Cyber Risk: Human Factors vs. Automation...

Operational Risk Management (ORM) is a growing multi-faceted mosaic comprised of people, processes, systems and external events. The risks to the enterprise are increasing at a dynamic speed and trajectory that requires the use of automated tools.

This is where risk to the enterprise may actually expand as executives and operational management rely on software to provide information assurance. The design and architecture of software needs a human-based fail-safe. It requires a human interface that allows and simultaneously requires human intervention. Has too much automation contributed to our increased levels of vulnerability?

Fortunately, the software designs have allowed for these opportunities and for a human-factor to ask "What if" questions. Those questions that may arise after an automated alert from the system tells us that something is outside the baseline parameters set for the system, the sensor or the alarm.

Now we go back to Operational Risk and the nature of thinking from a security and safety perspective. What is the continued reliance on automated systems doing to the human capital who have been charged with the over all "Standard of Care" for the enterprise?

We believe that they may have lost the ability to ask the right questions, at the right moment and with the correct contextual understanding.

What is the truth? Is it true? What evidence do we have that this is true? How do you know that the evidence is not spoiled or compromised? If we know the truth, then what do we do next? Is the software really telling us the truth?

The security and the safety of the enterprise is counting on you. And more importantly, the enterprise is asking you to question the software. The "rule-sets" that you have chosen as a result of the programmers and architects decisions can no longer be trusted.

Is our system learning? In what capacity is the system learning in context with the human interaction for judgement, intuition and ethical emotions? Are you with us? The next generation of "Cyber Security" Innovators are now at the edge of significant new breakthroughs and solutions.

"Active Defense" has been and is a controversial topic du jour, yet the next few years will be a new age of understanding, cultural bifurcations and significant global collaboration.

Our entire platform of digital trust is at stake and the conversation has finally made its way to the nation state policy levels.

Operational Risk Management (ORM) will remain a key factor in decision points for the enterprise, the consumer and the operators of critical infrastructure across the globe.

Lets work on keeping the human factor in the loop as automation continues to give us a false sense of security and safety...

New Vision: Security Operations Center and CIU...

Flashback over 8 years ago when there was a convergence of thinking about the topic of a "Defensible Standard of Care" going on in the industry.

The key Operational Risk Management news from the 2011 RSA Conference was coming in, yet there were inside sources who still needed to be interviewed. What did they think was the most brilliant presentation or idea(s) presented?

This particular release caught some eyes as it addressed much of the thinking on the latest evolution of the Security Operations Center (SOC).  How much of this is still relevant today:

New Vision for Security Operations: Six Core Elements

The vision includes six core elements and prescriptive guidance for how to incorporate these elements into existing security operations. These elements include:

• Risk planning: The new SOC will take a more information-centric approach to security risk planning and invest in understanding which organizational assets are highly valuable and essential to protect. With priorities based on GRC policies, security teams need to conduct risk assessments that focus on the “crown jewels” of the enterprise.
• Attack modeling: Understanding attack modeling in a complex environment requires determining which systems, people and processes have access to valuable information. Once the threat surface is modeled, organizations can then determine potential attack vectors and examine defense steps to isolate compromised access points efficiently and quickly. RSA® Laboratories has developed theoretical models based on known APT techniques and employed game theory principles to identify the most efficient means of severing an attack path and optimize defense costs.
• Virtualized environments: Virtualization will be a core capability of tomorrow's SOC – delivering a range of security benefits. For example, organizations can "sandbox" e-mail, attachments and URLs suspected of harboring malware. Anything suspicious can be launched in an isolated hypervisor and the virtual machine can be cut off from the rest of the system.
• Self- learning, predictive analysis: To remain relevant in tomorrow's IT environment, a SOC will need to truly integrate compliance monitoring and risk management. The system should continually monitor the environment to identify typical states which can then be applied to identify problematic patterns early. Statistic-based predictive modeling will be able to help correlate various alerts. Developing such a system will require real-time behavior analysis innovations, although some of these elements are available today.
• Automated, risk-based decision systems: A key differentiator of a more intelligent SOC will be its ability to assess risks instantly and vary responses accordingly. Similar to risk-based authentication, the SOC will employ predictive analytics to find high-risk events and then automatically initiate remediation activities. The prospect of dynamic typography is one of the most exciting areas of this type of systems automation for the cloud. To implement an APT, an attacker must understand network mapping and be able to model it. In response to this, organizations can remap their entire network infrastructure to disrupt an attacker’s reconnaissance efforts. This is akin to physically rearranging a city at frequent intervals – and the entire process can be automated so that links between systems stay intact and dependencies are handled without human intervention.
• Continual improvement through forensic analyses and community learning: Although forensic analysis can be resource-intensive, it is an imperative element of a SOC and key to mitigating the impact of subsequent attacks. Virtualized environments can provide snapshots of the IT environment at the time of the security event providing useful information if detection of the attack was delayed. Having a way to share information about attack patterns will be the future of the SOC. This concept should be embraced in order to exchange threat information within respective industries and better predict the path of the APT and thereby determine countermeasures.

The evolution of the SOC in your enterprise may start in some unconventional places. Who is it in your organization that is responsible for the loss of corporate assets?

Who in your company is the one who determines what items are counted as losses to the bottom line?

Who does the enterprise look to when the crisis hits and people are looking for answers in minutes, not hours, or days?

Who picks up the phone to answer the call from the local FBI Field Office?

These may not be the people you think of in the CIO's office or IT department. These people however need to be part of the combined Security Operations Center solution in the company.

The Advanced Persistent Threat (APT) now requires the intersection of prudent strategy from the business leadership, the accounting or finance leadership and the risk management leadership.

If the CIO is looked upon as the key executive running a "Utility" inside the enterprise, think again.

This blog has discussed the "Corporate Intelligence Unit" in years past :

Beyond the utilization of threat assessment or management teams, enterprises are going to the next level in creating a "Corporate Intelligence Unit" (CIU). The CIU is providing the "Strategic Insight" framework and assisting the organization in "Achieving a Defensible Standard of Care."

The framework elements that encompass policy, legal, privacy, governance, litigation, security, incidents and safety surround the CIU. It includes with effective processes and procedures that provides a push / pull of information flow. Application of the correct tools, software systems and controls adds to the overall milestone of what many corporate risk managers already understand.

