timely disclosure regarding such risks and incidents.”  In addition, a company should not limit its disclosure controls and procedures to only what is specifically required, but should also ensure timely collection and evaluation of information potentially subject to disclosure.
  • Insider Trading and Regulation FD. The Commission reminds companies that, in some circumstances,  cybersecurity risks and incidents may constitute material nonpublic information, and that existing insider trading and Regulation FD policies should already include any type of material nonpublic information.  However, the Commission states, companies should consider highlighting this possibility through training, or adding cybersecurity incidents to lists within these policies of examples of potentially material information. Policy administrators should establish processes to ensure they are aware of developing cybersecurity incidents when determining whether to close certain trading windows or approve specific trades.  Even when there has been no insider trading violation, companies may be subject to scrutiny if executives trade prior to disclosure of cyber incidents that develop into significant events.  Companies must be mindful of making selective disclosures of cybersecurity events to the persons enumerated under Regulation FD (namely, persons reasonably expected to trade on the basis of such information) before that information is publicly announced.  Policies and procedures for addressing a cybersecurity event should inform those handling the situation of the need to maintain appropriate confidentiality until a public announcement is ready to be made.
  • Conclusion.  The Release highlights the SEC’s increased attention to disclosures related to cybersecurity and concerns that investors may not be fully informed about the growing risks with cybersecurity. In response to this Release, publicly traded companies should:
    • Review and consider refreshing the disclosures in their periodic reports and registration statements, taking into account the detailed criteria contained in the Release and how the impact of incidents (and the risks of potential incidents) may be material to the information that must be presented.
    • Evaluate policies, procedures, and practices related to disclosure to consider whether they need to be updated or refreshed in light of this Release, and to ensure that their boards’ oversight is in line with the risks faced by the company;
    • Consider whether information regarding cybersecurity- and privacy-related risks and incidents is appropriately developed and communicated to result in accurate and timely disclosures and to avoid inadvertent insider trading and Regulation FD violations.

On January 28, 2017, as part of Data Privacy Day, Facebook shared its data privacy principles for the first time. In a blog post drafted by Erin Egan, Facebook’s Chief Privacy Officer, Facebook posted these principles to help users understand how data is used and managed on the site. Among other things, Facebook’s data privacy principles stress user control of privacy, the goal of protecting users’ accounts and implementing security tools (like two-factor authentication), and user ownership of information shared. Facebook also announced the launch of a new education campaign to help users understand how data privacy is handled by the company. As part of this effort, Facebook is preparing to roll out a “Privacy Center” that features important privacy settings in a single place.

This publication comes ahead of the European Union’s (EU) General Data Protection Regulation (GDPR), which will be implemented on May 25, 2018. The GDPR will set stringent data privacy requirements for companies operating in the EU.  In recent years, Facebook has faced scrutiny from EU regulators over its handling of user data. Facebook hopes to embrace a more transparent data privacy approach to meet all GDPR obligations.

To view Facebook’s Privacy Principles, click here.

With the May 25, 2018 deadline quickly approaching, many businesses are scrambling to prepare for compliance with the EU’s General Data Protection Regulation (GDPR), and questions and conversations are heating up.  Still others are still trying to wrap their arms around what GDPR is and what it means for U.S. businesses.  For those of you still trying to wrap your heads around it, below are a few basics to help familiarize yourself with the regulation and its relevance to you.

  1. I’m a U.S. business. Why does GDPR matter to me?

The reach of the GDPR regulation extends not only to European-based businesses, but also to all companies that do business, have customers, or collect data from people in the EU.  If you even have a website that could collect data from someone visiting the site from the EU, your business could be affected. No matter where your business resides, if you intentionally offer goods or services to the European Union, or monitor the behavior of individuals within the EU, the GPDR could be applicable.

  1. What’s the risk?

In addition to the PR or brand risk of being associated with noncompliance, GDPR provides for some pretty significant monetary penalties .  Some violations are subject to fines up to 10 million EUR or up to 2% of global annual turnover, whichever is greater.  For other violations, it is double – up to 20 million euros or 4% of your global annual turnover, whichever is greater.  For large businesses, this could be a substantial amount.

