Category: Legal & Regulatory Risk

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Agreed changes to EU-US Privacy Shield strengthens data transfer pact
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Report finds average cost of data breach reaches $4 million
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European Data Protection Supervisor less than impressed with EU-US Privacy Shield
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OAIC releases draft guide for conducting big data activities
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Yes it can cost you your job…even if you are the boss!
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Hacked accounts anyone?
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Australian Government releases Cyber Security Strategy
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Bangladesh Bank considers legal action against the NY Fed in Hollywood-esque hack
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Been Hacked? To Report Or Not To Report… To The SEC, It Isn’t Even A Question.
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A New Cyber Regulator on the Beat: The CFPB Issues its First Cybersecurity Order and Fine

Agreed changes to EU-US Privacy Shield strengthens data transfer pact

By Cameron Abbott and Giles Whittaker

The US and the European Union reportedly reached an agreement on the language of a key data transfer pact, including clearer limits on U.S. surveillance and stricter rules for companies holding information of Europeans. The updated EU-US Privacy Shield was sent to EU member states, who are expected to vote on the proposal in July. The revised data transfer pact is said to include stricter cross-border data-handling rules for companies using Europeans’ information for targeted online advertising, and also has detailed the specific condition under which U.S. government intelligence services would collect data in bulk and the safeguards on how the data is used.

Meanwhile, U.S. Chamber of Commerce Executive Vice President and Head of International Affairs Myron Brilliant urged the EU’s member states to quickly sign off on the updated version, saying that the new framework for trans-Atlantic data transfer is critical for companies on both sides of the pond.

Further information regarding the report by Reuters can be read here.

Report finds average cost of data breach reaches $4 million

By Cameron Abbott and Giles Whittaker

A report sponsored by IBM and conducted by the Ponemon Institute found that the average cost of a data breach has grown to $4 million, up 29% from 2013. The survey also found cybersecurity incidents continued to witness growth in both volume and sophistication, with 64% more security incidents reported in 2015 than the preceding year. According to the study, the companies lose $158 per compromised record. Also not surprisingly, breaches in highly regulated industries were even more costly. For instance, healthcare breaches reached $355 per record – a full $100 more than in 2013.

Read the full report conducted by the Ponemon Institute here.

European Data Protection Supervisor less than impressed with EU-US Privacy Shield

By Cameron Abbott, Rob Pulham and Giles Whittaker

The EU-US Privacy Shield data-sharing agreement has come under scrutiny from the European Data Protection Supervisor Giovanni Buttarelli. Mr Buttarelli has expressed concerns that the Privacy Shield, which will outline how data (including personal information) should be handled in foreign jurisdictions, is “not robust enough to withstand future legal scrutiny”.

While Mr Buttarelli said he “appreciates” the efforts made to develop a solution to replace Safe Harbour, he emphasised that “significant improvements are needed should the European Commission wish to adopt an adequacy decision, to respect…the key data protection principles” which are afforded in Europe with particular regard to “necessity, proportionality and redress mechanisms”.

Giovanni Buttarelli’s statement regarding the Privacy Shield can be found here.

OAIC releases draft guide for conducting big data activities

By Cameron Abbott and Simon Ly

Last week the OAIC released their consultation draft Guide to big data and the Australian Privacy Principles, with feedback on the Guide open until 26 July 2016.

The main purpose of the Guide is to facilitate big data activities while protecting personal information (being information or an opinion about an identified individual, or an individual who is reasonably identifiable). The Guide addresses issues such as notice and consent, retention minimisation and use limitation in regards to such data. Whilst not legally binding, the Guide will be referred to by the Privacy Commissioner in undertaking its functions under the Privacy Act.

