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"A new report from Javelin Strategy and Research suggests that many credit and debit card holders fail to understand the importance of a notice saying that a credit card or debit card has been breached and do not protect themselves from fraud. The company's research found that people notified of a breach of their secure data were four times as likely as the public at large of actually experiencing financial or other fraud within a year of the notification. Further, those who experienced a breach in their secure data and then an incident of fraud very rarely link the fraud to the breach. "Among consumers who received a data breach notification in the past 12 months, 19% suffered fraud, yet only 2% attributed their fraud to a data breach, the firm reported. "It seems as if consumers are not connecting the dots on data breach notifications to fraud events. They are aware, in the abstract, some personal records of theirs have been compromised, but when they become a victim of fraud they do not make the connection to the breach notification.""

"The United States House of Representatives took a major step this week toward enacting a national data breach notification law. H.R. 2221, the Data Accountability and Trust Act (DATA), cleared the House with a voice vote. In its current form, DATA requires businesses to notify customers and the Federal Trade Commission (FTC) if sensitive information has been exposed to a security breach. If the U.S. Senate can reconcile its own approach to data breach notification legislation with DATA, a new federal standard will emerge. If signed into law by President Barack Obama, a federal data breach ¬law would pre-empt the jumbled mass of dozens of state laws. "You'd be better served by federal legislation if the federal legislation has teeth and doesn't pre-empt the state's law," said California state senator Joe Simitian, speaking to executive editor Scot Petersen in September. "If there was a meaningful standard at the national level, I think many states would be happy to accept it." Aside from the data breach notification required by the HITECH Act, DATA would put into place the first national law of its kind. H.R. 2221 was sponsored by House Subcommittee Chair Rep. Bobby L. Rush of Illinois. The bill specifically states that: "Any person engaged in interstate commerce that owns or possesses data in electronic form containing personal information shall, following the discovery of a breach of security of the system maintained by such person that contains such data -- 1. notify each individual who is a citizen or resident of the United States whose personal information was acquired by an unauthorized person as a result of such a breach of security; and 2. notify the Federal Trade Commission."

Point by Marcus Ranum THERE'S AN OLD SAYING, "Sometimes things have to get a lot worse before they can get better." If that's true, then breach notification laws offer the chance of eventual improvements in security, years hence. For now? They're a huge distraction that has more to do with butt-covering and paperwork than improving systems security. Somehow, the security world has managed to ignore the effect voluntary (?) notification and notification laws have had in other fields-namely, none.We regularly get bank disclosure statements, stock plan announcements, HIPAA disclosures, etc.-and they all go immediately in the wastebasket, unread.When I got my personal information breach notification from the Department of Veterans Affairs, it went in the trash too. Counterpoint by Bruce Schneier THERE ARE THREE REASONS for breach notification laws. One, it's common politeness that when you lose something of someone else's, you tell him. The prevailing corporate attitude before the law-"They won't notice, and if they do notice they won't know it's us, so we are better off keeping quiet about the whole thing"-is just wrong. Two, it provides statistics to security researchers as to how pervasive the problem really is. And three, it forces companies to improve their security. That last point needs a bit of explanation. The problem with companies protecting your data is that it isn't in their financial best interest to do so. That is, the companies are responsible for protecting your data, but bear none of the costs if your data is compromised. You suffer the harm, but you have no control-or even knowledge- of the company's security practices. The idea behind such laws, and how they were sold to legislators, is that they would increase the cost-both in bad publicity and the actual notification-of security breaches, motivating companies to spend more to prevent them. In economic terms, the law reduces the externalities and forces companies to deal with the true costs of

Congress has been dithering over the adoption of a federal data security breach notice law for the last several years without coming to an agreement on a national standard for reporting breaches in the security of personal and financial data, but on February 17, data breach notice provisions applicable to health information were signed into law as part of the HITECH Act provisions of the massive economic stimulus legislation, H.R. 1 (111th Cong., 1st Sess. Feb. 17, 2009). Beginning no later than September 16 of this year, "covered entities" under the Health Insurance Portability and Accountability Act (HIPAA) will be required to give notice of breaches in the security of protected health information, and "business associates" of HIPAA-covered entities will be required to report such breaches to the covered entities. §13402(a) & (b). Currently, California and Arkansas are the only states that require that notification be given in the case of a breach in the security of medical or health insurance information. The HIPAA Privacy Rule currently does not contain a requirement that individuals be notified in the event of such as breach. However, some covered entities interpret the existing HIPAA Privacy Rule requirement that covered entities mitigate harmful effects of uses or disclosures of health information in violation of either the Privacy Rule or the entity's policies and procedures as suggesting that such notice be given, and many covered entities currently provide such notification.

