PII: Achieving a Defensible Standard of Care...

A data security breach of "Personal Identifiable Information" (PII) will impact your organization in the future. This incident is no different than other Operational Risk loss events to your global enterprise this year, such as occupational fraud or the settlement of a lawsuit.

Correct?

This time however, the difference is that now your own employees or your customers are the victim. Their PII has been lost or stolen and your organization has been the safeguarding entity of that valuable data until now. Your response is vital and the way you legally and ethically behave is a significant risk factor in itself.

Your brand reputation in the marketplace is on the line and the potential churn in lost customers or employees is at stake. Like many post 9/11 companies, your crisis response protocol is already in place for incidents that require your senior executives and the establishment of an immediate Incident Response Team (IRT).

So why is lost or stolen PII such an important executive issue for any organization?

In privacy, PII is less restrictive than in Information security and one definition can be found in the EU directive 95/46/EC:^[1]

"Article 2a: 'personal data' shall mean any information relating to an identified or identifiable natural person ('data subject'); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity;"

Although the concept of PII is ancient, it has become much more important as information technology and the AI-powered Internet have made it easier to collect PII, leading to a profitable market in collecting and reselling PII.

PII can also be exploited by criminals to stalk or steal the identity of a person, or to plan a person's murder or robbery, among other crimes. As a response to these threats, many web site privacy policies specifically address the collection of PII, and lawmakers have enacted for decades a series of legislation to limit the distribution and accessibility of PII.

As your General Counsel and Chief Privacy Officer begin to assess the magnitude and breadth of your recent PII exposure, so too does the plaintiff lawyers. Now the clock starts ticking and each tick gets louder and louder, as different litigation strategies are discussed. In Board Rooms and judges court chambers across the United States, the Federal Rules of Civil Procedure (FRCP) and the admissibility of "Electronically Stored Information" (ESI) is being discussed as a legitimate component of evidence and it's relevance in the case.

What if you could now "Rewind" this scenario and find yourself in a "legal safe zone" to adequately prepare, prevent and even preempt a "Data Security Breach" in your organization. This "legal safe zone" is available today and is as close as your corporate executive conference room, with several "Subject Matter Experts" working side-by-side. It's a professional service solution from a data breach services leader.

The "Achieving a Defensible Standard of Care" Readiness workshop in your organization begins with a two day facilitated process for discovery and convergence with your fellow company executives.

You will be engaged in a proactive, preventive and preemptive tactical plan in preparation for the day of your next PII-involved Data Security Breach. Upon completion, this operational plan establishes the baseline framework for a complete team-based drill.

This outcome will then test the readiness of your key stakeholders internally and external to the company. More importantly, it provides the strategic insight on what vulnerabilities still exist in your particular organizations approach to remediation and legal compliance.

Each year, despite security efforts, millions of personal records are compromised as a result of corporate and public-sector data breaches. Breach response costs - mandated notification, PR, call handling, credit monitoring and legal fees - can add up, yet traditional approaches don't fully mitigate the risk to your business or your customers.

A data security breach of "Personal Identifiable Information" (PII) will impact your organization in the future. The next one will be different…

Virtual Truth: False Information Risk...

How does "False Information" impact the risk to your organization? 

Decisions based upon faulty or inaccurate information is the root of many of the systemic failures of catastrophic history. The Titanic, Challenger Shuttle and Three Mile Island nuclear incident can all be attributed to the integrity of vital information.

Fast forward to the financial crisis and the past decades of consumer credit expansion strategies. What data have you been collecting from US consumers or clients about their personal identifiable information attributes?

The Information Age has drawn us into a more dangerous business operating environment as these digital assets have become another commodity to be sold in an international market place, to the highest bidder. Are you ready when the federal "Suits" or the local LEO's (Law Enforcement Officer) knock on your door in pursuit of the truth:

The Fair Credit Reporting Act (FCRA) spells out rights for victims of identity theft, as well as responsibilities for businesses. Identity theft victims are entitled to ask businesses for a copy of transaction records — such as applications for credit — relating to the theft of their identity. Indeed, victims can authorize law enforcement officers to get the records or ask that the business send a copy of the records directly to a law enforcement officer. The businesses covered by the law must provide copies of these records, free of charge, within 30 days of receiving the request for them in writing. This means that the law enforcement officials who ask for these records in writing may get them from your business without a subpoena, as long as they have the victim’s authorization.

