Data Security

Technology has changed the way businesses market themselves to consumers. Businesses now have the ability to identify shifting consumer preferences, launch highly targeted advertising campaigns, and communicate instantly with potential customers. One thing this new marketing has in common? Consumer data. As marketing technologies evolve, companies should be aware that the myriad of data security regulations don’t just apply to how companies conduct their business, but how they market it as well.

It seems that everyone accepts credit cards nowadays – including the farmer who sells produce at my local farmer’s market (which I appreciate because I never have cash)! Anyone who accepts credit cards or debit cards, even a sole proprietor who processes a small number of transactions, must be in compliance with the Payment Card Industry Data Security Standards (“PCI DSS”). Many small businesses may not have heard of the PCI DSS or assume that the requirements do not apply to them or that compliance is too expensive. To the contrary, all merchants that accept credit cards must comply with the PCI DSS, and the costs of a breach generally outweigh the time and expense to set up a secure and compliant card payment system in the first place.

For the first time in its enforcement history, the Consumer Financial Protection Bureau (“CFPB”) took action against a company for deceiving consumers about the company’s data security practices. The CFPB found that Dwolla, Inc. (“Dwolla”), an online payment system, made numerous false promises about the strength and extent of its data security practices. The CFPB’s action is also notable because the agency acted preemptively — Dwolla had never detected a data breach and no consumer data had been reported stolen.

The CFPB found that Dwolla claimed on its website and in direct communications with consumers that its data security practices “exceed” or “surpass” industry security standards; but, in reality, Dwolla failed to employ reasonable security measures to protect consumer data. In addition, Dwolla claimed that “all information is securely encrypted and stored” and that its mobile applications were safe and secure. However, the CFPB found that Dwolla did not encrypt certain sensitive consumer information and released applications to the public before testing that they were secure. The agency found several other examples of statements Dwolla made that could not be established as true.

Your business is an international company selling products to U.S. consumers. In the last few years, you may have heard a lot about high-profile information privacy and security cases brought by the U.S. government. Should you be concerned? Most definitely.

On Feb. 23, 2016, the FTC announced that Taiwan-based computer hardware maker ASUSTeK Computers, Inc. (“ASUS”) agreed to a 20-year consent order, resolving claims that it engaged in unfair and deceptive practices in connection with routers it sold to U.S. consumers. According to the FTC’s complaint, ASUS failed to take reasonable steps to secure the software for its routers, which it offered to consumers specifically for protecting their local networks and accessing their sensitive personal information. The FTC alleged that ASUS’s router firmware and admin console were susceptible to a number of “well-known and reasonably foreseeable vulnerabilities”; that its cloud applications included multiple vulnerabilities that would allow cyber attackers to gain easy, unauthorized access to consumers’ files and router login credentials; and that the application encouraged consumers to choose weak login credentials. By failing to take reasonable actions to remedy these issues, ASUS subjected its customers to a significant risk that their sensitive personal information and local networks would be subject to unauthorized access.

You may have a top-notch security incident response plan and a crack team for data breach response…but have you checked to be sure that your company’s HR policies are on the same team with you? Personnel Management is one of the most important—yet often overlooked—of the 10 activity channels for effective data breach response. In the crunch of handling an actual data security incident, your company’s HR policies will either pave or block the road to a nimble, successful response.

Of course, various policies are important for prevention of data security breaches, including policies for such matters as authorized computer systems, e-communications, and Internet use; authorized data and system access; strong passwords; use of encryption and encryption keys; mobile device safeguards; precluding or limiting storage of company data on home or other personal devices; and the like. But other policy provisions are essential for effective security breach response:

The Cybersecurity Act of 2015, signed into law on Dec. 18, has four titles that address longstanding concerns about cybersecurity in the United States, such as cybersecurity workforce shortages, infrastructure security, and gaps in business knowledge related to cybersecurity. This post distills the risks and highlights the benefits for private entities that may seek to take advantage of Title I of the Cybersecurity Act of 2015 – the Cybersecurity Information Sharing Act of 2015 (“CISA”).