The best way in most cases to defend against an insider attack and prevent an insider incident is to continuously help identify the source of the incident, the person(s) responsible and to correlate information on other peers that may have been impacted by the same incident or modus operandi of the subject. "Connecting The Dots" with others in the same company or with industry sector partners, increases the overall resilience factor and hardens the vulnerabilities that are all too often being exploited for months if not years.

In retrospect, you can be more effective investigating and collecting evidence in your company to gain a "DecisionAdvantage". To pursue civil or criminal recovery of losses from these insider incidents, you may not go to law enforcement, but it's likely they will come to you once they get a whistle blower report, catch the attacker and/or they have the evidence that you were a victim.

How your organization pulls together the right people to staff and operate your "CIU" is going to depend on your culture, funding and current state of the threat.

BALTIMORE—Sean Gallagher - 6/5/2019, 9:25 AM
It has been a month since the City of Baltimore's networks were brought to a standstill by ransomware. On Tuesday, Mayor Bernard "Jack" Young and his cabinet briefed press on the status of the cleanup, which the city's director of finance has estimated will cost Baltimore $10 million—not including $8 million lost because of deferred or lost revenue while the city was unable to process payments. The recovery remains in its early stages, with less than a third of city employees issued new log-in credentials thus far and many city business functions restricted to paper-based workarounds.

Here is another thought. A thorough review of the current funding, staffing and strategy of a SOC or CIU in the enterprise, may even become a priority at the next "Board of Directors" meeting.

CIU: Corporate Intelligence Unit...

Over six years later approaching 2017, Operational Risk Management (ORM) professionals are experiencing the "New Normal."   In a 2010 CSO Magazine sponsored eCrime Digital Watch Report and survey of 535 companies there are some observations on Operational Risk Management worth examination.

This CERT report the same year was focused on the "Insider Threat" and the area of concern is still on "Digital Incidents by Insiders."  Seven years later, these numbers have only increased:

• Past 12 months the number of incidents reported increased 16%
• The per incident monetary loss (mean) was $394,700.00

Yet these two items are just the trend these days as our global work place becomes more mobile and stratified using more partners, offshore suppliers and other 3rd parties to accomplish the daily tasks and workloads. What is even more alarming are the following stats from the survey:

• 72% of the incidents were handled internally without any legal action or law enforcement.
• 29% of these incidents could not identify a subject responsible for committing a crime.
• 35% of these incidents could not proceed due to a lack of evidence.

Interpreting these numbers prompts several questions worth discovering. First, why were 28% of the incidents handled with some form of legal action or law enforcement? One of two reasons that we can surmise. The incident was exposed to the public as a result of the magnitude or harm that was caused by the incident. The organization was prepared to capture evidence, properly investigate the incident and pursue a recovery of the loss either in a civil or criminal process of law.

Second, why were 35% of the incidents unable to proceed due to a lack of evidence? The organization may be lazy or apathetic to these loss events or may have an insurance policy that covers these types of losses and was able to successfully recover the almost $400,000.00 incident average through this process.

Or, the organization is not capable of leveraging a sound "Digital Governance" and "Legal Policy" framework in order to properly investigate incidents that come from their own internal work place ecosystem of employees, partners, suppliers and other 3rd parties.

In order to gain "Strategic Insight" into these vital Operational Risk matters within the enterprise the organization must establish an intelligence-led investigation. Once the proper evidence collection and analysis is completed on the incident then members of a corporate crisis team or threat management council can make more informed decisions. That brings us to the final question. Why in 71% of the incidents was a subject not identified as being responsible?

The answer to this question has much to do with the previous one where there was a lack of evidence. However, our hunch is that many of these insider incidents were the result of an employee error, mistake or unintended consequences. The lost or stolen laptop from the unlocked car may fill some of this category.

Why would it be in the best legal interest of an organization to have a robust evidence collection capability supported by a sound "Policy Governance and "Legal Framework"?

• Duty of Care
• Duty to Warn
• Duty to Act
• Duty to Supervise

This blog has touched upon these four vital areas of vulnerability to adversarial litigation in the past because we know that whether you ask these questions internally or the state's Attorney General and the FBI ask these questions the answers must be discovered:

1. What did you know?
2. When did you know it?
3. What are you doing about it?

While the number of loss events due to errors or omissions and many times due to a lack of proper training and awareness programs is growing, so are the incidents as a result of the insider threat from:

• Fraud
• Sabotage
• Espionage
• Trade Secrets Theft

The modern day enterprise with preemptive, robust and collaborative law enforcement mechanisms in place has accepted the reality of the threat perspectives in their workplace ecosystem:

• Some individuals who make threats ultimately pose threats.
• Many individuals who make threats do not pose threats.
• Some individuals who pose threats never make threats.

Make sure you read those a few times. As a result of the reality that the workplace ecosystem is an evolving, dynamic and rapidly changing set of human elements, behaviors and motivations the justification for creating more "Strategic Insight" is a necessary mitigation strategy. There is a growing trend today for these enlightened organizations to create and effectively provide the resources for a corporate threat management team. This team is comprised of a spectrum of members that span the digital to physical domains within the company. This includes the Chief Risk Officer, General Counsel, Internal Audit, Public Relations, Human Resources, Corporate Security and Information Technology.

In another less formal survey by Dr. Larry Barton of 630 employers the question was raised on the employee communication channel that caused the company to act on a risk. 38% were through a digital messaging medium such as e-mail, text messages and blogs or social networking sites. The ability to monitor over one third of employee communication channels remains a daunting task to this day.

Beyond the utilization of threat assessment or management teams, enterprises are going to the next level in creating a "Corporate Intelligence Unit" (CIU). The CIU is providing the "Strategic Insight" framework and assisting the organization in "Achieving a Defensible Standard of Care."

The framework elements that encompass policy, legal, privacy, governance, litigation, security, incidents and safety surround the CIU with effective processes and procedures that provides a push / pull of information flow. Application of the correct tools, software systems and controls adds to the overall milestone of what many corporate risk managers already understand.

The best way in most cases to defend against an insider attack and prevent an insider incident is to continuously help identify the source of the incident, the person(s) responsible and to correlate information on other peers that may have been impacted by the same incident or modus operandi of the subject. "Connecting The Dots" with others in the same company or with industry sector partners increases the overall resilience factor and hardens the vulnerabilities that are all too often being exploited for months if not years.

