Articles Posted in Risk Evaluation and Management

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It is difficult to overstate the current backlash against social media. Social media giants are under attack from virtually all sources, including both governments and individuals. The #humblebrag du jour is a social media addict publically stating the intent to close accounts, take social media sabbaticals, cull friend and follower lists, and boasting about how much better life has become after weaning themselves from the constant attention-drain – even if many do not follow through on the threat.

If you join the movement, you might be helping your company’s information security profile.

Social media accounts often contain sensitive personal data that can be accumulated, hacked, sold and resold in their own right.  But beyond that, they provide corporate hackers with enough information to guess passwords, whereabouts and interests, and provide enough data to craft sophisticated and effective spear-phishing emails – personalized missives that reflect the character and wording of the individuals they spoof, down to grammar, spelling and tone.

That’s why it’s so important to include a cybersecurity-focused review of your company’s social media policy and practices. If you aren’t going to set strict social media standards for C-level executives and consider conducting regular audits of their social accounts, then you at least need to educate them about the risk. Some of the key risks  – but only the most obvious ones – are below. Continue reading

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Cybersecurity is a method to protect your data and systems. Cyber resiliency is a way of doing business in the face of the inevitable.

When Hurricane Michael struck the Florida Panhandle earlier this month, it wiped away wide swaths of Mexico Beach, a coastal town on the Gulf of Mexico. Left conspicuously standing was a house built just last year of reinforced concrete, specifically designed to withstand a Category 5 storm.

The house, elevated on pilings to survive the storm surge, lost its stairwell—by design. It was built to separate from the building without damaging the structure itself. Other than the missing stairs, the house suffered only minor water damage and a cracked shower window.

This story is an important lesson, and a metaphor for cyber resiliency, taking steps to weather a data or systems catastrophe while maintaining ongoing business operations. The adoption of cyber resiliency is an important mindset shift for those dealing with cybersecurity.

Cybersecurity is the approach that focuses on the methods and processes of protecting electronic data – the goal is to thwart an attack, and emphasizes training people and systems to recognize infiltration so it can be stopped. Cyber resilience, on the other hand, assumes an attack will occur. The underlying premise could be summed up this way: “What can go wrong, will. What are you going to do about it?”

Many companies have made meaningful improvements in protecting their data. They have implemented better firewalls, procedures and training to reduce the likelihood of an attack.  While these steps are essential, implementing a cyber resilience program focuses on how the enterprise can continue doing business in the midst of and in the wake of an attack. Cyber resiliency requires a different set of tools and, more importantly, a corporate culture more attuned with surviving natural disasters.  Continue reading

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iheartcalifornia-300x138On June 28, 2018, Governor Brown signed the California Consumer Privacy Act of 2018, which goes into effect on January 1, 2020. But – because of certain look-back features in the new law – significant compliance will be required by January 1, 2019.

The Act is enforceable by the California Attorney General and authorizes a civil penalty up to $7,500 per violation.

Observers estimate that about 500,000 companies nationwide will need to comply with the California Consumer Privacy Act. The California Attorney General is expected to aggressively enforce the Act – and it will have the budget to do so. Consumer watchdogs and plaintiffs class-action lawyers will also be on the hunt for violators.

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This is a serious law and violations will have serious repercussions for your bottom line and your reputation.

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The Act provides many of the same consumer privacy protections as the European Union’s General Data Protection Act (GDPR). JMBM’s Cybersecurity & Privacy Group has counseled dozens of companies on GDPR compliance and is now discussing California’s new law with clients; we are eager to help you assess your own compliance and protect your business from expensive liability and litigation.

Some key points:

What does the Act do?

The new act says that California residents, including minors, who give personal data of almost any kind to a for-profit business, have the right to know how the data is being used, have it deleted, know who the data is being sold to, and object to the sale of their data. In short, California consumers now own their personal information and have a significant measure of control over it. It is important to note that personal data includes almost any data that can identify an individual, not just financial data.

Who is subject to the Act?

The California Consumer Privacy Act applies to any for-profit business that:

  • Does business in the state of California;
  • Collects consumers’ personal information (or is the entity on whose behalf such information is collected) and determines how that information is collected and processed;
  • Meets one or more of the following thresholds: has annual gross revenues in excess of $25 million; buys, receives, sells, or shares the personal information of 50,000 or more consumers, households or devices; or, derives 50% or more of its annual revenue from selling consumers’ personal information. The Act applies to small and mid-sized businesses, not just large companies.

What happens if a company does not comply?