Identity theft concerns are focused on the security and necessity of the collection process. Collecting personal information just because you can is unsafe. Organizations can reduce privacy risks by not collecting unnecessary personal info. Once the data gets into the data life cycle pipeline, the cost of managing and destroying it escalates. The Federal Trade Commission estimates that as many as 9 million people have their identities stolen every year. According to the Privacy Rights Clearinghouse, more than 200 million instances of data breaches have occurred since the beginning of 2005, and they show no signs of letting up. In the first quarter of 2008 alone, more than 85 million incidents were reported. The causes of data breaches run the gamut: Hackers get unencrypted, transmitted data and data at rest; laptops are stolen or lost; storage Relevant Products/Services devices are lost by third-party shipping companies; flash drives or PDAs are left lying around; Social Security numbers are accidentally printed on envelopes; or data is found on discarded computers. This article examines the organizational risks to CPAs and their clients or corporate employers of improperly managed data throughout the data life cycle. It also discusses best data management practices and proper procedures for responding to a data breach. Data breaches, whatever the cause, are costly. According to a study by the Ponemon Institute, the average cost of a data breach in 2007 was $6.3 million. The average cost to an organization per record compromised is about $197, which is typically spent on phone calls for customer notification, providing free credit monitoring, discounts on membership fees, or discounts on merchandise to make up for the security Relevant Products/Services breach. Some organizations also experience an increase in customer turnover. The organization typically spends additional money in data protection Relevant Products/Services enhancements. Companies sanctioned by

The Heartland data breach is an opportunity for the US government to standardise data breach notification laws. Bill Conner, chairman, president and CEO of Entrust, claimed that following the revelation that more than 100 million credit cards could have been compromised, the government needs to continue to move quickly to standardise data breach notification laws and call for technology, such as encryption and stronger authentication, that truly protects consumer information. Conner said: "Cybercrime continues to grow and is increasingly affecting more and more of this country's citizens. To slow the upward trend of cybercrime in this country, all organisations - enterprise, consumer and even governments - need to carefully review current security approaches and identify key gaps within their infrastructures." He further called for Congress to pass a data breach notification law that better protects consumer identities through stronger data security standards with strong encryption. "This is an opportunity to do something about a security issue that impacts all Americans", said Conner.

A group of U.S. companies, led by technology giants Microsoft, Hewlett-Packard and eBay, is set to outline recommendations for new federal data-privacy legislation that could make life easier for consumers and lead to a standard federal breach-notification law. The recommendations, which were developed by a group of industry players called the Consumer Privacy Legislative Forum, are set to be released at an upcoming privacy conference six weeks from now, according to Peter Cullen, Microsoft's chief privacy officer. The companies have been working for the past three years to encourage the adoption of federal consumer data-privacy laws and to answer the question of what federal legislation should look like, Cullen said in an interview. Other forum members include Google, Oracle, Procter & Gamble and Eli Lilly. One idea is that laws should make it easier for consumers to understand what they're getting into when they share their personal data with Web sites, Cullen said. "The whole focus on consent really puts an unfair burden on the consumer," he said. "My mom doesn't know what an IP address is." The recommendations will cover rules around data use and the ability of consumers to correct inaccurate data. And they will cover data breach notification, which is now covered by a patchwork of state laws. Simplifying breach-notification laws by creating a single federal standard is important, Cullen said Wednesday while speaking at a discussion of privacy policy in San Francisco. "It's not that there is no privacy law. There's actually too much privacy law," he said. "If you think about data-breach notification laws just as an example, there are 38 state laws, many of them very different." "We need to think about much more of a framework approach." Congress has passed some laws covering consumer data privacy, such as the 1996 Health Insurance Portability and Accountability Act (HIPAA), but existing laws do not comprehensively cover consumer privacy in general.

"Consumers who have received a data breach notification letter are four times more likely than others to be the victim of identity theft, according to a survey released this week by Javelin Strategy and Research. Approximately 11 percent of U.S. consumers have received a data breach notification letter in the past 12 months with a third of the breaches involving Social Security numbers and 15 percent involving ATM PINs, according to Javelin's third annual survey of nearly 5,000 U.S. consumers, released Tuesday. Of those who have received a data breach notification letter in the past year, 19.5 percent said they were the victims of fraud associated with identity theft, compared to 4.3 percent who have not received a notification but were victimized. "It wasn't just a statistical anomaly," Robert Vamosi, a Javelin risk fraud and security analyst and the author of the study, told SCMagazineUS.com on Wednesday. "In 2007 and 2006, we saw a similar pattern, so this isn't a blip. This is something that has been going on for a while.""

