Tag: Cybersecurity

Another Lesson for Higher Education Institutions about the Importance of Cybersecurity Investment

Key Takeaway

A Massachusetts class action claim underscores that institutions of higher education will continue to be targets for cybercriminals – and class action plaintiffs know it.

Background

On January 4, 2023, in Jackson v. Suffolk University, No. 23-cv-10019, Jackson (Plaintiff) filed a proposed class action lawsuit in the U.S. District Court for the District of Massachusetts against her alma matter, Suffolk University (Suffolk), arising from a data breach affecting thousands of current and former Suffolk students.

The complaint alleges that an unauthorized party gained access to Suffolk’s computer network on or about July 9, 2022.  After learning of the unauthorized access, Suffolk engaged cybersecurity experts to assist in an investigation. Suffolk completed the investigation on November 14, 2022.  The investigation concluded that an unauthorized third party gained access to and/or exfiltrated files containing personally identifiable information (PII) for students who enrolled after 2002.

The complaint further alleges that the PII exposed in the data breach included students’ full names, Social Security Numbers, Driver License numbers, state identification numbers, financial account information, and Protected Health Information.  While Suffolk did not release the total number of students affected by the data breach, the complaint alleges that approximately 36,000 Massachusetts residents were affected.  No information was provided about affected out-of-state residents.

Colleges and Universities are Prime Targets for Cybercriminals

Unfortunately, Suffolk’s data breach is not an outlier.  Colleges and universities present a wealth of opportunities for cyber criminals because they house massive amounts of sensitive data, including employee and student personal and financial information, medical records, and confidential and proprietary data.  Given how stolen data can be sold through open and anonymous forums on the Dark Web, colleges and universities will continue to remain prime targets for cybercriminals.

Recognizing this, the FBI issued a warning for higher education institutions in March 2021, informing them that cybercriminals have been targeting institutions of higher education with ransomware attacks.  In May 2022, the FBI issued a second alert, warning that cyber bad actors continue to conduct attacks against colleges and universities.

Suffolk Allegedly Breached Data Protection Duty

In the complaint, Plaintiff alleges that Suffolk did not follow industry and government guidelines to protect student PII.  In particular, Plaintiff alleges that Suffolk’s failure to protect student PII is prohibited by the Federal Trade Commission Act, 15 U.S.C.A. § 45 and that Suffolk failed to comply with the Financial Privacy Rule of the Gramm-Leach-Bliley Act (GLBA),  15 U.S.C.A. § 6801.  Further, the suit alleges that Suffolk violated the Massachusetts Right to Privacy Law, Mass. Gen. Laws Ann. ch. 214, § 1B, as well as its common law duties.

How Much Cybersecurity is Enough?

To mitigate cyber risk, colleges and university must not only follow applicable government guidelines but also  consider following industry best practices to protect student PII.

In particular, GLBA requires a covered organization to designate a qualified individual to oversee its information security program and conduct risk assessments that continually assess internal and external risks to the security, confidentiality and integrity of personal information.  After the risk assessment, the organization must address the identified risks and document the specific safeguards intended to address those risks.  See 16 CFR § 314.4.  

Suffolk, as well as other colleges and universities, may also want to look to Massachusetts law for guidance about how to further invest in its cybersecurity program.  Massachusetts was an early leader among U.S. states when, in 2007, it enacted the “Regulations to safeguard personal information of commonwealth residents” (Mass. Gen. Laws ch. 93H § 2) (Data Security Law).  The Data Security Law – still among the most prescriptive general data security state law – sets forth a list of minimum requirements that, while not specific to colleges and universities, serves as a good cybersecurity checklist for all organizations:

  1. Designation of one or more employees responsible for the WISP.
  2. Assessments of risks to the security, confidentiality and/or integrity of organizational Information and the effectiveness of the current safeguards for limiting those risks, including ongoing employee and independent contractor training, compliance with the WISP and tools for detecting and preventing security system failures.
  3. Employee security policies relating to protection of organizational Information outside of business premises.
  4. Disciplinary measures for violations of the WISP and related policies.
  5. Access control measures that prevent terminated employees from accessing organizational Information.
  6. Management of service providers that access organizational Information as part of providing services directly to the organization, including retaining service providers capable of protecting organizational Information consistent with the Data Security Regulations and other applicable laws and requiring service providers by contract to implement and maintain appropriate measures to protect organizational Information.
  7. Physical access restrictions for records containing organizational Information and storage of those records in locked facilities, storage areas or containers.
  8. Regular monitoring of the WISP to ensure that it is preventing unauthorized access to or use of organizational Information and upgrading the WISP as necessary to limit risks.
  9. Review the WISP at least annually or more often if business practices that relate to the protection of organizational Information materially change.
  10. Documentation of responsive actions taken in connection with any “breach of security” and mandatory post-incident review of those actions to evaluate the need for changes to business practices relating to protection of organizational Information.

An organization not implementing any of these controls should consider documenting the decision-making process as a defensive measure.  In implementing these requirements and recommendations, colleges and universities can best position themselves to thwart cybercriminals and plaintiffs alike.

Article By Ericka A. Johnson and Julia B. Jacobson of Squire Patton Boggs (US) LLP

For more cybersecurity and data privacy legal news, click here to visit the National Law Review.