The financial integrity of your future as a business and as a consumer is at stake. Christopher Burns brings this to light in a dramatic fashion in his book; Deadly Decisions:

"First, it is often extremely difficult to validate, corroborate, or verify the information we are dealing with, except by comparing it to the other information we are dealing with. And often the whole system is contaminated by misunderstanding, bad data and false assumptions that are hard to spot. The truth test rarely works. And second, the real issue of truth is not whether you or I should believe this or that, it is what we believe together. The truth that matters is group truth, and where we get into trouble is when a whole organization--a company, a community, a nation--starts to act on information that has been gathered from many sources and processed by many people but has come to contain significant elements that are false.”

Trusted Information is at the core of current global trading, business transactions and the fabric of our own personal identities. False information and knowledge is what creates operational risk factors that can change a whole company or the integrity of a whole nation.

Systems that comprise vast databases of "so called" trusted information are at our fingertips being utilized to make coherent and effective decisions. Yet what may be the more catastrophic Operational Risk beyond the simple stealing of information is the potential opportunity for the destruction of vital information.

The vulnerability of our institutions and the critical infrastructure of the United States economy is ever more at risk of a systemic loss. While our stolen data will continue to be sold to the highest bidder on a global platform for trading, the 4GW "Non-State" actors will change their modus operandi. This is a given.

Trusted Information systems that have certified integrity and the oversight controls to ensure the highest level of virtual truth is the "Holy Grail.”

The degree to which these same systems include false knowledge is our most complex problem for business and government in the next decade…

Unthinkable: Adapting in New World Disorder...

Will 2018 bring more data breaches, lost laptops and insider threats than 2017?  This is why CSO's, CPO's and corporate General Counsels have their teams working overtime.

When the enemy is increasing their attacks, utilizing new strategies and leveraging the existing base of compromised organizational intellectual and data assets, the future horizon becomes ever more clear. 

The statistics don't lie.  1579 documented Data Breaches occurred in 2017. Up 44.7% according to reports by the Identity Theft Resource Center (ITRC) compared to the previous year.  It is the new normal.

The Insider Threat Program (InTP) however, remains a key focus for Operational Risk Management (ORM) professionals because human behaviors are exaggerated during periods of stress, fear and uncertainty. This means that people who may have never considered doing something to jeopardize their reputations, may now be up against a wall.

When there is no obvious exit and no way out, people will do extraordinary things to get ahead, beat the odds and hedge their own risk portfolio of life.

In Joshua Cooper Ramo's book "The Age of the Unthinkable", "Why the New World Disorder Constantly Surprises Us and What We Can Do About It" the author discusses the concept of Deep Security. His analogy of how to think about "Deep Security" is the biological immune system:

"A reactive instinct for identifying dangers, adapting to deal with them, and then moving to control and contain the risk they present."

The key word in Ramo's writing is "Adapt".  Being Adaptive.  However, prior to this there are two other very vital words that we feel are even more imperative. Instinct. Identifying. In other words, Proactive Intuition.

Ask any savvy investigator on how she solved the case and you may hear just that, "I had a hunch."

Talk with a Chief Privacy Officer in any Global 500 company.  You might get them to admit they have a sense that their organization will be the target of an "Insider data breach" incident in the coming year or two.

Do you remember signing off on reading and your acceptance of the employee handbook?  When did your organization last make changes to the Corporate Employee policies?  We would start with the updates to the following sections:

• MEDIA CONTACT
• SOCIAL MEDIA POLICY
• REMOTE ACCESS POLICY
• E-MAIL, VOICE MAIL AND COMPUTER NETWORK SYSTEM PRIVACY
• (YOUR ORGANIZATION) RIGHT TO ACCESS INFORMATION
• SYSTEMS USE RESTRICTED TO COMPANY BUSINESS
• FORBIDDEN CONTENT
• PASSWORD SECURITY AND INTEGRITY
• INTERNET ACCEPTABLE USE POLICY
• POLICY ON USE OF SOFTWARE
• COMPANY PROPERTY
• PROTECTION OF TRADE SECRETS/NON-DISCLOSURE OF COMPANY INFORMATION 

Due to the increasing complexity of IT systems, cloud computing, data networks and the hundreds or thousands of laptops and mobile devices circling the globe with company executives and employees is enough to predict that a major breach will occur.

Being adaptive and having proactive intuition in the modern enterprise does not come natural. You have to work at it and it requires a substantial investment in time and resources to make it work effectively.  Proactive Intuition.

Once you realize that all of the controls, technology and physical security are not going to keep you out of harms way, you are well on your way to reaching the clairvoyance of "The Age of the Unthinkable."

Cluetrain: Manifesto Revisited...