The California State Senate approved today SB 20, legislation by State Senator Joe Simitian (D-Palo Alto), which aims to strengthen existing privacy protection laws for California consumers. The new law builds on legislation authored by Simitian in 2002 that requires a business or government agency that incurs a data breach to provide notice to the individual(s) whose information was compromised. More than 40 states have adopted similar legislation since that time, largely based on the California measure. "No one likes to get the news that information about them has been stolen," said Simitian, "but when it happens, people are entitled to get a notice they can understand, and that helps them decide what to do next." "The premise is simple," added Simitian. "What you don´t know can hurt you. Ignorance is not bliss. And you can´t protect yourself if you don´t know you´re at risk." Simitian said his latest proposal (SB 20), "is designed to make a good law even better." California´s current security breach notification law (AB 700, Simitian -2002) requires notice to consumers when their information has been compromised, but does not require data holders to provide any standard set of information about the nature of the breach. SB 20 will enhance consumer knowledge about security breaches by requiring that the notification contain specified information, including the type of personal information breached and the date of the breach.

Senate Judiciary Chairman Patrick Leahy (D-Vt.) has reintroduced a data breach bill that would set tougher rules for government agencies and private sector firms regarding consumers' personal information. This will be the third time around the block for the Personal Data Privacy and Security Act, which has cleared the Judiciary Committee, but never come to a vote on the Senate floor. The bill would preempt the more than 40 state laws laying out requirements for notifying consumers in the event of a data breach, a long-deferred legislative goal that has the general support of the IT industry. But Leahy's bill is about more than just data breaches. Among other things, it would set baseline security information standards for government agencies, something that the Obama administration has begun to work on with the early steps of an overhaul of the government's cybersecurity apparatus. "This is a comprehensive bill that not only deals with the need to provide Americans with notice when they have been victims of a data breach, but that also deals with the underlying problem of lax security and lack of accountability to help prevent data breaches from occurring in the first place," Leahy said in a statement. "Passing this comprehensive data privacy legislation is one of my highest legislative priorities as Chairman of the Judiciary Committee."

Chase Bank has sent out data breach notification letters to an undisclosed number of customers after a computer tape with customers' personal information was reported missing from a third-party vendor's storage facility. Tom Kelly, spokesperson for New York-based Chase, the commercial/consumer banking arm of financial giant JPMorgan Chase, says the vendor -- which he would not name -- confirmed it received and maintained the tape, and that its offsite facility had been searched thoroughly after the tape disappeared. Kelly would not say if the data on the tape was encrypted, but says its data can be read only with special equipment and software. "We have no evidence to indicate any of the information has been viewed or used inappropriately," Kelly says. A local ABC News station in Louisville, KY first reported the missing data tape and the notification letters being sent in August. Kelly says the notification letters are being sent out in batches, but would not say how long the tape has been missing, nor what type of customers' information (credit or banking) was on the tape. The electronic files, according to the notification letter, may have included names, addresses and Social Security numbers, but did not include any banking or financial information. Affected customers are being offered a free one-year subscription to the bank's identity protection program, Kelly says. For more information on 2009 data breaches involving financial institutions, see this interactive timeline

CSOs in healthcare organizations know that the Health Information Technology for Economic and Clinical Health (HITECH) Act, signed into law in February 2009, includes new privacy requirements that experts have called "the biggest change to the health care privacy and security environment since the original HIPAA privacy rule." These include: New requirements that widen the definition of what Personal Health Information (PHI) information must be protected and extend accountability from healthcare providers to their business associates; Lower thresholds, shorter timelines, and stronger methods for data breach victim notification; Effective immediately, increased and sometimes mandatory penalties with fines ranging from $25,000 to as much as $1.5 million; More aggressive enforcement including authority to pursue criminal cases against HIPAA-covered entities or their business associates. No doubt, the HITECH Act raises the stakes for a data breach. But regulations aside, data breaches can hurt your organization's credibility and can carry huge medical and financial risks to the people whose data is lost. We've managed hundreds of data breaches and helped thousands of identity theft victims. Through this we've learned firsthand that compliance doesn't necessarily equal low risk for data breach. For the well being of the business and patients, healthcare organizations and their partners need to take the most comprehensive approach to securing PHI.

