Cybersecurity 2020 features 12 jurisdictions. This new guide covers regulatory regimes, law and regulatory bodies, cybersecurity agencies, consensus or commonly applied frameworks, affirmative security requirements and data breach reporting and notification.
Last Updated: March 16, 2020
Governments around the world are increasingly imposing ever-more comprehensive and granular cybersecurity obligations, shorter-deadline data breach notification laws, and sizeable enforcement fines and penalties. None of this has proven sufficiently effective at reducing the epidemic of data breaches, hacks, cyber-intrusions and data breaches, including from recent trends in ransomware demands and business email compromises.
Since governments are not yet ready – or perhaps not even capable of – saving citizens and companies from cyber-criminals and nation-state hackers, here are some practical suggestions that companies could consider to reduce their likely vulnerabilities and help defend themselves from the legal, operational and reputational risks. While some of it is US-specific, much of it is of wider application, whether directly or indirectly.
Do This as Soon as You Can...
Enable effective system monitoring and a solution to analyse and meaningfully act upon the increased volume of information.
Impose multi-factor authentication for remote access to your networks and email systems.
Educate (and re-educate) employees to resist and report phishing attacks designed to access user credentials or sensitive data, or to trick personnel into clicking on malicious links.
Inventory or “map” your valuable data and systems, determine whether you have properly prioritised protecting them, and make sure your software patching program is up-to-date and sufficiently comprehensive.
Implement a “vendor management” program, and make sure you monitor and contractually bind service providers to adhere to your cybersecurity (and privacy) standards.
Conduct table-top simulations of cyber-attacks to practice your incident response protocols and educate employees as to what they would face in a real incident and how they need to work together.
In the USA, rely on the Cybersecurity Information Sharing Act of 2015 to monitor networks, implement cybersecurity defensive measures and share cyber-threat information “notwithstanding any other provision of law”.
Implement and Be Prepared to Demonstrate Reasonable Security
Numerous US state laws (such as New York, California and Ohio) and federal agency enforcers (such as the Federal Trade Commission) require companies to provide “reasonable security” to protect sensitive personal information. The New York SHIELD Act specifies what constitutes “reasonable security” in highly specific detail. The Ohio law provides details and options for achieving “reasonable security” and provides companies with an affirmative defence against state tort actions for those that do.
More ominously, the 2018 California Consumer Privacy Act does not specify what constitutes “reasonable security”, but does expose companies that suffer data breaches resulting from the failure to implement “reasonable security” to private litigation with potentially bankrupting statutory damages. In 2016, however, then California Attorney General Kamala Harris (who is now a US Senator and a former presidential candidate) issued a formal report providing some helpful guidance and perspective on “reasonable security”. (Report issued by the California Attorney General in February 2016, available at https://oag.ca.gov.) Accordingly, companies would do well to take her commentary to heart and consider the following.
Companies should implement and maintain reasonable security practices and procedures appropriate to the nature of the personal information they collect, use, retain, transfer or otherwise process. A reasonable security process would be implemented and maintained in accordance with applicable law and relevant standards as outlined in the Attorney General Report. For example, as set forth in the 2016 Report, among other safeguards, a reasonable security process would implement the Center for Internet Security’s Critical Security Controls for Effective Cyber Defense as identified in Appendix A of the California Attorney General Report.
Significantly, however, as also noted in that Report, “there is no perfect security”. The Attorney General expressly acknowledged this, and stated that reasonable security is a process that involves risk management and risk reduction, rather than risk elimination. Therefore, companies should be prepared to defend against California data breach actions by pointing to their commitment to developing, implementing, maintaining, monitoring and updating a reasonable information security program, but explain to consumers that, as noted by the Attorney General, no such program can be perfect. In other words, all risk cannot reasonably be eliminated. Data security incidents and breaches can occur due to vulnerabilities, criminal exploits or other factors that cannot reasonably be prevented.
As stated in the Attorney General Report, “implementing the [CIS] Controls will not prevent every attack, but it will significantly reduce the risk”. Accordingly, while corporate reasonable security processes should be designed to manage data security risks and reduce the risk of data security incidents and breaches, it cannot be presumed that the occurrence of any given incident or breach results from a company’s failure to implement and maintain a process for reasonable security.