© Copyright 2023 Squire Patton Boggs (US) LLP

Ankura CTIX FLASH Update – January 3, 2023

Malware Activity

Louisiana’s Largest Medical Complex Discloses Data Breach Associated to October Attack

On December 23rd, 2022, the Lake Charles Memorial Health System (LCMHS) began sending out notifications regarding a newly discovered data breach that is currently impacting approximately 270,000 patients. LCMHS is the largest medical complex in Lake Charles, Louisiana, which contains multiple hospitals and a primary care clinic. The organization discovered unusual activity on their network on October 21, 2022, and determined on October 25, 2022, that an unauthorized actor gained access to the organization’s network as well as “accessed or obtained certain files from [their] systems.” The LCMHS notice listed the following patient information as exposed: patient names, addresses, dates of birth, medical record or patient identification numbers, health insurance information, payment information, limited clinical information regarding received care, and Social Security numbers (SSNs) in limited instances. While LCMHS has yet to confirm the unauthorized actor responsible for the data breach, the Hive ransomware group listed the organization on their data leak site on November 15, 2022, as well as posted files allegedly exfiltrated after breaching the LCMHS network. The posted files contained “bills of materials, cards, contracts, medical info, papers, medical records, scans, residents, and more.” It is not unusual for Hive to claim responsibility for the associated attack as the threat group has previously targeted hospitals/healthcare organizations. CTIX analysts will continue to monitor the Hive ransomware group into 2023 and provide updates on the Lake Charles Memorial Health System data breach as necessary.

Threat Actor Activity

Kimsuky Threat Actors Target South Korean Policy Experts in New Campaign

Threat actors from the North Korean-backed Kimsuky group recently launched a phishing campaign targeting policy experts throughout South Korea. Kimsuky is a well-aged threat organization that has been in operation since 2013, primarily conducting cyber espionage and occasional financially motivated attacks. Aiming their attacks consistently at entities of South Korea, the group often targets academics, think tanks, and organizations relating to inter-Korea relations. In this recent campaign, Kimsuky threat actors distributed spear-phishing emails to several well-known South Korean policy experts. Within these emails, either an embedded website URL or an attachment was present, both executing malicious code to download malware to the compromised machine. One (1) tactic the threat actors utilized was distributing emails through hacked servers, masking the origin IP address(es). In total, of the 300 hacked servers, eighty-seven (87) of them were located throughout North Korea, with the others from around the globe. This type of social engineering attack is not new for the threat group as similar instances have occurred over the past decade. In January 2022, Kimsuky actors mimicked activities of researchers and think tanks in order to harvest intelligence from associated sources. CTIX continues to urge users to validate the integrity of email correspondence prior to visiting any embedded emails or downloading any attachments to lessen the risk of threat actor compromise.

Vulnerabilities

Netgear Patches Critical Vulnerability Leading to Arbitrary Code Execution

Network device manufacturer Netgear has just patched a high-severity vulnerability impacting multiple WiFi router models. The flaw, tracked as CVE-2022-48196, is described as a pre-authentication buffer overflow security vulnerability, which, if exploited, could allow threat actors to carry out a number of malicious activities. These activities include stealing sensitive information, creating Denial-of-Service (DoS) conditions, as well as downloading malware and executing arbitrary code. In past attacks, threat actors have utilized this type of vulnerability as an initial access vector by which they pivot to other parts of the network. Currently, there is very little technical information regarding the vulnerability and Netgear is temporarily withholding the details to allow as many of their users to update their vulnerable devices to the latest secure firmware. Netgear stated that this is a very low-complexity attack, meaning that unsophisticated attackers may be able to successfully exploit a device. CTIX analysts urge Netgear users with any of the vulnerable devices listed in Netgear’s advisory to patch their device immediately.

For more cybersecurity news, click here to visit the National Law Review.

Copyright © 2023 Ankura Consulting Group, LLC. All rights reserved.

Governor Wolf Signs Act 151 Addressing Data Breaches Within Local Entities

On Thursday, November 3, 2022, Governor Tom Wolf signed PA Senate Bill 696, also known as Act 151 of 2022 or the Breach of Personal Information Notification Act.  Act 151 amends Pennsylvania’s existing Breach of Personal Information Notification Act, strengthening protections for consumers, and imposing stricter requirements for state agencies, state agency contractors, political subdivisions, and certain individuals or businesses doing business in the Commonwealth.  Act 151 expands the definition of “personal information,” and requires Commonwealth entities to implement specific notification procedures in the event that a Commonwealth resident’s unencrypted and unredacted personal information has been, or is reasonably believed to have been, accessed and acquired by an unauthorized person.  The requirements for state-level and local entities differ slightly; this Alert will address the impact of Act 151 on local entities.  While this law does not take effect until May 22, 2023, it is critical that all entities impacted by this law be aware of these changes.

For the purposes of Act 151, the term “local entities” includes municipalities, counties, and public schools.  The term “public school” encompasses all school districts, charter schools, intermediate units, cyber charter schools, and area career and technical schools.  Act 151 requires that, in the event of a security breach of the system used by a local entity to maintain, store, or manage computerized data that includes personal information, the local entity must notify affected individuals within seven business days of the determination of the breach.  In addition, local entities must notify the local district attorney of the breach within three business days.

The definition of “personal information” has been updated, and includes a combination of (1) an individual’s first name or first initial and last name, and (2) one or more of the following items, if unencrypted and unredacted:

  • Social Security number;
  • Driver’s license number;
  • Financial account numbers or credit or debit card numbers, combined with any required security code or password;
  • Medical information;
  • Health insurance information; or
  • A username or password in combination with a password or security question and answer.