In retrospect, you can be more effective investigating and collecting evidence in your company to gain a "DecisionAdvantage". To pursue civil or criminal recovery of losses from these insider incidents, you may not go to law enforcement, but it's likely they will come to you once they get a whistle blower report, catch the attacker and/or they have the evidence that you were a victim.

What side of the incident spectrum you are on, either proactive or reactive could mean the difference on whether the attackers continue their schemes and attacks while continuously targeting those with the greatest vulnerabilities. In some cases, those attackers include the plaintiff bar and your evidence of "Duty of Care" is the bulls eye.

Black Swan: Strategy Execution for the "Outlier"...

The Black Swan is a surprise event and the idea that a catastrophe can strike without warning. What does your organization plan for? The low consequence high frequency incident or the high consequence low frequency incident? The ratio can tell you what your "Resilience" factor is to Operational Risk loss events. Key Performance Indicators (KPI's) can give you some forward looking view into the risk portfolio yet what about the resilience to the Black Swan?

A black swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was. The astonishing success of Google was a black swan; so was 9/11. For Nassim Nicholas Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives.

Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don’t know. We are, therefore, unable to truly estimate opportunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the “impossible.”

Your organization is no doubt spending time on the Operational Risk Management (ORM) events that consistently are in the high frequency "In Your Face" category. In a highly regulated industry sector such as finance, health care or energy the oversight mechanisms require a continuous analysis of risk based upon the criticality of these sectors to the overall resilience of the economy. Yet it is the "Outlier" incident that comes at the most unexpected time that is the real threat and the incident catalyst, that could be your "Black Swan". You never know when it is going to be coming, so you must plan, prepare and imagine that someday it will happen.

Enabling Global Operational Risk Management (ORM) requires thinking beyond models and outside the box analysis of the "Resilience Factor," should an outlier impact the organization, the state or the country. The resources, personnel and systems focused on these areas of risk are small today. But not for long. Just ask those people who had been working 24/7 since the "Fukushima" or "Lehman Brothers" crisis. Or more importantly, the plaintiff lawyers preparing their briefs for the inevitable aftermath of litigation over, who knew what, when.

One prediction into the future could be that litigation will follow all "Black Swan" incidents. If you are in a highly vulnerable industry sector because it's part of the critical infrastructure of the global grid, then you already know you are in the middle of the target zone. What is amazing to many in the after-action reporting is how much we continue to under estimate the magnitude of a lack of planning and resources devoted to these low frequency high consequence events.  Enter Target Corporation:

Is Target to Blame for Its Data Breach? Let the Lawsuits Begin 

By Joshua Brustein December 26, 2013 

The lawsuits started almost immediately after Target’s (TGT) admission that hackers had stolen information related to the credit-card accounts of 40 million shoppers. At least 11 customers are now pursuing class-action suits against the retailer, claiming it was negligent in protecting their data. 

Losing control of sensitive customer data is a fact of life for American companies. They’re collecting more of it, and they are often outgunned by hackers, who are highly motivated to get at it. It’s not even clear how much legal responsibility they have to protect it. “There is limited judicial guidance on what constitutes negligence in the cybersecurity area,” says Craig Newman, a partner at Richard Kibbe & Orbe who follows legal issues related to security.

ID Analytics: Risk of the Unknown...

Operational Risk Management (ORM) has been at the top of the news in the past few weeks.  Digital media and the metadata of "Big Data" is the topic of choice.  It is a revealing look behind the curtain of what is possible these days, with the tools and capabilities that exist for exploitation and analysis.  Is too much privacy an operational risk to your personal and professional well being?

In the spirit of full disclosure, if you are reading this now, we tracked how you found this blog and perhaps what search terms you used to be referred here.  Some of you, revealed their company identity.  So why do we do this?  The main reason is that we want to make sure that we understand what is on your mind these days, when it comes to the global Operational Risk Management (ORM) universe.  Here are a few examples in the past day or so that caught our eye:

• management of operational risk - Latvia
• operational risk management - Nigeria, Illinois, South Dakota, The Vanguard Group
• common board of directors mistakes - Turkey
• lessons learning from fail in operational risk - Malaysia
• predictive intelligence - North America
• rogue trader operational risk - United Kingdom
• fund industry operation management discussion topic - Luxembourg
• operational risk management game - Unknown
• reputation risk management process - Unknown
• operational risks in bank call center - Qatar
• coso definition of operational risk - Unknown
• black swan incident that occurs once in a lifetime - Unknown
• ubs operational risk case analysis - Unknown
• business resiliency definition - JP Morgan Chase
• "operational risk" outliers - France
• a risk effect on a daily operation - DeVry
• examples of smart objectives risk - United Kingdom
• black swan incident\ - South Carolina
• black swan incident - Computer Sciences Corporation
• what is a black swan incident - South Carolina
• duty of care board of directors - United Kingdom

Collection of data is one thing.  Relevance and sense-making is another.  Can you imagine some of the search terms that are tracked just by Google or Bing?

What about the companies that know us the best?  Those marketing and personal data sites that keep track of where you live, how much you spend on your credit cards and where, or even the name of your pets.  How often do you give them your phone number or e-mail address at the point-of-sale (POS) to get a discount at the local retailer, gas station or pharmacy?  Believe us when we say that there are hundreds of organizations that know more about you in the private sector than some government across the world.

The trail of "digital finger prints" you leave behind everyday are vast.  A snap shot of your face at the local ATM or a snap shot of your desktop when you login to the online banking web site.  In either case, these examples are just a few of the ways that your habits, locations, preferences and lifestyle are profiled each and every day.  Where did all of this begin?  Fraud Management.  Not Homeland Security.

As a citizen traveling across the country or a consumer, you willingly give up these digital bread crumbs of your journey through life.  Your goal now, is to make sure that you are not mistaken for someone else.  After all, you or your organization have developed a profile and a reputation that is being recorded and therefore, it could be a prudent strategy to make sure that you are not mixed up with another person or organization with the same name or brand identity.