The act is enforceable by the California Attorney General and authorizes a civil penalty up to $7,500 per violation.

In the event of a data breach, California residents will have a private right of action to recover up to $750 per incident, or actual damages. The statute directs courts to consider the nature, seriousness, persistence and willfulness of an incident, the number of violations, the length of time over which the incident occurred, and the violating company’s assets, liabilities and net worth.

Because of the minimum recoverable amount, consumers do not have to prove actual damages, only that there was a violation of the act.

What do you need to do now?  

California businesses will need to take several steps to achieve compliance, including:

  1. Adopt a method for handling consumer requests for personal information.
  2. Develop templates and procedures for responding to consumer requests.
  3. Develop procedures for collecting and processing data.
  4. Identify and document the legal basis for collecting and processing personal information, in order to respond to the consumer’s right to have their information deleted.
  5. Make appropriate changes to public-facing website disclosures, including adding a description of consumers’ rights under the Act, listing the categories of data collected, and including a conspicuous way for consumers to indicate that they do not want their data sold.

 What should you do now?

Contact us to discuss whether this new act applies to you, and how you should prepare for it. This is a serious law and violations will have serious repercussions for your bottom line and your reputation.

 

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Michael Gold
Partner and Co-Chair of the Cybersecurity & Privacy Group
310.201.3529
MGold@jmbm.com
Bob Braun Photo
Robert E. Braun
Partner and Co-Chair of the Cybersecurity & Privacy Group
310.785.5331
RBraun@jmbm.com

 

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Agreeing to ransom terms is a losing proposition; spend your time and energy preparing for an attack.

Ransomware attacks are on the rise, partly because of the ease and anonymity of crypto-currencies. In a typical ransomware attack, cyber criminals invade a computer system and encrypt key data, then threaten to destroy the data unless the victim pays the criminal a relatively minor sum (ranging from hundreds to thousands, or in rare cases, tens of thousands of dollars). Schemes go by the teasing names of CryptoLocker and WannaCry, but there’s nothing playful about finding that you are a target. Ransoms are priced at a level that encourage compliance with the criminal demand. Yet there’s nothing that ensures a payment will actually free up your data and the utility of your system – in many cases, it’s clear that the criminals never intended to unencrypt the data.  Moreover, once a system has been compromised, there can be little doubt that the hackers accessed sensitive data and left behind malware allowing them to create more mischief.

There is fierce debate over how to respond to attacks; even the FBI at one point seemed to advocate paying ransom to reclaim stolen data, though it clarified its position in 2016 and no longer recommends payment.  At the same time, for many firms, spending a relatively modest sum to recover mission-critical data sounds better than spending a far greater sum to recover only a portion of that data.  The latter approach is, however, a poor use of resources; rather than trying to determine whether to agree to ransom terms, spend your time and energy preparing for an attack. Companies should consider a ransomware attack as you would any other cybersecurity breach. That is, it is going to happen, the only question is when. Sound preparation boils down to several key considerations.

1. Back Up Data and Store It Properly

Any system is vulnerable when there is only one copy of data, or when backups are stored on tied or companion systems. If cyber criminals encrypt data on your main system, it’s important to be able to access the original data, and that means copying and storing it on a separate, secondary system that is untethered from the main system, and where it is possible to extract uninfected data. This is sound practice no matter what the threat; ransomware has only highlighted its importance. Whether its financial data, health records, or city citations, having multiple ways to access data is key. Moreover, simply having a backup is not sufficient; unless the backup is tested, one can never determine whether it is effective, how long it will take to implement, and other key issues. Continue reading

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By David Ma and Robert Braun

The Securities and Exchange Commission (SEC) could be on target to make 2018 the year of cryptocurrency regulation—or at least the start of it.

In January, Jay Clayton, chair of the Securities and Exchange Commission, and J. Christopher Giancarlo, chair of the Commodity Futures Trading Commission, published an op-ed in which they declared distributed ledger technology (DLT) in need of regulation. They wrote:

“History … has proved that transparency, investor protection and market integrity are critical to ensuring that innovation continues. But today we are seeing substantial DLT-related market activity that shows little or no regard to our proven regulatory approach. This concerns us.”

There’s a fair bit to be concerned about. That month, the global cryptocurrency market, which is highly volatile, surpassed a market value of $700 billion. And the SEC is late to the game. It was only last year that its Enforcement Division created a cyber unit.