The last three items were added by this amendment.  Additionally, the new language provides that “personal information” does not include information that is made publicly available from government records or widely distributed media.

Act 151 defines previously undefined terms, drawing a distinction between “determination” and “discovery” of a breach, and setting forth different obligations relating to each.  “Determination,” under the act, is defined as, “a verification or reasonable certainty that a breach of the security of the system has occurred.”  “Discovery” is defined as, “the knowledge of or reasonable suspicion that a breach of the security of the system has occurred.”  This distinction affords entities the ability to investigate a potential breach before the more onerous notification requirements are triggered.  A local entity’s obligation to notify Commonwealth residents is triggered when the entity has reached a determination that a breach has occurred.  Further, any vendor that maintains, stores, or manages computerized data on behalf of a local entity is responsible for notifying the local entity upon discovery of a breach, but the local entity is ultimately responsible for making the determinations and discharging any remaining duties under Act 151.

Another significant update afforded by Act 151 is the addition of an electronic notification procedure.  Previously, notice could be given: (1) by written letter mailed to the last known home address of the individual; (2) telephonically, if certain requirements are met; (3) by email if a prior business relationship exists and the entity has a valid email address; or (4) by substitute notice if the cost of providing notice would exceed $100,000, the affected class of individuals to be notified exceeds 175,000, or the entity does not have sufficient contact information.  Now, in addition to the email option, entities can provide an electronic notice that directs the individual whose personal information may have been materially compromised to promptly change their password and security question or answer, or to take any other appropriate steps to protect their information.

Act 151 also provides that all entities that maintain, store, or manage computerized personal information on behalf of the Commonwealth must utilize encryption –  this provision originally applied only to employees and contractors of Commonwealth agencies, but was broadened in Act 151.  Further, the act provides that all entities that maintain, store, or manage computerized personal information on behalf of the Commonwealth must maintain policies relating to the transmission and storage of personal information – such policies were previously developed by the Governor’s Office of Administration.

Finally, under Act 151, any entity that is subject to and in compliance with certain healthcare and federal privacy laws is deemed to be in compliance with Act 151.  For example, an entity that is subject to and in compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is deemed compliant with Act 151.

Although Act 151 is an amendment to prior legislation, the updates create potential exposure for local entities and the vendors that serve them.  For local municipalities, schools, and counties, compliance will require a proactive approach – local entities will have to familiarize themselves with the new requirements, be mindful of the personal information they hold, and ensure that their vendors are aware of their obligations.  Further, local entities will be required to implement encryption protocols, and prepare and maintain storage and transmission policies.

Originally Published by Babst Calland November 29, 2022. Article By Michael T. Korns and Ember K. Holmes of Babst, Calland, Clements & Zomnir, P.C.

Click here to read more legislative news on the National Law Review website.

© Copyright Babst, Calland, Clements and Zomnir, P.C.

Nineteen States Have Banned TikTok on Government-Issued Devices

Governors of numerous states have issued Executive Orders in the past several weeks banning TikTok from government-issued devices and many have already implemented a ban, with others considering similar measures. There is also bi-partisan support of a ban in the Senate, which unanimously approved a bill last week that would ban the app from devices issued by federal agencies. There is already a ban prohibiting military personnel from downloading the app on government-issued devices.

The bans are in response to the national security concerns that TikTok poses to U.S. citizens [View related posts].

To date, 19 states have issued some sort of ban on the use of TikTok on government-issued devices, including some Executive Orders banning the use of TikTok statewide on all government-issued devices. Other state officials have implemented a ban within an individual state department, such as the Louisiana Secretary of State’s Office. In 2020, Nebraska was the first state to issue a ban. Other states that have banned TikTok use in some way are: South Dakota, North Dakota, Maryland, South Carolina, Texas, New Hampshire, Utah, Louisiana, West Virginia, Georgia, Oklahoma, Idaho, Iowa, Tennessee, Alabama, Virginia, and Montana.

Indiana’s Attorney General filed suit against TikTok alleging that the app collects and uses individuals’ sensitive and personal information, but deceives consumers into believing that the information is secure. We anticipate that both the federal government and additional state governments will continue to assess the risk and issue bans on its use in the next few weeks.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.
For more Cybersecurity Legal News, click here to visit the National Law Review.

Ankura CTIX FLASH Update – December 13, 2022

Malware Activity

Uber Discloses New Data Breach Related to Third-Party Vendor

Uber has disclosed a new data breach that is related to the security breach of Teqtivity, a third-party vendor that Uber uses for asset management and tracking services. A threat actor named “UberLeaks” began leaking allegedly stolen data from Uber and Uber Eats on December 10, 2022, on a hacking forum. The exposed data includes Windows domain login names and email addresses, corporate reports, IT asset management information, data destruction reports, multiple archives of apparent source code associated with mobile device management (MDM) platforms, and more. One document in particular contained over 77,000 Uber employee email addresses and Windows Active Directory information. UberLeaks posted the alleged stolen information in four (4) separate postings regarding Uber MDM, Uber Eats MDM, Teqtivity MDM, and TripActions MDM platforms. The actor included one (1) member of the Lapsus$ threat group in each post, but Uber confirmed that Lapsus$ is not related to this December breach despite being previously linked to the company’s cyberattack in September 2022. Uber confirmed that this breach is not related to the security incident that took place in September and that the code identified is not owned by Uber. Teqtivity published a data breach notification on December 12, 2022, that stated the company is aware of “customer data that was compromised due to unauthorized access to our systems by a malicious third party” and that the third-party obtained access to its AWS backup server that housed company code and data files. Teqtivity also noted that its ongoing investigation identified the following exposed information: first name, last name, work email address, work location details, device serial number, device make, device model, and technical specs. The company confirmed that home address, banking information, and government identification numbers are not collected or retained. Uber and Teqtivity are both in the midst of ongoing investigations into this data breach. CTIX analysts will provide updates on the matter once available.