Don't expect a letter from Monster or Heartland Payment Systems letting you know they've lost your data. The breaches at Monster.com and Heartland Payment Systems are raising questions about the efficacy of data-loss disclosure laws enacted in at least 45 states. Back in 2007 we wrote about how the financial services industry lobbied hard to block proposed federal rules requiring organizations to notify individuals whose data they lose, and to permit consumers to freeze their credit histories. States such as California and Massachusetts have passed laws giving consumers these rights. But the Monster and Heartland capers have brought weaknesses in the legislation to center stage. I asked Lisa Sotto, head of privacy and information management at law firm Hunton & Williams, about this: Q: Heartland and Monster told me they intend to comply with all state laws. That said, they have not announced plans to notify individual victims. Is that OK? A: In the state breach notification laws, it is permissible to delay notification if a law enforcement agency determines that notification would impede a criminal investigation. If such a delay is requested by law enforcement, notification must be made after the law enforcement agency determines that notice would not compromise the investigation. I do not know if these companies received a delay request from a law enforcement agency. Q: Monster says it chose not to email individual victims because the bad guys could then replicate that message and use it as a phishing template. That makes sense. But is that allowed by state consumer protection laws? A: There are now 45-plus state laws and they are not uniform. Typically, notice is provided via first class mail, but there are provisions in the state laws allowing for electronic notice as well. Q: The only official notices from Heartland and Monster so far has been one-page disclosures posted on a web site. Does that cover them? A: There are provisions in the state laws al

Heartland Payment Systems, the sixth-largest payments processor in the U.S., announced Monday that its processing systems were breached in 2008, exposing an undetermined number of consumers to potential fraud. Meanwhile, Forcht Bank, one of the 10 largest banks in Kentucky, told its customers it would begin reissuing 8,500 debit cards after being informed by its own card processor of a possible breach. In the case of Heartland, while the company continues to assess the damages inflicted by the attack, Robert Baldwin, the company's president and CFO, says law enforcement has already noted that the attack against his company is part of a wider cyber fraud operation. "The indication that it is tied to wider cyber fraud operation comes directly from conversations with the Department of Justice and the U.S. Secret Service," Baldwin says. The company says it believes the breach has been contained. Heartland, headquartered in Princeton, NJ, handles approximately 100 million transactions per month, although the number of unique cardholders is much lower. "It is still a question as to the percentage of the data flow they were able to get," Baldwin says, adding he would not speculate on the number of cards potentially exposed. Specifics surrounding when the breach occurred are still being analyzed. But Baldwin says two forensic auditing teams have been working on the breach analysis and investigation since late 2008, after Heartland received the notification from Visa and MasterCard. The investigation began immediately after the credit card companies told Heartland they saw suspicious activity surrounding processed card transactions. Described by Baldwin as "quite a sophisticated attack," he says it has been challenging to discover exactly how it happened.

There are three reasons for breach notification laws. One, it's common politeness that when you lose something of someone else's, you tell him. The prevailing corporate attitude before the law - "They won't notice, and if they do notice they won't know it's us, so we are better off keeping quiet about the whole thing" - is just wrong. Two, it provides statistics to security researchers as to how pervasive the problem really is. And three, it forces companies to improve their security. That last point needs a bit of explanation. The problem with companies protecting your data is that it isn't in their financial best interest to do so. That is, the companies are responsible for protecting your data, but bear none of the costs if your data is compromised. You suffer the harm, but you have no control - or even knowledge - of the company's security practices. The idea behind such laws, and how they were sold to legislators, is that they would increase the cost - both in bad publicity and the actual notification - of security breaches, motivating companies to spend more to prevent them. In economic terms, the law reduces the externalities and forces companies to deal with the true costs of these data breaches.

The federal GLBA, HIPAA, FACTA and its Red Flags and Disposal Rules, state data Breach Notification Laws and many other federal and state laws and industry regulations like PCI-DSS are intended to protect the privacy and security of consumer's personally identifiable and financial information entrusted to businesses and other organizations. Many suchidentity theft, id theft, government security, government privacy regulations aim to prevent identity theft and privacy violations. While some businesses have been negligent in securing information, other businesses have been victimized by black hat hackers or "crackers" who operate ahead of the cybersecurity technology curve. Cybersecurity is an ongoing challenge for businesses and for government as discussed in the President's Cyberspace Policy Review. In the four-year period ending in 2008, 23% of all data breaches reported were attributed to hackers. For those data breaches involving more than one million profiles, hacking was identified as the cause in 66% of the breaches according to a recent research report on data breach risk factors.