Playing catch-up, the SEC followed up this interest with subpoenas in March to more than 80 cryptocurrency companies, including a $100 million fund started by TechCrunch’s founder Michael Arrington, in an effort to gather information on how these cryptofunds operate.

There is growing concern of fraud in the market. Some startups are using cryptocurrency to raise funds, and regulators fear that some Initial Coin Offerings (ICOs) are launched for companies that don’t even exist. Some investors eager for quick profits are likely not investigating the associated risks.

It’s unclear whether securities laws apply to digital coins. The SEC has indicated the regulations do apply, but has not formally laid out how issuers and traders should comply. The SEC has repeatedly said that the vast majority of ICOs should be registered with the agency, in part because the coins trade on secondary markets like other securities that the SEC regulates. Continue reading

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FinCEN, the Financial Crimes Enforcement Network, has indicated that cryptocurrencies will not get an enforcement “pass.”

By David Ma and Robert Braun

The Treasury Department has outlined its efforts to police electronic currencies in a letter to Sen. Ron Wyden after the lawmaker asked what the department was doing to ensure that Bitcoin and other cryptocurrencies are not being used by criminals to evade banking regulations.

Wyden, D-OR, is the ranking member of the Senate Finance Committee. He communicated his concern to the Treasury Department that cryptocurrencies could, among other uses, allow foreign governments to circumvent U.S. economic sanctions.

In its February 13, 2018 letter to Wyden, which surfaced in March, the Treasury Department reiterated its stance that cryptocurrency companies and trading organizations must comply with laws designed to combat money laundering and the financing of terrorism. To comply, these companies and organizations must investigate customers and report suspicious transactions to authorities.

While the letter does not go into further detail about what this would mean for established cryptocurrencies or Initial Coin Offerings (ICOs), some observers fear that this could mean that ICOs would be required to perform the same “Know Your Customer” (KYC) due diligence that banks do when customers open bank accounts. It also implies that cryptocurrency companies and organizations may have some obligation to monitor transactions made with their cryptocurrency.

But given the anonymous nature of cryptocurrencies, it would be difficult, from a practical perspective, for an ICO to perform the same “know your customer” diligence that a bank does. Continue reading

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Welcome to the third article in our series of blogs about blockchain technology and its impact on business practices, corporate governance and cybersecurity.

 

 

In Robert Braun’s article, Blockchain: The good, the bad, and how to tell the difference published by FinTech Weekly, he explores two issues about blockchain that trouble many in the business community: “How secure is blockchain, really?” and “Is it too good for criminals”? He also explains the connection between blockchain and climate change, and offers up some guidelines for adopting blockchain (or investing in its technology). He writes:

“Blockchain has been touted as a disruptive technology that can be used to benefit virtually any transaction, ranging from money transmission to supply chain management, to restaurant reservations.  With its promise of highly secure, private and instantaneous transactions, blockchain would seem to enhance any transfer or transaction. But while blockchain technology has caught the imagination of the public, it is based on an extension of existing technologies, not on something truly new.  It is disruptive, but not in the sense that the creation of mortgage-backed securities or the Internet was disruptive.  Those changes created entirely new opportunities and markets; blockchain is a technique that allows for new ways of doing the same thing.  At the same time, cryptocurrencies – by far, the most popular of blockchain applications – has shown the shortcomings in the technology or, at least, in how it has been adopted.”

To read the full article, see Blockchain: The good, the bad, and how to tell the difference

To read the first article in this series, see So, What is This Blockchain Thing?
To read the second article in this series, see The Four Horsemen of Cryptocurrencies: Volatility, criminal activity, security issues and human error

 

Robert E. Braun is the co-chair of the Cybersecurity and Privacy Law Group at Jeffer Mangels Butler & Mitchell LLP. Bob helps clients to develop and implement privacy and information security policies, negotiate agreements for technologies and data management services, and comply with legal and regulatory requirements. He helps clients to develop and implement data breach response plans, and he and his team respond quickly to clients’ needs when a data breach occurs. Contact Bob at RBraun@jmbm.com or +1 310.785.5331.

JMBM’s Cybersecurity and Privacy Group counsels clients in a wide variety of industries, including accounting firms, law firms, business management firms and family offices, in matters ranging from development of cybersecurity strategies, creation of data security and privacy policies, responding to data breaches and regulatory inquiries and investigations, and crisis management. The Cybersecurity and Privacy Group uses a focused intake methodology that permits clients to get a reliable sense of their cybersecurity readiness and to determine optimal, client-specific approaches to cybersecurity.