How can you do this?  Operational Risk Management (ORM) is about monitoring yourself and your organization to make sure you understand your competition (good or bad) for the same personal or business identity space.  Do you have Biometric and DNA samples of all of your key executives?  If you don't, then the question is why not?  You may have considered this in light of some of the places that your executives are traveling.  Cities and countries across the globe with the risk of kidnapping, improvised explosive devices (IED) and other risks to their lives.

As we look into the crystal ball of our digital futures, we see the scenes from movies past that have already captured our own human imagination.  A world where everyone is known and you may even choose to "opt-in" to be tracked.  After all, you are unique.  You make your own choices in life.  The risks that you face may very well be greater, for those who choose a life to remain private, anonymous and even unknown.

RSA Conference: CSO Insomnia Over Insider Threat...

Next week in the U.S. there will be thousands of risk management and security professionals invading the RSA Conference in San Francisco. The myriad of topics, education and case studies are worth examining to see what is on the mind of these thought leaders and practitioners who are also designated speakers. You can even look to the popular press to see what the vibe is on what this years biggest worries will be:

1. Mobile Devices
2. Advanced Persistent Threat
3. Big Data Privacy
4. Hacktavists

However, if you spend some time to drill down on each of these topic areas and really look at the actual presentations of the presenters, some are based upon real cases and research and others are not. The one presentation that caught our eye and continues to be what some savvy CSOs would say keeps them sleeping with one eye open each night, is their insomnia over the "Insider Threat." That person or organized group of unidentified subjects that are there to recruit vulnerable people into initiating or perpetuating crimes against the organization.

Dawn Cappelli runs the Insider Threat Center at the Software Engineering Institute and highlights these areas of concern from their research and analysis of real cases:

The CERT Top 10 List for Winning the Battle Against Insider Threats

Dawn M. Cappelli Director, CERT Insider Threat Center CERT Program, Software Engineering Institute Carnegie Mellon University

• 10. Learn from past incidents
• 9. Focus on protecting the crown jewels
• 8. Use your current technologies differently
• 7. Mitigate threats from trusted business partners
• 6. Recognize concerning behaviors as a potential indicator
• 5. Educate employees regarding potential recruitment
• 4. Pay close attention at resignation / termination!
• 3. Address employee privacy issues with General Counsel
• 2. Work together across the organization
• 1. Create an insider threat program NOW!

Number Three on the list is certainly on the top third and for good reason. Employees and the policy decisions on what data is owned by the company and owned by the employee is of grave concern these days in the United States. Now after so many years it looks as if this issue is going to get more heated and see the light of day from a congressional point of view. Yet the CSO must feel that the ability for the safeguards necessary to keep the organization safe and secure are not in place yet. Catherine Dunn of ALMs Corporate Counsel sheds more light on this:

According to a new White House report on consumer data privacy protection, trust is worth a lot of money to U.S. businesses—users have to know their data will be protected if the economic engine of digital innovation is to keep roaring. Ergo, the U.S. needs a privacy framework that’s “flexible” enough to accommodate industry innovation, and comprehensive enough that consumers will feel safe—and keep clicking.

But trust between consumers and companies in the U.S. is only part of the equation. There’s another important element, too: how compatible U.S. safeguards are with those of the rest of the world, and particularly Europe. This new proposal arrives a month ahead of a conference on data protection between E.U. and U.S. officials in Washington, D.C., leading to questions about whether Europe and the U.S. are any closer to getting on the same page when it comes to data privacy.

The answer not only depends on who you ask, but also what section of the White House’s report you’re looking at. The white paper lists seven principles and stresses that these principles should form the basis of voluntary codes of conduct adopted by industry. Once adopted, the Federal Trade Commission would have the power to enforce compliance to those codes. The paper also includes a call for Congress to pass legislation based on these principles, and devotes a section to “international interoperability”—which considers how data can be sent across international borders without violating laws on either side of the transaction.

This is where we need to make sure we understand the difference between what privacy issues have to do with a company employee and the privacy associated with just a U.S. consumer, who is not an employee but perhaps a member, client or customer of the organization.

If we go back to the big worries at RSA and combine this with the employees who are operating at the "Speed of Business" in your enterprise, you begin to see the difference. Actually, if you think about it some more, every employee of the organization has a duty to care for the information inside the organization, in order to better protect the assets of the enterprise but simultaneously the assets of the consumer.

The consumer assets are their "Personal Identifiable Information" (PII) and this represents in many cases what the organized criminals are after in the first place. This is where the outside recruitment threat starts to have its nexus. However, even the highly trained and state sponsored agents who are inside the enterprise to steal corporate or national security secrets are far and few these days. That may be surprising to some, but if you look at how the exfiltration of data is taking place it's almost all automated. No human intervention is required.

If that is the case, then what is Dawn Cappelli and the Insider Threat Team at CERT so concerned about from their research insights:

Criminal enterprises mask their fraud by involving multiple insiders who often work in different areas of the organization and who know how to bypass critical processes and remain undetected. In several cases, management is involved in the fraud. Those insiders affiliated with organized crime are either selling information to these groups for further exploitation or are directly employed by them. Ties to organized crime appear in only 24 cases in the CERT insider threat database and are characterized by multiple insiders and/or outsiders committing long-term fraud.

All of the insiders involved with organized crime attacked the organization for financial gain. The insiders usually were employed in lower level positions in the organization, were motivated by financial gain, and were recruited by outsiders to commit their crimes. The average damages in these cases exceed $3M, with some cases resulting in $50M in losses.

Now you know why your CSO is headed to the RSA Conference this week and why they are sleeping with one eye open these days.

Digital Paradox: Privacy v. Security...

The media communications and advertising industries are buzzing over the new U.S. Federal Trade Commission report and framework entitled: Protecting Consumer Privacy in an Era of Rapid Change. The Operational Risk Management implications to your enterprise could be significant if you currently do not understand how your marketing department provides disclosures or manages consumer collected data. If you think that you are protected because you outsource to a 3rd party, then think again. The power to the consumer is increasing and the data privacy laws are playing a quick game of catch-up on regulation:

Scope: The framework applies to all commercial entities that collect or use consumer data that can be reasonably linked to a specific consumer, computer, or other device.

Companies should promote consumer privacy throughout their organizations and at every stage of the development of their products and services.