  1. What should I be doing?

First, talk with your general counsel or outside law firm.  They can help you interpret the law, review contractual obligations and assess the company’s overall privacy policies to help guide your compliance strategy going forward.  They can also help create defensible interpretations within certain ambiguous language in the regulation (e.g., what is “personal data” for purposes of the GDPR?).  The Article 29 Working Party, made up of the data protection authorities (DPAs) from all EU member states, has published guidance to clarify certain provisions, which can be helpful during this process.

Second, create a cross-functional team including areas including (but not limited to): communications/PR, IT, customer experience, digital, legal and operations.  This may be fairly similar to any cross-functional teams you may have (and hopefully have) already established to prepare for data breaches.  This team can begin designing and implementing a compliance strategy.  Under certain conditions, your business may need to appoint a Data Protection Officer (DPO) (See Articles 29 and 30).

  1. What are some key points of the GDPR?

GDPR is a data privacy regulation in the EU that is aimed at protecting users’ rights and privacy online.  It requires business to assess what kinds of data they’re collecting and to make that data accessible to users.  The regulation is long and complex with several moving parts, but four key points may be worth noting.

Key Definitions:  You will see several references to controllers, data subjects, personal data, and processing.  This vocabulary may be unfamiliar in relation to U.S. law, but here is how these key terms are defined – as a business subject to GDPR, you may be a “controller” or you may be a “processor”.  The individual is the “data subject”:

  • “Controller” = “the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; where the purposes and means of such processing are determined by Union or Member State law, the controller or the specific criteria for its nomination may be provided for by Union or Member State law.”
  • “Processor” = “means a natural or legal person, public authority, agency or other body which processes personal data on behalf of the controller”
  • “Data subject”= “an identified or identifiable natural person (see definition of “personal data” above).”
  • “Personal data” = “any information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person.”
  • “Processing” = “any operation or set of operations which is performed on personal data or on sets of personal data, whether or not by automated means, such as collection, recording, organization, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction”
  1. Some Key Articles/Provisions:

Article 12Transparent information, communication and modalities for the exercise of the rights of the data subject.

This article creates rules around how users give consent to record their data.  The data subject must be provided with accurate information on all relevant issues, such as the kind of data to be collected or process, and for what purposes. For some particularly sensitive data, (e.g., political opinion, religion, biometric data (including photographs), health data, etc.), consent must be “explicit”.   Consent must be “freely given”, meaning that the user has a “genuine” choice and be able to withdraw consent “without detriment”.  The data subject cannot be obliged to consent to data processing that is not necessary to provide the service he or she has requested.

For these reasons, the traditional “notice and consent” may not be sufficient, and actionable forms or buttons may be necessary.  “Silence, pre-ticked boxes or inactivity,” however, is presumed inadequate to confer consent.  Recital 32 of the GDPR notes that an affirmative action signaling consent may include ticking a box on a website, “choosing technical settings for information society services”, or “another statement or conduct” that clearly indicates assent to the processing.  “Silence, pre-ticked boxes, or inactivity” however, is presumed inadequate.  For those reaching European citizens digitally, working with IT or UX experts may prove important to create a seamless, but compliant, experience.

Article 17Right to erasure

The “right to be forgotten” means that businesses must be able to remove data on a user at their “without undue delay”.  Further, the businesses have an obligation to erase personal data “without undue delay” under certain additional circumstances.

Article 20. Right to data portability.

Users have the right to receive any data that a business may have on them the firm must provide such data in a “structured, commonly used and machine-readable format”.  Further, the data subject has the right to transmit such data to another business without being hindered by the business that provide the data where the processing is either (a) based on certain consents or (b) carried out by automated means.  Where technically feasible, the data subject also has the right to have the personal data transmitted directly from one controller to another.

Article 8. Conditions applicable to child’s consent in relation to information society services.

Article 8 limits the ability of children to consent to data processing without parental authorization.  Previous drafts of the GDPR had set the age of consent at 13 years old, which would have been consistent with the age set by the United States’ Children’s Online Privacy and Protection Act (“COPPA”). A last-minute proposal aimed  to raise the age of consent to 16 years old.  In the final draft, the age of consent is set at 16 unless a member state sets a lower age no below 13 years.  Thus, unless otherwise provided by member state law, controllers must obtain parental consent when processing the personal data of a child under the age of 16. With the difference between the U.S. age of consent under COPPA set at 13 (COPPA) and the European age of consent under the GDPR set at 16 (unless otherwise lowered by a member state), this could present some challenges for U.S. businesses offering international services.