One of the key aspects dealt with in the Guide is that entities should consider undertaking big data activities on an anonymised manner by de-identifying personal information. If so, this has the favourable outcome that such data will not be considered personal information so accordingly less onerous obligations apply under the Privacy Act to such data. Of course, if this is the case it also lessens the chance that personal information will be compromised should a data breach occur (speaking of which, we note OAIC’s April 2016 guide to deal with data breaches). However, in our experience most of our clients want to analyse and then drill down to take actions or campaigns in relation to a then identified group of customers.

The Guide also highlights how big data interacts with the APPs as well as discussing other related concepts, such as “privacy by design” frameworks. For more information, you can access the OAIC’s consultation draft Guide here.

Yes it can cost you your job…even if you are the boss!

By Cameron Abbott and Giles Whittaker

The CEO of Austrian aerospace parts maker FACC, has been fired following a cyber fraud that cost the company 42 million euros (AUD $65 million). FACC also fired their CFO in February soon after the cyber fraud.

Executives are being held responsible for business’ cybersecurity measures, and while FACC declined to comment on the details of Walter Stephan’s shortcomings, their supervisory board concluded that Walter Stephan had “severely violate his duties, in particular in relation to the fake president incident”. It is likely that this violation is in reference to a lack of adequate cybersecurity procedures or protections, which would be considered essential for most businesses in this technologically integrated era.

So how was it done? The technique used to deceive FACC into handing over their money is known as a ‘fake president incident’. To put it simply, the hackers sent an email to an employee posing as the CEO, and requested that funds be transferred to a specified account for a fake acquisition project. It would appear the board figured it shouldn’t have been that easy.

More information about this cyber fraud can be found in an article by reuters.

Hacked accounts anyone?

By Cameron Abbott and Giles Whittaker

Have you been hacked? If you are the user of a Google, Yahoo or Microsoft e-mail account then it is a possibility. Alex Holden, the founder and Chief Information Officer of Hold Security who discovered the hack has identified 272.3 million account credentials have been stolen. The majority of these accounts are users of Mail.ru which is Russia’s most popular e-mail service.

57 million Mail.ru account credentials had been hacked and Mail.ru “are now checking any combinations of usernames/passwords match users’ e-mails and are still active”, from initial checks there were no live combinations.

Google and Yahoo are yet to provide any response.

This recent hack, which was performed by a young Russian hacker who is more determined to become famous than rich from his recent efforts after only asking for 50 roubles (less than $1) for the entire dataset, is one of the biggest collection of stolen credentials since the attacks on major US banks and retailers two years ago. The information which was stolen, as suggest by Holden in an interview with Reuters is “potent [and] it is floating around in the underground…which can be abused multiple times.”

Some of the stolen credentials include those for employees of large US banking, manufacturing and retail companies. When considering that 22 percent of big data breaches come from stolen online credentials (according to a recent survey of 325 computer professional) and hacks of this nature typically allow for further break-ins or phishing attacks by accessing the contacts of each hacked account, the domino effect of a hack such as this is substantial. Furthermore, individuals that like to re-use their preferred passwords across multiple accounts have exposed themselves to additional hacks.

So what is the take away message? According to Will Harwood, founder and Chief Technology Officer of Silicon SAFE, the solution as he told Infosecurity is to put the “password data in a dedicated hardware supported database that only allows data to be stored and compared, never revealed.”

For more of Will Harwood’s security suggestions and the Infosecurity article click here.

To read more about Alex Holden’s discovery of the Russian hacker click here.

Australian Government releases Cyber Security Strategy

By Cameron Abbott and Giles Whittaker

Cybersecurity appears to be a new popular expenditure, particularly in Australia, as Malcom Turnbull announces his government’s new Cyber Security Strategy initiative budgeted to cost $230 million over 4 years in addition to the $400 million allocated in the 2016 Defence White Paper over 10 years.

So what do we get for all that money? The government has announced their 5 themes of action over the next 4 years which includes:

  1. a national cyber partnership;
  2. strong cyber defences;
  3. global responsibility and influence;
  4. growth and innovation; and
  5. a cyber smart nation.