Threat Actor Activity

PLAY Ransomware Claims Responsibility for Antwerp Cyberattack

After last week’s ransomware attack on the city of Antwerp, a threat organization has claimed responsibility and has begun making demands. The threat group, tracked as PLAY ransomware, is an up-and-coming ransomware operation that has been posting leaked information since November 2022, according to an available posting on their leak site. Samples of the threat group’s ransomware variants have shown activity dating back to June 2022, which is around the time PLAY ransomware targeted the Argentina Court of Cordoba (August). While PLAY’s ransomware attack crippled several sectors of Antwerp, it appears to have had a significant impact on residential facilities throughout the city, as stated by officials. According to PLAY NEWS, PLAY’s ransomware leak site, the publication date for the exfiltrated data is Monday, December 19, 2022, if the undisclosed ransom is not paid. PLAY threat actors claim to have 557 gigabytes (GB) worth of Antwerp-related data including but not limited to personal identifiable information, passports, identification cards, and financial documents. CTIX continues to monitor the developing situation and will provide additional updates as more information is released.

Vulnerabilities

Fortinet Patches Critical RCE Vulnerability in FortiOS SSL-VPN Products

After observing active exploitation attempts in-the-wild, the network security solutions manufacturer Fortinet has patched a critical vulnerability affecting their FortiOS SSL-VPN products. The flaw, tracked as CVE-2022-42475, was given a CVSS score of 9.3/10 and is a heap-based buffer overflow, which could allow unauthenticated attackers to perform arbitrary remote code execution (RCE) if successfully exploited. Specifically, the vulnerability exists within the FortiOS sslvpnd product, which enables individual users to safely access an organization’s network, client-server applications, and internal network utilities and directories without the need for specialized software. The vulnerability was first discovered by researchers from the French cybersecurity firm Olympe Cyberdefense who warned users to monitor their logs for suspicious activity until a patch was released. Although very few technical details about the exploitation have been divulged, Fortinet did share lists of suspicious artifacts and IPs. Based on research by Ankura CTIX analysts, the IPs released by Fortinet are located around the globe and are not associated with known threat actors at this time. To prevent exploitation, all Fortinet administrators leveraging FortiOS sslvpnd should ensure that they download and install the latest patch. If organizations cannot immediately patch their systems due to the business interruption it would cause, Olympe Cyberdefense suggests “customers monitor logs, disable the VPN-SSL functionality, and create access rules to limit connections from specific IP addresses.” A list of the affected products and their solutions, as well as the indicators of compromise can be found in the Fortinet advisory linked below.

The semi-weekly Ankura Cyber Threat Investigations and Expert Services (CTIX) FLASH Update is designed to provide timely and relevant cyber intelligence pertaining to current or emerging cyber events. The preceding is a collection of cyber threat intelligence leads assembled over the past few days and typically includes high level intelligence pertaining to recent threat group/actor activity and newly identified vulnerabilities impacting a wide range of industries and victims. 

Article By Ankura Cyber Threat Investigations and Expert Services

For more cybersecurity legal news, click here to visit the National Law Review.

Copyright © 2022 Ankura Consulting Group, LLC. All rights reserved.

ANOTHER TRILLION DOLLAR CASE:? TikTok Hit in MASSIVE CIPA Suit Over Its Business Model of Profiting from Advertising by Collecting and Monetizing User Data

Data privacy lawsuits are EXPLODING and one of our country’s most popular mobile app — TikTok’s privacy issues keep piling up.

Following its recent $92 million class-action data privacy settlement for its alleged violation of Illinois Biometric Information Privacy Act (BIPA), TikTok is now facing a CIPA and Federal Wire Tap class action for collecting users’ data via its in-app browser without Plaintiff and class member’s consent.

The complaint alleges “[n]owhere in [Tik Tok’s] Terms of Service or the privacy policies is it disclosed that Defendants compel their users to use an in-app browser that installs JavaScipt code into the external websites that users visit from the TikTok app which then provides TikTok with a complete record of every keystroke, every tap on any button, link, image or other component on any website, and details about the elements the users clicked. “

Despite being a free app, TikTok makes billions in revenue by collecting users’ data without their consent.

“The world’s most valuable resource is no longer oil, but data.”

While we’ve discussed before, many companies do collect data for legitimate purposes with consent. However this new complaint alleges a very specific type of data collection practice without the TikTok user’s OR the third party website operator’s consent.

TikTok allegedly relies on selling digital advertising spots for income and the algorithm used to determine what advertisements to display on a user’s home page, utilizes tracking software to understand a users’ interest and habits. In order to drive this business, TikTok presents users with links to third-party websites in TikTok’s in-app browser without a user  (or the third party website operator) knowing this is occurring via TikTok’s in-app browser. The user’s keystrokes is simultaneously being intercepted and recorded.