Article 32.  Security of Processing.

Firms must follow security best practices across the board when collecting and protecting data. This may include, but isn’t limited to, specific password policies, information security frameworks (e.g., NIST, ISO, COBIT/ISACA, SSAE, etc.), and data encryption.

  1. What Else Should I Know?

If you believe your business might be affected, you should already be familiarizing yourself with the GDPR regulations and be well into your compliance plan.  The above summary is a sampling of key points and not a comprehensive analysis,, which should be undertaken to better understand your compliance obligations.  You should also be aware of the ePrivacy Regulation which will be following on the heels of the GDPR.

Whereas the GDPR covers the right to protection of personal data, while the ePrivacy Regulation encompasses a person’s right to a private life, including confidentiality.  There is some obvious overlap here, but the ePrivacy Regulation is intended to particularize GDPR for electronic communications — devices, processing techniques, storage, browsers etc.  The laws are intended to be in sync, but the ePrivacy regulations are still up in the air — optimistically forecasted to be finally approved by the end of 2018, although the implementation date remains to be seen.  In sum, GDPR compliance is all you can focus on right now, and hopefully GDPR compliance should position your business well for any additional compliance obligations that could subsequently arise from the finalized ePrivacy Regulation.

On November 15, 2017, the Trump administration released the Vulnerabilities Equities Policy and Process. This document describes the process by which U.S. agencies and departments determine whether to disclose or restrict information on vulnerabilities in information systems and technologies. The Vulnerabilities Equities Process (VEP) balances whether to disclose vulnerability information to the vendor or supplier in the expectation that the vulnerability will be fixed or to temporarily restrict disclosure of the information so that it can be used for national security and/or law enforcement purposes.

The Equities Review Board (ERB), consisting of individuals from numerous agencies, functions as the forum for interagency deliberation and determination concerning the VEP. The National Security Agency will function as the VEP Executive Secretariat. The VEP Executive Secretariat will oversee communications, documentation and recordkeeping for the VEP. The VEP Executive Secretariat will also publish a report of unclassified information on an annual basis.

The VEP provides steps for submitting and reviewing identified vulnerabilities:

  • When an agency determines that a vulnerability reaches the threshold for entry into the VEP, it will notify the VEP Executive Secretariat and provide a recommendation for disclosure or restriction of the vulnerability.
  • The VEP Executive Secretariat will provide notice to all agencies of the ERB and request agencies to respond if they have a strong interest (i.e., “equity”) in the vulnerability. Any agencies with a strong interest in the vulnerability must concur or disagree with the recommendation.
  • The ERB will then reach a consensus on whether or not to disclose or restrict the vulnerability

To view the VEP Charter, click here.

To view the fact sheet, click here.

If you’ve seen the news, you’re probably aware that Equifax announced last week that hackers had breached some of its website application software, potentially affecting the sensitive personal information of approximately 143,000,000 consumers.  If you believe you may be affected by the breach, or are wondering what to do about it, read below for: (A) a brief background of the breach and mitigating efforts, as well as: (B) 5 basic steps to take that may improve your chances of protecting yourself from identity theft as a result of the breach.

A. Background: Equifax Breach

The scope of data includes names, social security numbers, birth dates, addresses, and driver’s licenses.  The incident may have also compromised credit card numbers for 209,000 U.S. consumers, and other “dispute documents” that contained identifying information for 182,000 consumers.  On July 29, the company discovered the intrusion, which began in mid-May and continued through July.  More information can be found in a video statement by CEO, Rick Smith.  To support consumers, Equifax has beefed up its call centers and is directing consumers to a specific Equifax’s website, where they can type in their last name and the last 6 digits of their social security number to see if they are impacted; they also have the option to enroll in its “TrustedID Premier” service. Normally costing $19.95 a month, Equifax is offering this “comprehensive package of ID theft protection and credit monitoring at no cost.”

