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FFIEC Advises Banks On Website, ATM Cyber Attacks
On April 2, the FFIEC advised financial institutions that distributed denial-of-service (DDoS) attacks on a financial institution’s public websites present operational and reputation risks. If coupled with attempted fraud, a financial institution may also experience fraud losses and face liquidity and capital risks. The FFIEC members expect financial institutions to address DDoS readiness as part of ongoing information security and incident response plans and to, among other things, (i) maintain an ongoing program to assess information security risk; (ii) monitor Internet traffic to the institution’s website to detect attacks; (iii) activate incident response plans and notify service providers, including Internet service providers, as appropriate, if the institution suspects that a DDoS attack is occurring; (iv) ensure sufficient staffing for the duration of the DDoS attack and consider hiring pre-contracted third-party servicers, as appropriate, that can assist in managing the Internet-based traffic flow; and (v) evaluate any gaps in the institution’s response following attacks and in its ongoing risk assessments, and adjust risk management controls accordingly.
In a second statement, the FFIEC advised financial institutions of a type of large dollar value ATM cash-out fraud by which cyber attackers gain access to, and alter the settings on, ATM web-based control panels used by small- to medium-sized financial institutions. The FFIEC states that institutions that issue debit, prepaid, or ATM cards may face operational risks, fraud losses, liquidity and capital risks, and reputation risks, and that institutions that outsource their card issuing function to a card processor may initially be liable for losses even if the compromise occurs at the processor. To mitigate these risks, the FFIEC expects member financial institutions to, among other things, (i) conduct ongoing information security risk assessments; (ii) perform security monitoring, prevention, and risk mitigation; (iii) take specific steps to protect against unauthorized access; (iv) implement and test controls around critical systems regularly; and (v) conduct information security awareness and training programs.
Data Breach Class Settlement Approved After Eleventh Circuit Held Identity Theft Following Breach Presents Cognizable Injury
Recently, the U.S. District Court for the Southern District of Florida approved a class settlement in a case in which the plaintiffs claimed financial harm from a health care companys failure to protect their personal information. Resnick v. AvMed Inc., No. 10-24513 (S.D. Fla. Feb. 28, 2014). The settlement follows a September 2012 decision from the U.S. Court of Appeals for the Eleventh Circuit, in which the court reversed the district court's dismissal of the case and held that because the complaint alleged financial injury, and because monetary loss is cognizable under Florida law, the plaintiffs alleged a cognizable injury. The court explained that the plaintiffs demonstrated a sufficient nexus between the data breach and the identity theft beyond allegations of time and sequence because the plaintiffs plead that they were careful in protecting their identities and had never been victims of identity theft. The settlement requires the company to pay $3 million, with each class member receiving up to $10 for each year they paid an insurance premium, up to a maximum of $30. The company also agreed to implement new data security measures.
White House Big Data Initiative Seeks Public Comments On Privacy Issues
Last week, as part of the White House’s initiative on “big data” and privacy (led by John Podesta), the White House Office of Science and Technology Policy issued a request for information seeking public input regarding broad privacy-related issues. The request defines “big data” as “datasets so large, diverse, and/or complex, that conventional technologies cannot adequately capture, store, or analyze them.” It seeks comments on a number of issues, including: (i) the public policy implications of the collection, storage, analysis, and use of big data; (ii) the types of uses of big data that could measurably improve outcomes or productivity with further government action, funding, or research, and uses of big data that raise the most public policy concerns; (iii) the technological trends or key technologies which will affect the collection, storage, analysis and use of big data, and whether any are particularly promising for safeguarding privacy; (iv) how the policy frameworks or regulations for handling big data should differ between the government and the private sector; and (v) issues raised by the use of big data across jurisdictions. Comments are due by March 31, 2014.
CFTC Outlines GLB Act Privacy Best Practices
Recently, the CFTC’s Division of Swaps Oversight issued Staff Advisory No. 14-21, which recommends best practices for CFTC-regulated intermediaries to comply with applicable Gramm-Leach-Bliley (GLB) Act privacy requirements, consistent with the Division’s intention to focus more resources on GLB privacy compliance. The advisory states that its recommendations are generally consistent with guidelines and regulations issued by other federal financial regulators, and the majority of the specific best practices are supported with references to prior rules and guidance. A number of the best practices cite the Interagency Guidelines Establishing Standards for Safeguarding Customer Information and Rescission of Year 2000 Standards for Safety and Soundness and a parallel FTC rule. Notably, several of the recommendations rely on a rule proposed by the SEC in 2008 but which has not yet been finalized. For example, the CFTC recommends based on that SEC proposal and the Interagency Guidelines that covered entities establish a breach investigation and notice process to alert potentially impacted individuals and to notify the CFTC. In addition, without referencing any other federal rule or guidance the Staff Advisory recommends that covered entities engage at least once every two years an independent party to test and monitor the safeguards’ controls, systems, policies and procedures, maintaining written records of the effectiveness of the controls.