“Specifically, when a user attempts to access a website, by clicking a link while using the TikTok app, the website does not open via the default browser.  Instead, unbeknownst to the user, the link is opened inside the TikTok app, in [Tik Tok’s] in-app browser.  Thus, the user views the third-party website without leaving the TikTok app. “

The Tik-Tok in-app browser does not just track purchase information, it allegedly tracks detailed private and sensitive information – including information about  a person’s physical and mental health.

For example, health providers and pharmacies, such as Planned Parenthood, have a digital presence on TikTok, with videos that appear on users’ feeds.

Once a user clicks on this link, they are directed to Planned Parenthood’s main webpage via TikTok’s in-app browser. While the user is assured that his or her information is “privacy and anonymous,” TikTok is allegedly intercepting it and monetizing it to send targeted advertisements to the user – without the user’s or Planned Parenthood’s consent.

The complaint not only details out the global privacy concerns regarding TikTok’s privacy practices (including FTC investigations, outright ban preventing U.S. military from using it, TikTok’s BIPA lawsuit, and an uptick in privacy advocate concerns) it also specifically calls out the concerns around collecting reproductive health information after the demise of Roe v. Wade this year:

“TikTok’s acquisition of this sensitive information is especially concerning given the Supreme Court’s recent reversal of Roe v. Wade and the subsequent criminalization of abortion in several states.  Almost immediately after the precedent-overturning decision was issued, anxieties arose regarding data privacy in the context of commonly used period and ovulation tracking apps.  The potential of governments to acquire digital data to support prosecution cases for abortions was quickly flagged as a well-founded concern.”

Esh. The allegations are alarming and the 76 page complaint can be read here: TikTok.

In any event, the class is alleged as:

“Nationwide Class: All natural persons in the United State whose used the TikTok app to visit websites external to the app, via the in-app browser.

California Subclass: All natural persons residing in California whose used the TikTok app to visit websites external to the app, via the in-app browser.”

The complaint alleges California law applies to all class members – like the Meta CIPA complaint we will have to wait and see how a nationwide class can be brought related to a CA statute.

On the CIPA claim, the Plaintiff – Austin Recht – seeks an unspecific amount of damages for the class but the demand is $5,000 per violation or 3x the amount of damages sustained by Plaintiff and the class in an amount to be proven at trial.

We’ll obviously continue to keep an eye out on this.

Article By Puja J. Amin of Troutman Firm

For more communications and media legal news, click here to visit the National Law Review.

© 2022 Troutman Firm

“Red Flags in the Mind Set”: SEC Sanctions Three Broker/Dealers for Identity Theft Deficiencies

In 1975, around the time of “May Day” (1 May 1975), which brought the end of fixed commission rates and the birth of registered clearing agencies for securities trading (1976), the U. S. Securities and Exchange Commission (“SEC”) created a designated unit to deal with the growth of trading and the oversight of broker/dealers. That unit, the Office of Compliance Inspections and Examinations (the “OCIE”), evolved and grew over time. It regularly issued Risk Alerts on specific topics aimed at Broker/Dealers and/or Investment Advisers, expecting that those addressees would take appropriate steps to prevent the occurrence of the identified risk, or at least mitigate its impact on customers. On Sept. 15, 2020, the OCIE issued a Risk Alert entitled “Cybersecurity: Safeguarding Client Accounts against Credential Compromise,” which emphasized the importance of compliance with SEC Regulation S-ID, the “Identity Theft Red Flags Rule,” adopted May 20, 2013, under Sections of the Securities Exchange Act of 1934 (the “34 Act”) and the Investment Advisers Act of 1940, as amended (the “40 Act”). See, in that connection, the discussion of this and related SEC cyber regulations in my Nov. 19, 2020, Blog “Credential Stuffing: Cyber Intrusions into Client Accounts of Broker/Dealers and Investment Advisors.”

The SEC was required to adopt Regulation S-ID by a provision in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which amended a provision of the Fair Credit Reporting Act of 1970 (“FCRA”) to add both the SEC and the Commodity Futures Trading Commission to the federal agencies that must have “red flag” rules. That “red flag” requirement for the seven federal prudential bank regulators and the Federal Trade Commission was made part of the FCRA by a 2003 amendment. Until Wednesday, July 27, 2022, the SEC had (despite the Sept. 15, 2020, Risk Alert) brought only one enforcement action for violating the “Red Flag” Rule (in 2018 when customers of the firm involved suffered harm from the identity thefts). In 2017, however, the Commission created a new unit in its Division of Enforcement to better address the growing risks of cyber intrusion in the U.S. capital markets, the Crypto Assets and Cyber Unit (“CACU”). That unit almost doubled in size recently with the addition of 20 newly assigned persons, as reported in an SEC Press Release of May 3, 2022. There the Commission stated the Unit “will continue to tackle the omnipresent cyber-related threats in the nation’s [capital] markets.” Also, underscoring the ever-increasing role played by the SEC in overseeing the operations of broker/dealers and investment advisers, the OCIE was renamed the Division of Examinations (“Exams”) on Dec. 17, 2020, elevating an “Office” of the SEC to a “Division.”