With 500 Million plus people who are self-profiling themselves on Facebook these days, you might wonder if they even truly think about their privacy. See Controlling How You Share, Facebook

A variety of business models involve practices that fall outside the proposed “commonly accepted practices” category. These include, for example, a retailer collecting purchase information directly from a consumer and then selling it to a data broker or other third party that may be unknown to the consumer. Other examples include online behavioral advertising, in which an online publisher allows third parties to collect data about consumers’ use of the website, as well as social media services, where the service or platform provider allows third party applications to collect data about a consumer’s use of the service. In addition, as noted above, using deep packet inspection to create marketing profiles of consumers would not be a commonly accepted practice.

The new framework and panel discussions has focused on the Operational Risks associated with collecting, storing and sharing data on consumers. The regulations that change going forward to assist in consumer protections and disclosures may not have much impact on whether the consumers "Personal Identifiable Information" (PII) is disclosed to nefarious transnational criminal syndicates without their permission.

If you are a U.S. government military employee you may have received notice lately from yourPenFed Credit Union that you too may have your PII in the hands of people that will use it for monetary gain. The continuous loss of data by institutions has now been verified as just another criminal business enterprise by organized crime and in many cases sanctioned by nation states. The data protection and data theft game is the modern equivalent of bank robbery yet it is moving at the speed of electrons across fiber optic networks world wide.

And now that this accelerating consumer issue of cybersecurity has made it's way to The White House, one can only wonder what may change. The cost to business is now $204.00 per record according to well respected research by Ponemon Institute. The MOU with DHS, Department of Commerce and the Financial Services Sector Coordinating Council (FSSCC) remains the window dressing on another unfunded effort to deter the cyber plague before us.

There is no shortage of people reporting about the breaches (this blog included), the hacks and the data leakage via employees using Peer 2 Peer file sharing software within the walls of their Fortune 500 company or government agency. Some people who are disclosing the information are doing it with alternative motives and rarely try to provide a potential solution to the problem.

So what can a PenFed or major U.S. Government agency do, to stem the tide of the growing digital tsunami of data thefts and transnational economic crime or acts of espionage? There is not one solution nor is there ever going to be a day when it all comes to an end. Which brings us to the mind set shift that is necessary to make a difference.

The Security vs. Privacy legal topic is somewhere in the mix of the solution. The education of our digital natives at a young age is another. Many kids know how to type with their thumbs better than they can write a legible letter to grand mother. And finally, the implementation of new technologies that will enable law enforcement to their jobs more effectively.

Now back to the mind set shift. Cecilia Kang of the Washington Post reports:

As the United States looks at ways to better protect Internet users’ privacy, Europe is going through its own update of online privacy rules. The 27-nation European Union is taking a more aggressive approach to privacy by setting higher bars for how data can be collected on Web users.

European laws prohibit Web sites from tracking users without their permission. The E.U. is also weighing legislation that would let users delete all their information from a Web site, such as Facebook, and transfer data from one wireless provider to another without leaving profiles behind.

Viviane Reding, the vice president of the E.U. Justice Commission and head of privacy regulation, visited The Post on Wednesday to talk about her approach to protecting users in the age of Internet over-sharing. On Thursday, she is scheduled to meet with U.S. Attorney General Eric Holder to discuss ways the E.U. and U.S. can cooperate on safeguarding consumers' personal information, including data on travel and finances. The talks may also touch on the recent disclosure of classified documents by Wikileaks.

ID Risk Management: Dubai Investigation Links to Workplace Violence...

What is your name? Where do you live? What is your phone number? Where were you born? What is your social security number? What is your passport number? Where was it issued? What evidence do you have that this is all true? Your identity is at stake and Operational Risk Management is on the line.

These questions and more are asked of us on a regular basis to establish our true identity. The entity asking these questions is considering you to be granted access, access to what? It could be to establish an account at a banking institution, get a drivers license or become a member of a trusted community of people. Or it could be a country deciding whether to grant you a visa to visit or work for a period of time.

SOCA is in the midst of interviewing people who had their identity stolen. This investigation is about a form of ID Theft that goes beyond the international scandal associated with the Dubai homicide incident. The Washington Post reports:

Agents from Britain's Serious Organized Crime Agency are in Israel investigating the use of forged British passports by people who Dubai officials allege were part of an assassination squad run by Israel's Mossad spy agency. The 27 members of the group used European or Australian passports -- some forged -- to enter Dubai, officials say. In several cases, the names and other information on the passports matched those of Israeli citizens who hold dual nationality and who claim that their identities were "borrowed" by those involved in the operation.

Two SOCA agents will interview the 10 British-Israelis who were affected and issue them new passports, a British Embassy spokesman said. According to Israeli news reports, Australian investigators are planning a similar visit. The European Union last week condemned the use of forged travel documents in the killing of Hamas commander Mahmoud al-Mabhouh, without mentioning Israel specifically.

Whether you are the UAE, admitting people into your country or a Global 500 company allowing someone access to your corporate facilities, digital assets or place of business; you must have ways to effectively validate who people say they are, and who they really are. Even if you asked all of the questions above in the early stages of the company hiring process, would you really have the entire picture? This changes over time and events in a persons life. Identity Management and the use of both "known to many" and "known to few" attributes about who you are and who you know, is a reality in today's blur of global commerce.

When a country has a breach of security admitting people, who are not who they purport to be, is it any different in the context of a Defense Industrial Base company headquartered in Chicago, IL or an Investment Banking firm in Geneva, Suisse? What are different are the motives and the outcomes from the fraudulent acts.

What are the current arguments and the leading reasons why our policies, methods and tools associated with Identity Management are in a state of chaos in the United States? The FTC's latest report gives you a better idea of the breadth of the privacy problem trying to be solved:

The Federal Trade Commission released a report listing top complaints consumers filed with the agency in 2009. It shows that while identity theft remains the top complaint category, identity theft complaints declined 5 percentage points from 2008.

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and other complaints. In addition, the 50 metropolitan areas reporting the highest incidence of identity theft are noted.

The top complaint was Identity Theft, which accounted for 21% of all complaints for the year.

A complete list of complaints can be found at: http://www.ftc.gov/sentinel/reports/sentinel-annual-reports/sentinel-cy2009.pdf.