This will include the funding to establish a Cyber Security Growth Centre through a National Innovation and Science Agenda. The Growth Centre is intended to serve as an innovation hub which will identify and prioritise cybersecurity challenges and identify opportunities for Australia to build globally competitive commercial solutions.

Cybersecurity is grabbing global attention and the Turnbull government has appointment their first Cyber Ambassador. The role of the Cyber Ambassador will be to identify opportunities for practical international cooperation and ensure Australia is situated to take advantage of new commercial opportunities.

Small businesses are often left exposed to hackers due to a lack of resources allocated to cybersecurity and, are targeted for their potential provide a back door to other companies, are often targeted. Turnbull’s no business left behind strategy sees small businesses being allocated $15 million in grants to have their systems tested and improved by The Council of Registered Ethical Security Testers (CREST).

For further information access the government’s plan here.

Bangladesh Bank considers legal action against the NY Fed in Hollywood-esque hack

By Cameron Abbott and Simon Ly

In a story that would make an excellent plot to a sequel to Ocean’s 13, the Federal Reserve Bank of New York has been the target of a successful major cyber hack. Part of the targeted attack was an attempt to steal nearly $1 billion from Bangladesh Bank’s account.

If anyone would be well protected it would be the NY Fed, right? Well, while they were able to block some 30 transactions, 5 were successful, resulting in $81 million being stolen from Bangladesh Bank’s account.

The NY Fed has released a statement outlining that its systems were not breached, but instead pointing to SWIFT, a member-owned cooperative relied upon by banks to authenticate international monetary transactions. In response, a SWIFT representative stated that it “reiterates that the SWIFT network itself was not breached”. For its part, the NY Fed agreed that it “viewed this as a major lapse on the part of FRB NY”.

It will be fascinating to see how this he-said she-said blame game plays out. The current state of events is that the Bangladesh Bank is engaging legal counsel to establish grounds for recompense.

It goes without saying that these mind boggling figures and the nature of the attack emphasise that no one is immune from attacks. Next time someone tells you that it can’t happen to your organisation – remember this example.

For more information, please see Bloomberg’s report here.

Been Hacked? To Report Or Not To Report… To The SEC, It Isn’t Even A Question.

By Tyler Kirk

In the US, the Securities and Exchange Commission has encouraged its regulated entities to self-report. If entities do not self-report, there is the very real possibility that a whistleblower may disclose a cybersecurity incident to the Commission. Significantly, the SEC has indicated that it would take a more adversarial position against an entity that does not self-report.
When self-reporting cybersecurity incidents to the SEC, it is important to approach the Commission with a well thought out plan for responding to the incident. Moreover, a remediation strategy should be a part of every entity’s cybersecurity policies and procedures.

After a cybersecurity incident, SEC regulated entities, such as investment companies and their boards, should move quickly to establish the scope of the incident, decide whether to self-report to the SEC, and begin the remediation process. According to the Commission, under some circumstances, the SEC has tools available to assist with remediation.

Importantly, self-reporting cybersecurity incidents to the SEC could benefit an investment company and its board by leading to a reduced penalty in the event an enforcement action is brought on the basis of the incident.

A New Cyber Regulator on the Beat: The CFPB Issues its First Cybersecurity Order and Fine

By Ted Kornobis

On March 2, 2016, the Consumer Financial Protection Bureau (“CFPB”) instituted its first data security enforcement action, in the form of a consent order against online payment platform Dwolla, Inc.

The CFPB joins several other regulators that have recently issued statements or instituted enforcement actions in this space, including the Securities and Exchange Commission (“SEC”), Commodities Futures Trading Commission (“CFTC”), the Financial Industry Regulatory Authority (“FINRA”), the National Futures Association (“NFA”), the Department of Justice (“DOJ”), state attorneys general, and the Federal Trade Commission (“FTC”), which has been active in this area for several years.

To read more click here.

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