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Welcome to the second article in our series of blogs about blockchain technology and its impact on business practices, corporate governance and cybersecurity.

 

 

In Robert Braun’s article, Cryptocurrencies – Does the Next Big Thing have Staying Power?, published by FinTech Weekly, he describes four challenges that arise in the use of cryptocurrencies, and potentially in other blockchain applications: volatility, criminal activity, security issues, and human error.  He writes:

“Cryptocurrencies – not just bitcoin, but any of the hundreds of different currencies that have been created using blockchain technology – have caught the imagination of the public.  There are, seemingly, daily articles that predict either the demise of all traditional currencies in favor of cryptocurrencies, and just as many articles predicting the demise of cryptocurrencies.  While cryptocurrencies are just one of the many uses of blockchain technology, the challenges cryptocurrencies face may reflect hurdles for other uses of bitcoin. With that in mind, four challenges arise in the use of cryptocurrencies, and potentially in other blockchain applications.”

To read the full article, see Cryptocurrencies – Does the Next Big Thing have Staying Power?

To read the first blog in this series on blockchain technology, see So, What is This Blockchain Thing?

 

Robert E. Braun is the co-chair of the Cybersecurity and Privacy Law Group at Jeffer Mangels Butler & Mitchell LLP. Bob helps clients to develop and implement privacy and information security policies, negotiate agreements for technologies and data management services, and comply with legal and regulatory requirements. He helps clients to develop and implement data breach response plans, and he and his team respond quickly to clients’ needs when a data breach occurs. Contact Bob at RBraun@jmbm.com or +1 310.785.5331.

JMBM’s Cybersecurity and Privacy Group counsels clients in a wide variety of industries, including accounting firms, law firms, business management firms and family offices, in matters ranging from development of cybersecurity strategies, creation of data security and privacy policies, responding to data breaches and regulatory inquiries and investigations, and crisis management. The Cybersecurity and Privacy Group uses a focused intake methodology that permits clients to get a reliable sense of their cybersecurity readiness and to determine optimal, client-specific approaches to cybersecurity.

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This article was originally published by Hotel Business Review and is reprinted with permission from www.hotelexecutive.com.

Almost as soon as there were data breaches, hotels became a prime target of hackers, and the hospitality industry has consistently been one of the most commonly targeted businesses. Since 2010, hotel properties ranging from major multinational corporations to single location hotels have been impacted.

The recent report that Hyatt Hotels was a victim for the second time in as many years has raised more concerns about the industry’s ability to address cybersecurity. While consumers are so used to receiving breach notices that “breach fatigue” has set in, the second successful attack on Hyatt is sure to raise the eyebrows of regulators, plaintiffs’ lawyers, and guests. The data breach will affect the loyalty, trust and consumer perception of all Hyatt Hotels guests. So how can hotels prove to guests that they are safe and trustworthy?

“While the company claims that it has implemented additional security measures to strengthen the security of its systems, no explanation was given as to why these additional measures were not implemented after the first attack,” said Robert Cattanach of Dorsey & Whitney. “Estimates of actual harm have yet to be provided, which is typically the weak spot of any attempted class action, but the liability exposure seems problematic regardless.”

Hyatt is in no way alone. On November 2, 2017, the BBC reported that Hilton was fined $700,000 for “mishandling” two data breaches in 2014 and 2015. The attorneys general of New York and Vermont said Hilton took too long to inform their guests about the breaches and the hotels “lacked adequate security measures.” Hilton discovered the first of the two breaches in February 2015 and the second in July 2015, according to the article, but the company only went public with the breaches in November 2015. The company has said there is no evidence any of the data accessed was stolen, but the attorneys general said the tools used in the data breaches made it impossible to determine what was done. Continue reading

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First in a series of blogs about blockchain technology and
its impact on business practices, corporate governance and cybersecurity

It’s hard to avoid articles, white papers, blog pieces and presentations that promote the almost magical use of blockchain – it seems that blockchain, a form of distributed ledger technology, can be applied to virtually any situation, and best of all, it is entirely secure.  As Don and Alex Tapscott wrote in Blockchain Revolution, “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

One aspect of blockchain technology has become highly debated – whether it is as secure as its proponents claim.  Since it seems inevitable that blockchain technology will be used to drive a variety of transactions, and not simply cryptocurrency, the JMBM Cybersecurity and Privacy Group has examined the technology and its impact on data security and corporate governance.

But before we can discuss the benefits and pitfalls of the technology, we have to answer a threshold question: what is a blockchain? Continue reading