Examinations of three broker/dealers by personnel from Exams led the CACU to investigate all three, resulting in the institution of Administrative and Cease-and Desist Proceedings against each of the respondents for violations of Regulation S-ID. In those proceedings, the Commission alleged that the Identity Theft Protection Program (“ITPP”), which each respondent was required to have, was deficient. Regulation S-ID, including its Appendix A, sets forth both the requirements for an ITPP and types of red flags the Program should consider, and in Supplement A to Appendix A, includes examples of red flags from each category of possible risks. An ITPP must be in writing and should contain the following:

  1. Reasonable policies and procedures to identify, detect and respond appropriately to relevant red flags of the types likely to arise considering the firm’s business and the scope of its brokerage and/or advisory activities; and those policies and procedures should specify the responsive steps to be taken; broad generalizations will not suffice. Those policies and procedures should also describe the firm’s practices with respect to theft identification, prevention, and response, and direct that the firm document the steps to be taken in each case.
  2.  Requirements for periodic updates of the Program, including updates reflecting the firm’s experience with both a) identity theft; and b) changes in the firm’s business. In addition, the updates should address changes in the types and mechanisms of cybersecurity risks the firm might plausibly encounter.
  3. Requirements for periodic review of the types of accounts offered and the risks associated with each type.
  4. Provisions directing at least annual reports to the firm’s board of directors, and/or senior management, addressing the program’s effectiveness, including identity theft-related incidents and management responses to them.
  5. Provisions for training of staff in identity theft and the responses required by the firm’s ITPP.
  6. Requirements for monitoring third party service providers for compliance with identity theft provisions that meet those of the firm’s program.

The ITPP of each of the three broker/dealers was, as noted, found deficient. The first, J.P. Morgan Securities, LLC (“MORGAN”), organized under Delaware law and headquartered in New York, New York, is a wholly owned subsidiary of JPMorgan Chase & Co. (described by the Commission as “a global financial services firm” in its July 27, 2022, Order Instituting Administrative and Cease-and-Desist Proceedings [the “Morgan Order”]). Morgan is registered with the Commission as both a broker/dealer (since Dec. 13, 1985) and an investment adviser (since April 3, 1965). As recited in the Morgan Order, the SEC found Morgan offered and maintained customer accounts “primarily for personal, family, or household purposes that involve or are designed to permit multiple payments or transactions.” The order further notes that from Jan. 1, 2017, through Dec. 31, 2019, Morgan’s ITPP did not meet the requirements of Regulation S-ID because it “merely restated the general legal requirements” and did not specify how Morgan would identify a red flag or direct how to respond to it. The Morgan Order notes that although Morgan did take action to detect and respond to incidents of identity theft, the procedures followed were not in Morgan’s Program. Further, Morgan did not periodically update its program, even as both the types of accounts offered, and the extent of cybersecurity risks changed. The SEC also found Morgan did not adequately monitor its third-party service providers, and it failed to provide any identity theft-specific training to its staff. As a result, Morgan had violated Regulation S-ID. The order noted that Morgan “has undertaken substantial remedial acts, including auditing and revising … [its Program].” Nonetheless, Morgan was ordered to cease and desist from violating Regulation S-ID, was censured, and was ordered to pay a civil penalty of $1.2 million.

The second broker/dealer charged was UBS Financial Services Inc.(“UFS”), a Delaware corporation dually registered with the Commission as both a broker/dealer and an investment adviser since 1971. UFS, headquartered in Weehawken, New Jersey, is a subsidiary of UBS Group AG, a publicly traded major financial institution incorporated in Switzerland. In 2008, UBF adopted an ITPP (the “UBF Program”) pursuant to the 2003 amendments to the FCRA. The program applied both to UBF and to other affiliated entities and branch offices in the U.S. and Puerto Rico “which offered private and retail banking, mortgage, and private investment services that operated under UBS Group AG’s Wealth Management Americas’ line of business.” See my blog published on Aug. 22, 2022, “Only Sell What You Know: Swiss Bank Negligence is a Fraud on Clients,” for information about the origins and history of UBS Group AG.

The July 27, 2022, SEC Order instituting Administrative and Cease-and-Desist Proceedings against UBF (the “UBF Order”) stated that UBF made no change to the UBF Program when, in 2013, it became subject to Regulation S-ID, or thereafter from Jan. 1, 2017, to Dec. 31, 2019, other than to revise the list of entities and branches it covered. The Commission found UBF failed to update the UBF Program even as the accounts it offered changed, and without considering if some accounts offered by affiliated entities and branches are not “covered accounts” within regulation S-ID. The UBF Program did not have reasonable policies and procedures to identify red flags, taking into consideration account types and attendant risks, and did not specify what responses were required. The SEC also found the program wanting for not providing for periodic updates, especially addressing changes in accounts and/or in cybersecurity risks. The annual reports to the board of directors “did not provide sufficient information” to assess the UBF Program’s effectiveness or the adequacy of UBF’s monitoring of third-party service providers; indeed, the UBF Order notes the “board minutes do not reflect any discussion of compliance with Regulation S-ID.” In addition, UBF “did not conduct any training of its staff specific” to the UBF Program, including how to detect and respond to red flags.  As a result, the Commission found UBF in violation of Regulation S-ID. Although the Commission again noted the “substantial remedial acts” undertaken by UBF, including retaining “an outside consulting firm to review its Program” and to recommend change, the SEC nonetheless ordered UBF to cease and desist from violating the Regulation, censured UBF, and ordered it to pay a civil penalty of $925,000.