It’s been clear for many years that greater information-sharing between companies and with the government would help fight cyber threats. The barriers to such sharing have been (1) liability exposure for companies that collect and share such information, which can include personally identifiable information, and (2) institutional and educational impediments to analyzing and sharing information effectively.

CISA is designed to remove both of these information-sharing barriers. First, CISA provides immunity to companies that share “cyber threat indicators and defensive measures” with the federal government in a CISA-authorized manner. Second, CISA authorizes, for a “cybersecurity purpose,” both use and sharing of defensive measures and monitoring of information systems. CISA also mandates that federal agencies establish privacy protections for shared information and publish procedures and guidelines to help companies identify and share cyber threat information. Notably, companies are not required to share information in order to receive information on “threat indicators and defensive measures,” nor are entities required to act upon information received – but this won’t shield companies from ordinary ‘failure to act’ negligence claims.

All encryption tools are not created equal. Just ask the folks at Microsoft, who have recently demonstrated that encrypted Electronic Medical Record databases can leak information. Turns out that CryptDB, a SQL database add-on developed at MIT that allows searching of encrypted data, allows search queries to be combined with information in the public domain to hack the database. More on this in a minute. In the meantime, let’s consider the assumption that encryption is inviolate/ infrangible/ impervious to hacks. As I mentioned in an earlier post, encryption algorithms are too complex for most laypersons to understand, but we should at least wrap our heads around the concept that encryption is not a “set it and forget it” technology, nor is it foolproof.

My New Year’s resolutions will likely be broken early and often in 2016. My consequences are mostly non-monetary: a few more pounds, a little less savings, and not winning the triathlon in my age group. Your consequences, as a HIPAA-covered entity or business associate, for not complying with the Privacy and Security Rules could be much greater, and could put you into serious debt to the HHS Office of Civil Rights (OCR). Therefore, we propose that you resolve now to become fully HIPAA compliant in 2016.

OCR delivered an early holiday gift, wrapped in the Director’s Sept. 23, 2015, report to the Office of Inspector General. In that report, she disclosed that OCR will launch Phase 2 of its HIPAA audit program in early 2016, focusing on noncompliance issues for both covered entities and business associates.

So, grab that cup of hot cocoa and peruse this review of 2014-2015 HIPAA enforcement actions, which should help identify noncompliance issues on which OCR will focus in 2016. 

For those who observe it, the Christmas season (secular version 2.0) is definitely here. As a child, I cherished the thought of a man with a red suit accessing our house through the chimney. For those of us concerned about computer system security, we worry about a person with a black hat accessing our data through phishing, hacking, and malware. I hate to mention, well, you know who, but someone out there loves the thought of taking your Whoville roast beast.

Enjoy the next few days with your family and friends, but remember, it’s also time to consider your data security for 2016. Knowing you, once you’ve opened all the presents, eaten dinner, and just settled down for a moment of quiet sanity, your thoughts will inevitably turn to the new year. So, here are six holiday-themed recommendations for your consideration. If you don’t recognize the quotes below, that means you didn’t spend your childhood binge-watching classic holiday programs. Not a worry – simply unwrap the answer key at the bottom.

Today the FTC announced a $100-million settlement of its most recent data security lawsuit against LifeLock, the ubiquitous B2C provider of credit monitoring and identity theft protection to consumers.  Despite years of litigation with the FTC and 35 states’ attorneys general, LifeLock has continued with a business model that taps into consumers’ visceral fear of identity theft, and also consumers’ persistent belief that such exposure can magically disappear… all for “less than $10/ month.” But while “Nobody can conceive or imagine all the wonders there are unseen and unseeable in the world,” LifeLock’s settlement with the FTC is a reminder that there is no perfect protection against identity theft.