In any event, companies would be well served to map their information security programs to the standards specified in the New York SHIELD Act and the 2016 California Attorney General Report, and other recognised cybersecurity frameworks (such as those of the National Institute for Standards and Technology).
Conduct a Cybersecurity Governance Review
Company counsel should review their company’s cybersecurity processes, protocols and other significant documentation (eg, policies, reports to the Board, incident response plans, risk assessments, audits, etc) to identify potential governance or compliance gaps and areas for improvement and, potentially together with a cybersecurity forensic firm, review their cybersecurity program and risk assessments from a technical perspective as well. The purpose of this type of cybersecurity legal governance review would be to provide legal advice regarding the company’s compliance obligations as well as to prepare for defence of potential claims, enforcement or litigation challenging the company’s current practices – especially after a data breach has occurred. This governance review and cybersecurity assessment should be conducted pursuant to attorney-client privilege and attorney work product confidentiality protection.
Possible work products could include: (i) summaries of applicable cybersecurity legal requirements; (ii) comments on and proposals of possible revisions to the company’s core documents; (iii) high-level assessments of compliance against industry accepted third-party standards and defensibility of the information security controls; and (iv) recommendations and next steps to further strengthen the company’s program and governance posture.
Cybersecurity and Incident Response Assessment
In the spirit of practical guidance, the following are some elements that companies should focus on in assessing their cybersecurity program and incident response protocols.
Initial participant determination
Understand and identify the key participants in a scoping project, and conduct interviews of key personnel with the following responsibilities: relevant divisional or business unit leaders regarding cybersecurity and incident response; the chief information security officer; the legal/regulatory/compliance officer.
Analysis and recommendations
In the longer term, it is sensible to focus on the following:
Get Ready to Act When You Are Attacked by Ransomware
In the immediate aftermath of a ransomware incident, the most important elements are containment and recovery, in other words to preserve forensic data, and plan to limit business disruption through work-arounds or alternative channels. Top priorities should be to consider bringing in a third-party forensic vendor to assess systems and malware – such a vendor may be able to identify the ransomware and the threat actor – and identifying the system vulnerability and what steps can be taken to close it.
Another important question companies face is whether to pay the ransom. The FBI advises against this, but recognises that companies sometimes have to do so. While there is no exact science on whether companies decide to pay, it is usually based on the importance of the ransomed data to their ongoing operations, whether there are usable back-ups, the amount of the ransom demand, and whether the attacker will actually follow through on decrypting the data (which the forensic vendor may be able to help assess). Any ransom payment should be discussed with the board of directors. To pay the ransom, a company will typically need a vendor with a bitcoin wallet; the forensic vendor may be able to provide this service.
Checking the OFAC list to establish whether a criminal is on the sanction list is another option, as indeed is negotiating with an attacker to lower the amount of the ransom demand and to have the attacker demonstrate that it is capable of decrypting the frozen system by doing so for a sample file. Other important topics include the following: notifying the insurer; notifying law enforcement (ie, the FBI); and considering any updates to SEC filing disclosures.
After the immediate focus on containment and recovery, the focus very quickly (ie, within 24-48 hours) should shift to external data breach notification needs. The key question is whether the ransomware malware is known or not known to seek to exfiltrate data. Is the ransomware a feint to cover another ongoing attack? The forensic vendor should be able to provide guidance on this, including by looking at the vector of attack, the nature of the malware, whether there was escalation, etc. If there was no exfiltration, it is less likely notifications will be necessary.
Nonetheless, it will be necessary to consider a number of different potential notification obligations, including at least the following: (i) state and (if relevant) international notification requirements for breaches of personal information; and (ii) notifying business partners or counter-parties.
Looking ahead, the longer-term project of assessing what steps should be taken to help prevent recurrence need to address the following issues: back-ups and resiliency; anti-phishing training; multi-factor authentication; anti-intrusion systems and safeguards as well as detection; restoring customer relations with business partners, counter-parties and customers; and detailing the lessons learned on minimising business disruption.
Every corporate cybersecurity program must, of course, fit the company’s own risk profile and threat environment. Nonetheless, the steps recommended above should help provide corporate counsel with a practical framework to assess their company’s state of cyber-preparedness on some key cyber topics. Anticipating and planning for these risks will also help the company defend itself in the event an incident triggers legal scrutiny.