What is interesting is that the same people who are coming to work every day with their TWIC or CAC cards are also victims of ID Theft as consumers. The same individuals who walk into the SCIF or the bank vault may very well be people who have active investigations going on regarding their identity being used to perpetrate crimes or other fraudulent motivations. So what are some of the most important issues on the Identity Management horizon?

In all of the breaches, all of the incidents there is a root cause for the failure in the people, process, systems or external factor that opened up the vulnerability for the attacker to exploit and obtain their objective. It's called Continuous Monitoring. This issue is found in all places in Appendix G of the US NIST sp800-37 that illustrates the reason why continuous monitoring is critical especially in information systems:

Private Sector companies have a duty to invest in resources, policy refinement and new methods or tools to keep continuous monitoring as vigilant as possible:

"Conducting a thorough point-in-time assessment of the deployed security controls is a necessary but not sufficient condition to demonstrate security due diligence. A well designed and well-managed continuous monitoring program can effectively transform an otherwise static security control assessment and risk determination process into a dynamic process that provides essential, near real-time security status-related information to organizational officials in order to take appropriate risk mitigation actions and make cost-effective, risk-based decisions regarding the operation"

Whether you are the United Arab Emirates or the University of Alabama-Huntsville the Identity Management problem is much the same. David Swink at Psychology Today has this to say on the other growing virus named "Workplace Violence" that is invading corporate America:

In the aftermath of school and workplace attacks, it is often discovered that there were warning signs that the perpetrator was moving down a path toward violence. In some circumstances, people reported the troubling behavior and the information was not forwarded to the people who could prevent an attack. Sometimes the troubling behavior didn't reach a threshold, in the judgment of the person receiving the report, that something needed to be done. There is often confusion about what information can or cannot be shared under privacy laws like FERPA or HIPPA.

Threatening behavior may come to the attention of multiple departments within an organization that generally don't share information with each other. Without clear policies, procedures, and training, large organizations may find it challenging to channel widely dispersed information about potential threats to a central reporting entity.

With a single report of threatening behavior, the situation may not look that bad, but when the other "dots" are connected, a clear image emerges that this person is someone that needs to be assessed and managed in order to prevent violence.

Much of what we know about our employees is found in their HR files, background reports (if ever done) and what co-workers say about their behaviors in the workplace. Corporate Security, Risk Management, General Counsel, Information Technology, Public Relations and even the EAP (Employee Assistance Program) executive managers shall create, maintain and continuously operate a Corporate Intelligence Unit and Threat Assessment Team. Without it, the consequences of not knowing a persons true identity or current state of mind could cost you more than the loss of life. It could cost you your global reputation.

Health Care: Operational Risk on Steroids...

Health Care Sector Operational Risk Management is on the front burner once again. Recent changes to federal law governing health information suggest expanded regulation, increased enforcement, and significantly enhanced penalties could be on the horizon for businesses not previously subject to HIPAA. The Health Insurance Portability and Accountability Act (HIPAA), which was amended by the American Recovery and Reinvestment Act of 2009 (ARRA) in February, regulates the use of, access to, and dissemination of healthcare information. The increased scrutiny of our own health related personal identifiable information is only the beginning of a national platform for health care. Personal health records will be highly sought after by criminal organizations to help them with extensive online extortion schemes so they can monetize the stolen information.

Does your business or organization have a website that allows people to maintain their medical information online? Do you provide applications for personal health records – say, a device that allows people to upload readings from a blood pressure cuff or pedometer into their personal health record?

The American Recovery and Reinvestment Act of 2009 includes provisions to strengthen privacy and security protections for this new sector of web-based businesses. The law directed the Federal Trade Commission to issue a rule requiring companies to contact customers in the event of a security breach. After receiving comments from the public, the FTC issued the Health Breach Notification Rule.

Transnational economic crime syndicates that have been fueled by the failures in systems and people at institutions in the financial services industry may now be getting a better source to perpetuate their wave of extortion . Just think about the phishing e-mail that goes out to the hundreds of thousands of people who have a particular type of medical condition or are taking a specific drug to help a particular medical diagnosis. Revealing the names, occupations and other relevant information on the subset of male politicians running for office that are currently taking the Pfizer drug for ED or the subset of women talk show hosts that are taking the drug Xanax may have some individuals willing to pay up the 500 or 1000 dollars being demanded from the criminals that stole the Protected Health Information (PHI).

As the United States speeds along towards the consensus on a national health care system the risk of health care data breaches will be rising. Where a doctor had a small staff helping with the back office to bill insurers and where the health care information systems vendors were in high demand you will now have the nexus of targets that cyberspace criminals will be focused on. Like the consumer retailers who rely on third party credit card processing companies to take care of the millions of annual point-of-sale transactions, so too will the consumers of health care services at the retail level. Doctors offices, pharmacies and out patient or triage centers.

The HHS and FTC interim rules were mandated by more stringent privacy and security requirements outlined in the American Recovery and Reinvestment Act of 2009 (ARRA) for Health Insurance Portability and Accountability Act of 1996 (HIPAA) covered entities and business associates and certain non-HIPAA-covered entities.

"This new federal law ensures that covered entities and business associates are accountable to the Department and to individuals for proper safeguarding of the private information entrusted to their care," said Robinsue Frohboese, acting director of the HHS Office for Civil Rights.

HHS and FTC said their rules were intentionally written to be harmonious with one another. The entities covered by either rule have up to 60 days to notify individuals whose information was accessed without authorization. If the breach involves PHI belonging to 500 or more people, entities must alert the media and either HHS or FTC, depending on which rule they are subject to. If the breach involves less than 500 people, the entities must keep a log of the incident to be submitted to either HHS or FTC at the end of the year.

Unlike the motive to utilize the information from a compromised credit card to monetize through additional fraudulent purchases, the new health care criminal syndicates will find their own niches. Whether there is a continued attempt at utilizing the PHI for spear phishing attempts at specific individuals online or a more broad use of PHI to steal ones identity to obtain health services at hospitals or physicians offices, the impact could now turn more deadly:

Medical identity theft is potentially lethal to its victims. When the identity thief obtains medical treatment, medical records are created in the name of the victim. When treatment occurs in the same locality as the victim, the treatment of the thief can be appended to local medical records of the victim. With the strong movement towards electronic medical records, all those under the victim’s name and social security number can be collated in seconds. Once the thief’s medical records are collated with the victim’s, there is a risk of mistreatment of the victim, which can potentially lead to death.