Visa, MasterCard Announce Payment Security Working Group
On March 7, Visa and Mastercard announced the formation of a cross-industry payment security working group, which the payment system providers state will be focused on “enhancing payment system security to keep pace with the expectations of consumers, retailers and financial institutions.” The group’s initial focus will be on supporting the adoption of EMV chip technology in the United States. In addition, the group will promote tokenization and point-to-point encryption, and will develop “an actionable roadmap for securing the future across all segments of the payments industry.” The group will include representatives from banks of all sizes, credit unions, acquirers, retailers, point-of-sale device manufacturers and industry trade groups.
FTC Announces International Privacy Initiatives
On March 6, the FTC released a memorandum of understanding (MOU) it signed with the UK’s Information Commissioner’s Office (ICO), which is designed to strengthen the agencies’ privacy enforcement partnership. The FTC stated that over the last several years it has worked with the ICO on numerous investigations and international initiatives to increase global privacy cooperation. The MOU establishes a formal framework for the agencies to provide mutual assistance and exchange of information for the purpose of investigating, enforcing, and/or securing compliance with certain privacy violations. The FTC also announced a joint project with the European Union (EU) and Asia-Pacific Economic Cooperation (APEC) economies to map together the requirements for APEC Cross Border Privacy Rules and EU Binding Corporate Rules, which is designed to provide a practical reference tool for companies that seek “double certification” under the APEC and EU systems, and shows the substantial overlap between the two.
State Banking Associations Object To Senators' Request For Increased Bank Payment System Security Oversight
On March 5, 53 state bankers associations sent a letter to Federal Reserve Board Chair Janet Yellen defending banks’ efforts to secure consumer financial data and highlighting the responsibilities of other parties, in particular merchants, to do the same. The banking associations, representing bankers in every state and Puerto Rico, took issue with a letter Democratic Senators Dick Durbin (D-IL) and Al Franken (D-MN) sent last month to the Federal Reserve Board Chair seeking information about the Board’s oversight of card issuers’ fraud prevention policies and recommending that the Board do more to verify the effectiveness of such policies. The banking associations contend that the Senators’ letter is a “thinly veiled effort to once again advance the regulation of interchange under the guise of current concerns over data security,” and criticize the Senators for converting a discussion about security responsibilities into one about interchange fees.
California AG Suggests Cybersecurity Measures
On February 27, California Attorney General Kamala Harris issued a guide to assist small businesses in defending against the threat of cybercrime. The guide, which was developed with the California Chamber of Commerce and Lookout, a mobile security company, stresses that small businesses should assume that they are a target for cybercrime and act accordingly. In addition to providing actionable steps to prevent cyber-attacks, the guide encourages every small business to develop a “game plan” for responding to the inevitability of an actual incident: “Experience has shown that many organizations wait until they have actually suffered a serious data breach before attempting to come up with a process for dealing with such a situation – which amounts, effectively, to building an airplane in the air.”
NIST Releases Final Cybersecurity Framework
On February 12, the Obama Administration released the Cybersecurity Framework prepared by NIST, as called for by Executive Order 13636 issued by President Obama one year ago. The Framework organizes best practices regarding cyber risks into three components—the Framework Core, Profiles and Tiers—each of which “reinforces the connection between business drivers and cybersecurity activities.” The Framework Core component is described as a set of cybersecurity activities and informative references that are common across critical infrastructure sectors. The cybersecurity activities are grouped into five functions—Identify, Protect, Detect, Respond, and Recover—which provide a high-level view of an organization’s management of cyber risks. The second component, Profiles, is designed to assist organizations in aligning their cybersecurity activities with business requirements, risk tolerances, and resources. Finally, the Tiers component provides a mechanism for organizations to view their approach and processes for managing cyber risk. The Department of Homeland Security has established a voluntary program intended to increase awareness and use of the Framework to help organizations of all sizes manage cybersecurity risks and improve security and resilience of critical infrastructure. NIST hopes the Framework will serve as a model for international cooperation on strengthening critical infrastructure cybersecurity. NIST will continue to update and improve the Framework as the industry provides feedback on implementation. NIST also issued a Roadmap that discusses its next steps with the Framework and identifies key areas of cybersecurity development, alignment, and collaboration.
House Committee Approves Cybersecurity Bill
On February 5, the House Homeland Security Committee unanimously approved H.R. 3696, the National Cybersecurity and Critical Infrastructure Protection Act of 2013 (the NCCIP). The NCCIP builds on many of the ideas set forth in the February 2013 Presidential Executive Order on cybersecurity. The bill seeks to enhance cybersecurity readiness in governmental and private institutions, in part, by facilitating information sharing and a “public-private collaboration” between government agencies and “critical infrastructure owners” and by promoting “cross-sector coordination and sharing of threat information” through NIST. The bill directs NIST to develop voluntary best practices that include individual privacy and civil liberty protections. The NCCIP also amends the Support Anti-Terrorism by Fostering Effective Technologies Act of 2002 (SAFETY Act) to provide liability protections for those selling or providing agency-approved cybersecurity technology to customers.