Criticisms.  Some debate currently exists about whether consumers should sign up for this product on the Equifax website, and various criticisms are being blasted on social media and elsewhere over the way in which Equifax is handling the breach:

  • Some have specifically criticized the nature of Equifax’s help, asserting that (a) consumers may be giving up some rights to sue the company if they signed up for its credit monitoring services, and (b) while companies do offer an opt out provision, consumers must do so in writing within 30 days of accepting the services, which the CFPB has pushed back against.
  • One Ars Technica article even criticizes the security of the Equifax website itself, which encourages you to type in your last name and the last 6 digits of your social security number to see if you’ve been impacted. According ot the article, “it runs on a stock installation WordPress … that doesn’t provide the enterprise-grade security required for a site that asks people to provide their last name and all but three digits of their Social Security number.”
  • Some criticize free credit card monitoring as simply a Band-Aid, like treating the symptom instead of the underlying disease.
  • Other criticisms range from the Equifax’s delay (five weeks) before announcing to sale of shared by top executives shortly after the July 29 discovery of the breach.

Response.  Contrary to some of these assertions and several social media posts, Equifax has clarified on its website that consumers signing up for TrustedID Premier will not be automatically enrolled or charged after the conclusion of the complimentary year of Trusted ID Premier. Equifax also subsequently clarified in its FAQs that enrolling in the free credit file monitoring and ID theft protection associated with this cybersecurity incident does not waive any rights to take legal action.

B. Now What Do I Do?

Perhaps you are concerned that your information may have been compromised.  Perhaps you even went on the Equifax website and were told that your information “may have been impacted”. As you weigh the pros and cons of enrolling in Equifax’s TrustedID Premier product, or entering your information to see whether you may have been impacted, here are some additional steps you can take to protect yourself:

  1. Check your credit reports. Through this website, you can check your credit reports once a year – for free – from each of the 3 major credit reporting agencies, Equifax, Experian, and TransUnion. Accounts or activity that you do not recognize could indicate identity theft.
  2. Consider placing a credit freeze on your files. While it may not prevent an identity thief from making charges to existing accounts, placing a credit freeze on your file could make it harder for someone to open a new account in your name. A freeze will remain in place until you request it to be removed or temporarily lifted, which can take up to 3 business days.  Note that if you plan on opening a new account, applying for a job, renting an apartment or buying insurance in the near future, you will need to either remove the freeze or lift it temporarily for a specific time or specific party (e.g., potential landlord, employer, etc.). Check with your credit reporting company for the costs and lead times associated with temporarily lifting a freeze. If you coordinate with the party, you can find out which company they are contacting, and simply lift the freeze for that company instead of all three.
  3. Alternatively, if someone has misused your information, place a fraud alert. While a credit freeze locks down your credit, a fraud alert allows creditors to access your report as long as they take steps to verify your identify.  For instance, if you provide a phone number, the business must call you to verify you are the person making the credit requests. This may prevent someone from opening new credit accounts in your name, but won’t prevent the misuse of your existing accounts (i.e., bank, credit card, insurance statements), which you should still monitor for any indications of fraudulent transactions. You must only ask one of the three credit reporting companies to put a fraud alert on your report – they will contact the other two.  Fraud alerts are free, but require you to provide proof of your identity. They can vary from: (a) initial fraud alert (90 days, but can be renewed), (b) extended fraud alert (7 years) and (c) active duty military alert (protecting the military while deployed for one year).
  4. Monitor your existing credit card and bank accounts closely. As stated above, credit freezes and fraud alerts help prevent the opening of new accounts using your information, but they may not prevent misuse of your existing accounts. For the next couple of months, put a note in your calendar to sit down and go through each bank and credit statements to monitor for any charges you do not recognize.
  5. File your taxes early. Tax identity theft can occur when someone uses your Social Security number to get a tax refund or a job.  You may recall in 2015, when hackers obtained sensitive information and then used the data to authenticate themselves to the IRS Get Transcript application and receive tax record belong to approx. 724,000 tax filers. More recently, the IRS announced the compromise of an online tool used to fill out FAFSA student loan applications. By filing your taxes as soon as you have the tax information you need, you can help to prevent a scammer from doing so. Respond to any letters from the IRS right away.

Contact Information for the Three Credit Reporting Companies:

  1. TransUnion — 1-800-680-7289
  2. Experian — 1-888-397-3742
  3. Equifax — 1-888-766-0008

 

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.