The third member of this broker/dealer trio is TradeStation Securities, Inc. (“TSS”), a Florida corporation headquartered in Plantation, Florida, that, according to the July 27, 2022, SEC Order Instituting Administrative and Cease-and-Desist Proceedings (the “TSS Order”), “provides primarily commission-free, directed online brokerage services to retail and institutional customers.” TSS has been registered with the SEC as a broker/dealer since January 1996. Their ITPP, too, was found deficient. The ITPP implemented by TSS (the “TSS Program”) essentially ignored the reality of TSS’s business as an online operation. For instance, the TSS Program cited only the red flags offered as “non-comprehensive examples in Supplement A to Appendix A” and not any “relevant to its business and the nature and scope of its brokerage activities.” Hence, the TSS Program cited the need to confirm the physical appearance of customers to make certain it was consistent with photographs or physical descriptions in the file. But an online broker/dealer would have scant opportunity to see a customer or a new customer in person, even when opening an account. Nor did TSS check the Supplement A red flag examples cited in the TSS Program when opening new customer accounts. The TSS Program directed only that “additional due diligence” should be performed if a red flag were identified, rather than directing specific responsive steps to be taken, such as not opening an account in a questionable situation. There were no requirements for periodic updates of the TSS Program. Indeed, “there were no material changes to the Program” after May 20, 2013, “despite significant changes in external cybersecurity risks related to identity theft.” At this point in the TSS Order, the Commission cited a finding in the Federal Register that “[a]dvancements in technology … have led to increasing threats to the integrity … of personal information.” The SEC found that TSS did not provide reports about the TSS Program and compliance with Regulation S-ID either to the TSS board or to a designated member of senior management, and that TSS had no adequate policies and procedures in place to monitor third-party service providers for compliance with detecting and preventing identity theft. The order is silent on the extent of TSS’s training of staff to deal with identity threats, but considering the other shortcomings, presumably such training was at best haphazard. The Commission found that TSS violated Regulation S-ID. Although the TSS Order noted (as with the other Proceedings) the “substantial remedial acts” undertaken by TSS, including retaining “an outside consulting firm” to aid compliance, the Commission nonetheless ordered TSS to cease-and-desist from violating the Regulation, censured TSS, and ordered it to pay a civil penalty of $425,000.

These three enforcement actions on the same day, especially ones involving two of the world’s leading financial institutions, signal a new level of attention by the Commission to cybersecurity risks to customers of broker/dealers and investment advisers, with a focus on the risks inherent in identity theft. As one leading law firm writing about these three actions advised, “[f]irms should review their ITPPs placing particular emphasis on identifying red flags tailored to their business and on conducting regular compliance reviews to update those red flags and related policies and procedures to reflect changes in business practices and risk.” That sound advice should be followed NOW, before the CACU comes calling.

For more Financial, Securities, and Banking Law news, click here to visit the National Law Review.

©2022 Norris McLaughlin P.A., All Rights Reserved

Ankura Cyber Threat Intelligence Bulletin: August – September 2022

Over the past sixty days, Ankura’s Cyber Threat Investigations & Expert Services (CTIX) Team of analysts has compiled key learnings about the latest global threats and current cyber trends into an in-depth report: The Cyber Threat Intelligence Bulletin. This report provides high-level executives, technical analysts, and everyday readers with the latest intel and insights from our expert analysts.

Download the report for an in-depth look at the key cyber trends to watch and help safeguard your organization from constantly evolving cyber threats with the latest cyber intelligence, ransomware, and threat insights.

 Our latest report explains the following observations in detail:

Law Enforcement Works with Threat Intelligence to Prosecute Human Traffickers

In the age of high-speed internet and social media, criminals have evolved to use information technology to bolster their criminal enterprises and human traffickers are no different. Whether it be through the clearnet or dark web, human traffickers have leveraged the internet to scale their operations, forcing law enforcement to reevaluate how to best combat this problem. In response to the changes in trafficker tactics, techniques, and procedures (TTPs), governments across the world have responded with legislation and policies in an attempt to better thwart the efforts of these criminals. Researchers from Recorded Future’s Insikt Group have published compelling reports as a proof-of-concept (PoC) for a methodology on how law enforcement agencies and investigators can utilize real-time threat intelligence to leverage sources of data in order to aid in tracking, mitigating, and potentially prosecuting human sex traffickers. Download the full report for additional details on law enforcement efforts to prosecute human traffickers and more on the Insikt Group’s findings.

Emerging Threat Organization “MONTI”: Sister Organization or Imposter Threat Group?

Over the past several weeks a new, potentially imposter, threat organization has mimicked the tactics, techniques, procedures (TTPs), and infrastructure of the Conti Ransomware Group. Tracked as MONTI, this doppelganger organization emerged in the threat landscape in July 2022 after compromising a company and encrypting approximately twenty (20) hosting devices and a multi-host VMWare ESXi instance tied to over twenty (20) additional servers. While the July attack pushed the group into the limelight, analysts believe that attacks from the doppelganger organization go back even further into the early summer of 2022. Similarities discovered between Conti Ransomware and the alleged spinoff Monti Ransomware include attack TTPs alongside the reuse of Conti-attributed malicious payloads, deployed tools, and ransom notes. Additionally, the encrypted files exfiltrated by Monti contain nearly identical encryption, which could indicate code re-usage. Read the full report to find out what CTIX analysts expect to see from this group in the future.