Lind Weaver, a retired school teacher, was harassed by a bill collector for a medical bill for the amputation of her foot. The problem was that Weaver still had two feet. Foot amputations are associated with diabetes, a disease that Weaver did not have. Months later Weaver suffered a heart attack, when she awoke in the hospital a nurse asked her which type of drugs she was taking for her diabetes. Had Weaver underwent heart surgery as a diabetic, mistreatment could have been life threatening.

Protected Health Information will continue to be a challenge for those institutions that are trying to achieve a "Defensible Standard of Care" in the decade ahead. The wave of risks associated with online banking and the technologies driven by consumers thirst for financial information will seem non-consequential compared to what we are about to experience in the online health care industry.

Red Flags Rule: Reputations at Stake...

The "Red Flags Rule" is on the back burner in the United States until November 1, 2009. The Federal Trade Commission has delayed the compliance mandate again. Are you ready? Do you have to comply?

The Federal Trade Commission has postponed a deadline for many of the nation's businesses -- including banks, public utilities and health-care providers -- to comply with a controversial identity-theft prevention program.

The program, called the "Red Flags Rule," was to take effect Aug. 1 but will now be delayed until Nov. 1. The program is aimed at preventing the loss of billions of dollars as the result of the theft of consumer and taxpayer personal information. Under the regulation, companies and institutions would be required to establish a way to identify potential threats at the businesses, find ways of detecting such threats and install measures to prevent them. Employees would also have to be educated about the programs.

A survey commissioned in 2006 by the FTC revealed that more than nine million Americans have their identities stolen each year at a total estimated loss of $15.6 billion.

The nation is under a barrage of attacks from adversaries that lie in the shadows such as "Conficker" and other botnets or malware and business still delays the compliance measures asked of them. One only has to look deeply into the latest 2009 report from CISCO to better understand the state of risk from "Transnational Economic Crime":

Report Highlights

• Criminals are exploiting traditional vulnerabilities because they believe security experts and individual users are paying little attention to these types of threats.
• Compromising legitimate websites for the purpose of propagating malware remains a highly effective technique for criminals.
• Web 2.0 applications, prized for their ease of use and flexibility, have become lures for criminals.
• Criminals are now targeting online banking customers using well-designed, localized text message scams that leave virtually no trail in their wake.
• The Obama administration has made strengthening U.S. cybersecurity a high priority, and plans to meet threats by using technological innovations and partnering with the private sector. Other countries are similarly increasing efforts to enhance cybersecurity and prevent cybercrime.
• Compared to 2008, the number of vulnerabilities and discrete threats has not risen as quickly. According to research by Cisco, this is a clear sign that the security community is succeeding in making it more difficult for attacks to take root and grow.

Operational Risks are vast and the technology landscape is not getting more narrow, it is expanding. Cloud Computing is now the latest attempt to get cost savings and to make the IT puzzle less of an asset management nightmare. If you think that you understand it and where it's heading, think again. One only has to visit "Black Hat" and the briefings to get a better sense of what the true risks are going to be if not already. This one caught our eye and for good reason:

Nitesh Dhanjani

Psychotronica: Exposure, Control, and Deceit

This talk will expose how voluntary and public information from new communication paradigms such as social networking applications can enable you to remotely capture private information about targeted individuals.

Topics of discussion will include:

Hacking the Psyche: Remote behavior analysis that can be used to construct personality profiles to predict current and future psychological states of targeted individuals, including discussions on how emotional and subconscious states can be discovered even before the target is consciously aware.

Techniques on how individuals may be remotely influenced by messaging tactics, and how criminal groups and governments may use this capability, including a case study of Twitter and the recent terror attacks in Bombay.

Reconnaissance and pillage of private information, including critical data that the victim may not be aware of revealing, and that which may be impossible to protect by definition.

The goal of this presentation is to raise consciousness on how the new paradigms of social communication bring with it real risks as well as marketing and economic advantages.

The risks to "Social Networking" Twitter-based consumers and the extended digital enterprise are vast. The CISO's and internal audit teams have been having their own internal battle for years and will soon realize that once and for all, they are on the same side of the Cyberspace war. The risks to the organization may come in the form of a major business disruption, denial of service (DOS) or even worse, a significant loss of consumer Personal Identifiable Information (PII). Even if you are considered PCI compliant just as "Network Solutions" was, the loss of reputation can be significant:

Hackers have broken into Web servers owned by domain registrar and hosting provider Network Solutions, planting rogue code that resulted in the compromise of more than 573,000 debit and credit card accounts over the past three months, Security Fix has learned.

Herndon, Va. based Network Solutions discovered in early June that attackers had hacked into Web servers the company uses to provide e-commerce services - a package that includes everything from Web hosting to payment processing -- to at least 4,343 customers, mostly mom-and-pop online stores. The malicious code left behind by the attackers allowed them to intercept personal and financial information for customers who purchased from those stores, Network Solutions spokeswoman Susan Wade said.

The "Red Flag" may have turned to a "White Flag" as you surrender to the lawyers and the federal oversight.

A Defensible Standard of Care: Six Million Reasons...

There are 6,000,000 reasons why Operational Risk at TD Ameritrade is in the Red Zone this week as a result of what seems to be a case of malicious code discovered last week, or over a year ago.

This author received a recent letter from TD Ameritrade regarding their so called pseudo "breach". And we quote:

"While investigating client reports about the industry-wide issue of investment-related SPAM, we recently discovered and eliminated unauthorized code from our systems. This code allowed certain information stored in one of our databases, including email addresses, to be retrieved by an external source."

What is absolutely amazing is the request to visit www.amtd.com for more information and a list of Frequently Asked Questions (FAQs) and an additional message from me, (The CEO Joe Moglia). The link to this message requires you to run Windows Media Player for what must be a sincere apology. However, the PR department must not know how many malicious code exploits are associated with .wmv files. Nor, how many people still do not have broadband connections as a consumer.

But that is not even the most fascinating aspect of this whole incident. The story gets even more disturbing if it is indeed true:

Scott Kamber of Kamber & Associates, a New York law firm that sued Sony BMG last year for its use of a rootkit, told InformationWeek on Monday that the lawsuit initially claimed that Ameritrade knew about the data breach last November. However, he says he now has information that the company knew about the ongoing breach a full year ago.