Data Privacy Trends: Randy Sabett, Information Security Attorney March 26, 2009 Activity at the State Level Points Toward a Federal Data Breach Notification Law Data privacy legislation -- the trend started in California and is being discussed heatedly in Massachusetts today. Data breach notification and privacy laws have now been enacted in 40 separate states, and government observers think we're close to seeing federal legislation proposed. In an exclusive interview, Randy Sabett, a noted privacy/information security attorney, discusses: Trends in state data privacy legislation; What these laws mean to businesses; The Obama Administration's approach to data privacy; Trends to keep an eye on throughout 2009. Randy V. Sabett, CISSP, is a partner in the Washington, D.C. office of Sonnenschein Nath & Rosenthal LLP, where he is a member of the Internet, Communications & Data Protection Practice. He counsels clients on information security, privacy, IT licensing, and patents, dealing with such issues as Public Key Infrastructure (PKI), digital and electronic signatures, federated identity, HIPAA, Gramm-Leach-Bliley, Sarbanes-Oxley, state and federal information security and privacy laws, identity theft and security breaches. He served as a Commissioner for the Commission on Cyber Security for the 44th Presidency.

A rule requiring healthcare providers, health plans, and other entities covered by the Health Insurance Portability and Accountability Act (HIPAA) to notify individuals of a breach of their unsecured protected health information will become effective September 23, 2009. The "breach notification" regulations implement provisions of the Health Information Technology for Economic and Clinical Health (HITECH) Act, which was part of the American Recovery and Reinvestment Act of 2009 (ARRA). The new "breach notification" regulations apply to HIPAA-covered entities and their business associates. HIPAA covered-entities include health plans, healthcare clearinghouses, and healthcare providers. A business associate is a person or entity (such as a healthcare benefits broker) who, on behalf of the covered entity, performs a function involving the use or disclosure of individually identifiable health information.

On Friday, Brunswick, Maine-based heating and hardware firm Downeast Energy & Building Supply sent a letter notifying at least 850 customers that the company had suffered a data breach. Downeast sent the notice after discovering that hackers had broken in and stolen more than $200,000 from the company's online bank account. The attack on Downeast Energy bears all the hallmarks of online thieves who have stolen millions from dozens of other businesses, schools and counties over the past several months. In every case, the thieves appeared more interested in quick cash than in pilfering their victims' customer databases. Nevertheless, the intrusions highlight an additional cost for victims of this type of crime: complying with state data breach notification laws. "This is something new to us, fortunately, but we have responsibilities under Maine statute to report these things to our customers and employees," said the company's president, John Peters, in an interview with Security Fix. At least 44 other states and the District of Columbia have similar data breach notification laws. Sometime prior to September, attackers planted keystroke logging malware on Downeast's computer systems, and stole the credentials the company uses to manage its bank accounts online. Then, on or around Sept. 2, the hackers used that access to initiate a series of sub-$10,000 money transfers out of the company's account to at least 20 individuals around the United States who had no prior business with Downeast Energy. This type of crime is impossible without the cooperation of so-called "money mules," willing or unwitting individuals typically hired via Internet job search Web sites to act as "local agents" or "financial agents" responsible for moving money on behalf of a generic-sounding international corporation, legal experts say.The mules are then instructed to withdraw the cash and wire it via Western Union or Moneygram to fraud gangs overseas, typically in Eastern Europe.

"In a sign that state attorneys general may be flexing the HIPAA enforcement muscle granted by the HITECH Act provisions in the Recovery Act, the Connecticut and Arizona attorneys general are investigating health plans that recently experienced data breaches that they failed to disclose for several months. Typically, state attorneys general prosecute only violations of state laws, but they now have authority to investigate and levy fines for violations of HIPAA and the HITECH Act, which requires mandatory notifications within two months of knowledge of a breach. Connecticut Attorney General Richard Blumenthal (D) has emerged as possibly the first AG to take on a HIPAA investigation, and Arizona's AG may also be pursuing a similar course. The larger of the two breaches that have come to the AGs' attention was experienced by Health Net, Inc., which lost a portable external hard drive containing seven years of data for 446,000 Connecticut residents. The lost data came from 1.5 million individuals in total, who also hailed from New Jersey and New York. Health Net reported the loss to the Connecticut AG on Nov. 19, and on the same day Blumenthal issued a scathing statement demanding answers and promising action. He specifically said he was investigating whether Health Net may have violated "federal laws," as well as his state's own data protection laws."