Figure 1: Conti Ransom Note

Figure 2: Monti Ransom Note

Iranian State-Sponsored Threat Organization’s Attack Timeline Targeting the Albanian Government

In July 2022, nation-state Iranian threat actors, identified by the FBI as “Homeland Justice”, launched a “destructive cyber-attack” against the Government of NATO-member Albania in which the group acquired initial access to the victim network approximately fourteen (14) months before (May of 2021). During this period, the threat actors continuously accessed and exfiltrated email content. The peak activity was observed between May and June of 2022, where actors conducted lateral movements, network reconnaissance, and credential harvesting.

This attack and eventual data dumps were targeted against the Albania-based Iranian dissident group Mujahideen E-Khalq (MEK), otherwise known as the People’s Mojahedin Organization of Iran. MEK is a “controversial Iranian resistance group” that was exiled to Albania and once listed by the United States as a Foreign Terrorist Organization for activity in the 1970s but was later removed in late 2012. Albania eventually severed diplomatic ties with Iran on September 7, 2022, and is suspected to be the first country to ever have done so due to cyber-related attacks. For a more detailed analysis of this attack and its ramifications, download our full report.

 Figure: Homeland Justice Ransom Note Image

Banning Ransomware Payments Becomes Hot-Button Issue in State Legislature

There is a debate occurring in courtrooms across the United States regarding the ethics and impacts of allowing businesses to make ransomware payments. North Carolina and Florida have broken new ground earlier this year passing laws that prohibit state agencies from paying cyber extortion ransom demands. While these two (2) states have been leading the way in ransomware laws, at least twelve (12) other states have addressed ransomware in some way, adding criminal penalties for those involved and requiring public entities to report ransomware incidents. Download the full report to discover what experts think of government ransomware payment bans and the potential effects they could have on ransomware incidents.

Threat Actor of the Month: Worok

ESET researchers discovered a new cluster of the long-active TA428 identified as “Worok.” TA428 is a Chinese advanced persistence threat (APT) group first identified by Proofpoint researchers in July 2019 during “Operation LagTime IT”, a malicious attack campaign targeted against government IT agencies in East Asia. Download the full report for an in-depth look at Worok’s tactics and objectives, and insights from our analysts about the anticipated future impact of this group.

New List of Trending Indicators of Compromise (IOCs)

IOCs can be utilized by organizations to detect security incidents more quickly as indicators may not have otherwise been flagged as suspicious or malicious. Explore our latest list of technical indicators of compromise within the past sixty (60) days that are associated with monitored threat groups and/or campaigns of interest.

Article By Ted Theisen and Jason Hale of Ankura

For more data privacy and cybersecurity legal news, click here to visit the National Law Review.

Copyright © 2022 Ankura Consulting Group, LLC. All rights reserved.

AUVSI and DOD’s Defense Innovation Unit Announce Collaboration for Cyber Standards for Drones

The Association for Uncrewed Vehicle Systems International (AUVSI), the world’s leading trade association for drones and other autonomous vehicles, announced a collaboration with the Department of Defense’s (DOD) Defense Innovation Unit (DIU) to further commercial cyber methodologies to design a shared standard. AUVSI’s effort is meant to expand the number of vetted drones that meet congressional and federal agency drone security requirements.

This pilot program would extend relevant cyber-credentialing across the U.S. industrial base and assist the DOD and other government entities in streamlining and accelerating drone capabilities across the board. Overall, this collaboration will help make the drone industry more secure. The program will work with numerous cybersecurity firms to conduct technical cyber assessments before the DIU, DOD, and other government entities conduct additional vetting as necessary.

Currently, the Blue UAS (Unmanned Aircraft Systems) Cleared List has 14 drones on it and 13 more drones are scheduled to be added. The Blue UAS Cleared List is routinely updated and contains a list of DOD-approved drones for government users. These drones are section 848 FY20 NDAA compliant, validated as cyber-secure and safe to fly, and are available for government purchase and operation. However, even with these additions, the demand for additional cleared drones with new capabilities and technology has outpaced the DIU’s ability to scale the program. This collaboration seeks to close that gap and offer cybersecurity certification in close cooperation with the DIU. With off-the-shelf drones serving as critical tools to help conduct diverse government operations, partnership with AUVSI and cybersecurity experts will make it easier for government users to use commercial technology and achieve effective operations in a secure manner.

Article By Kathryn M. Rattigan of Robinson & Cole LLP

For more cybersecurity and data privacy news, click here to visit the National Law Review.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.

Former Uber Security Chief Found Guilty in Criminal Trial for Failure to Disclose Breach to FTC

On October 5, 2022, former Uber security chief Joe Sullivan was found guilty by a jury in U.S. federal court for his alleged failure to disclose a breach of Uber customer and driver data to the FTC in the midst of an ongoing FTC investigation into the company. Sullivan was charged with one count of obstructing an FTC investigation and one count of misprision, the act of concealing a felony from authorities.

The government alleged that in 2016, in the midst of an ongoing FTC investigation into Uber for a 2014 data breach, Sullivan learned of a new breach that affected the personal information of more than 57 million Uber customers and drivers. The hackers allegedly demanded a ransom of at least $100,000 from Uber. Instead of reporting the new breach to the FTC, Sullivan and his team allegedly paid the ransom and had the hackers sign a nondisclosure agreement. Sullivan also allegedly did not report the breach to Uber’s General Counsel.  Uber did not publicly disclose the incident or inform the FTC of the incident until 2017, when Uber’s new chief executive, Dara Khosrowshahi, joined the company.

This case is significant because it represents the first time a company executive has faced criminal prosecution related to the handling of a data breach.

For more Privacy Law news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.