Kamber, who filed the suit this past May, had recently filed a preliminary injunction asking the court to compel Ameritrade to disclose the data breach and the compromised information to current and prospective customers. The company was given a two-week adjournment and made the public announcement during that recess.

"I am glad customers finally know of the compromise of their personal information," said Kamber. "I'm not pleased it took the company so long to do that."

Hillyer said she could not comment on ongoing litigation but said, "As soon as we discovered it, we stopped it. And as soon as we had gathered enough information, we notified our clients."

Ameritrade notified the FBI and the U.S. Securities and Exchange Commission last week, according to the spokeswoman.

It's apparent that the nexus of Information Security, Digital Forensics, eDiscovery, Legal Risk and Reputation Management have imploded in Bellevue, NE yet this will not be the last place we hear about this kind of incident. If a Rootkit is on a server there, you can be sure that there are others at a another broker or investment management firm near you.

Being vigilant about protecting privacy and doing the right thing with customers in the event of a breach has significant legal ramifications, that is for certain. What is less known at this point are the processes and corporate behavior that could be even more of a source of liability for TD Ameritrade. Who what how and why is now under investigation and will play out in a court room again soon.

The degree that any firm in the industry is "Litigation Ready" or has adequately prepared for this particular nexus between the elements of Information Security and the Law will determine the amount of Operational Risk they are potentially exposed to in incidents like this one. How can any firm prepare for an event similar to this?

1. Conduct a Litigation Readiness Audit of the firm.

2. Develop a strategic plan for achieving a "Defensible Standard of Care."

3. Train the stakeholders on Crisis, Command and Control.

4. Implement an early warning data analytics system to preempt potential threats.

Number four on this list pertains to something that is also in the authors letter. "As part of our effort to protect privacy, we have hired ID Analytics, which specializes in identity risk, to investigate and monitor potential identity theft." Let's just hope these guys didn't load up a CD at their shop handed over to them by TD Ameritrade with 6,000,000 records of personal identifiable information on it.

FACTA: The Writing is on the Wall...

Now that the financial community is wiping their brow with a sigh of relief on this latest Supreme Court ruling, what can a General Counsel or Chief Risk Officer expect? Will the adversarial train of plaintiff suits slow down and come to a halt. Not likely.

The U.S. Supreme Court's ruling that blocks investors from suing Wall Street investment banks under antitrust laws could save Wall Street firms a bundle by limiting investors to smaller recoveries.

In a case dating back to the dot-com bubble, the high court ruled Monday that antitrust suits would pose a "substantial risk" to the securities market. Damages in antitrust cases are tripled, in contrast to penalties under the securities laws.

The ruling struck down a lower court decision that would have allowed investors to go after Wall Street firms that they say engaged in anticompetitive practices by conspiring to drive up prices on about 900 newly issued stocks in the late 1990s.

Because the well-documented implosion of names like Enron Corp. swallowed any serious money that investors might hope to recover from that and other flame-outs, some investors have turned to the banks and other Wall Street regulars such as accounting firms that did work for such companies.

Wall Street institutions in the case before the Supreme Court were Credit Suisse Securities (USA) LLC, formerly Credit Suisse First Boston LLC; Bear, Stearns & Co. Inc.; Citigroup Global Markets Inc.; Comerica Inc.; Deutsche Bank Securities Inc.; Fidelity Distributors Corp.; Fidelity Brokerage Services LLC; Fidelity Investments Institutional Services Co. Inc.; Goldman, Sachs & Co.; The Goldman Sachs Group Inc.; Janus Capital Management LLC; Lehman Brothers Inc.; Merrill Lynch, Pierce, Fenner & Smith Inc.; Morgan Stanley & Co. Inc.; Robertson Stephens Inc.; Van Wagoner Capital Management Inc.; and Van Wagoner Funds, Inc.

These institutions may not have "Anti-Trust" anxiety from the Supreme Court any longer yet there are plenty of other Operational Risks on their minds. Namely International Fraud.

In an era of data warehousing, metadata management, business process management and the looming BASEL II Accord there are plenty of conversations about what to do about fraud and other regulatory compliance. Multi-factor authentication for online banking systems is not a trivial matter when it comes to Enterprise Risk Management. Is the customer service organization ready for the upgrade? Is the consumer going to be confused on what questions they are being asked to get access to their latest online credit card statement? What is my customer "churn" factor? In other words, how many of my customers are jumping ship as a result of the operational risks that have turned their loyalty into consumer driven class action fraud litigation?

An International Banking Fusion Center is on the horizon and it's not too far from the same justification that addresses Know Your Customer (KYC) and the financing of terrorism.

According to one study respondent, "Organizations are secretive of fraud losses and that inhibits our ability to work together."

"The sharing of intelligence is key to being able to take advantage of the predictability of fraud," First Data's Barwell continues. "Banks are sitting on valuable data that, if analyzed innovatively, could provide fraud intelligence worth sharing. One major bank has shown that if their internal client databases across business lines and geographies are analyzed using sophisticated link analysis tools, spurious networks of accounts can be uncovered and, when fully investigated, could uncover organized networks of first-party fraud accounts."

Barwell adds that several U.S. banks have expressed interest in taking the "quantum leap" to true data sharing.

The International Language of Fraud

"In the last eight to 10 years, fraud has really gone international," says Steve Baker, director of the Midwest region of the Federal Trade Commission (FTC). The FTC maintains a Consumer Sentinel database that includes more than 3.5 million consumer fraud complaints and is accessible to more than 3,000 law enforcement agencies internationally. In 2006, 22 percent of the reported fraud was cross border.

So What? What does information sharing have in common with:

International fraud, Identity Theft and the risk of litigation within the banking or credit card industry. Now the bankers want to sue the retailers and recover losses for the lack of privacy and security controls at the retailers. Since December 2006, plaintiffs’ class action firms in California and elsewhere have filed over 200 nationwide class actions in federal court against a broad spectrum of retailers and restaurants alleging violations of the Fair and Accurate Credit Transactions Act ("FACTA"). In addition to California federal courts, FACTA cases have been filed recently in federal courts in Pennsylvania, Illinois, New Jersey, Nevada, Maryland and Kansas.