When was the last time you revisited the 95 theses of the Cluetrain Manifesto? There are some nuggets here that remain timeless, even though they were written over 16 years ago. Here are some of the classics:

• Markets are conversations.
• Markets consist of human beings, not demographic sectors.
• People in networked markets have figured out that they get far better information and support from one another than from vendors. So much for corporate rhetoric about adding value to commoditized products.
• There are no secrets. The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone.
• Networked markets can change suppliers overnight. Networked knowledge workers can change employers over lunch.
• Your own "downsizing initiatives" taught us to ask the question: "Loyalty? What's that?" Smart markets will find suppliers who speak their own language.
• Companies make a religion of security, but this is largely a red herring. Most are protecting less against competitors than against their own market and workforce.
• To traditional corporations, networked conversations may appear confused, may sound confusing. But we are organizing faster than they are. We have better tools, more new ideas, no rules to slow us down.
• We are waking up and linking to each other. We are watching. But we are not waiting.

In a hyperlinked, social networked, iPhone rich society the authors and founders of the Cluetrain Manifesto must have had a crystal ball. The "end of business as usual" has been accelerating and the exponential explosion of zero's and one's has produced a global economy.

Just look at the saturation of IP connections across the planet Earth and you will see where the capital is flowing and the societal impact is obvious.

"A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter—and getting smarter faster than most companies."

So what? So what does all of this have to do with Operational Risk Management?

It has to do with the pervasive vulnerability that an organization perpetuates, without the correct attitude and policies about managing risks. Theft of trade secrets, corporate espionage, competitive intelligence and loss of intellectual capital as the head hunters feast on your key employees to name a few.

Global enterprises with deep hierarchy in the organizational chart, continue to wonder how their best people have left and who leaked the information on the next big idea.

How would you ever put enough policies, tools, systems, training or behavior modification in place to stop the flow of new hyperlinks through your own corporate IntraNet or the public bulletin boards and social networking web sites? The fact is that you can't.

Here’s one example of how things work in a hyperlinked organization:

You’re a sales rep in the Southwest who has a customer with a product problem. You know that the Southwest tech-support person happens not to know anything about this problem. In fact, (s)he’s a flat-out bozo. So, to do what’s right for your customer you go outside the prescribed channels and pull together the support person from the Northeast, a product manager you respect, and a senior engineer who’s been responsive in the past (no good deed goes unpunished!). Via e-mail or by building a mini-Web site on an intranet, you initiate a discussion, research numbers, check out competitive solutions, and quickly solve the customer’s problem -- all without ever notifying the "appropriate authorities" of what you’re doing because all they’ll do is try to force you back into the official channels.

Game. Set. Match. Managing Operational Risks in the 21st century requires a whole new perspective. A brand new definition of the new "Normal."

Critical Infrastructure: "Known Vulnerabilities" in Your Enterprise...

What are the known vulnerabilities in your enterprise architecture?  We will come back to this question.

Asymmetric Warfare across the globe spans a digital Internetwork that has it's roots fostered in openness and with little regulation.  We are in many instances within real possibilities of significant digital systems failures.  Here is a just small window into that battlefield.

Operational Risk Management (ORM), is a mature discipline that you and your organization shall embrace, study, expand and continuously support.  One facet of Operational Risk, the Information Technology (IT) systems in your enterprise, is not part of an evolution any longer.  It has become a pervasive and mobile social revolution, that is now accelerating beyond your comprehension.

Let's put it another way.  Known but unmitigated vulnerabilities, will likely be the origin of your demise, failure, damage, ruin and loss of precious assets.  Why do you let it continue?

You and your organization are on the edge, operating each day with peoples lives, reputations and Personal Identifiable Information (PII) at stake and even the livelihood of the enterprise itself.

Whether that is your family, business, state or even your country, you can do something more to address your known vulnerabilities.  Do you know who, what and where they are in your enterprise?

When you hear the name "Equifax" today, what do you think?  Data security breach, correct?  What about these organizations:

• Whole Foods Market Services, Inc.
• Discover Financial Services
• Transamerica
• Hyatt Hotels
• Northwestern Mutual Life Insurance Company
• Wells Fargo Advisors
• Sprint
• Massachusetts Mutual Life Insurance Company
• Sharp Memorial Hospital
• Virgin America
• The Neiman Marcus Group
• Keller Williams Realty, Inc.
• Club Quarters Hotels
• Hard Rock International
• Four Seasons Hotels Limited
• BMO Harris Bank NA
• Bank of the West
• Gannett Company, Inc.

These are all well known companies, who have reported data security breaches by law, to the State of California, over the past 6 months.  There are dozens more of other organizations who are not large, well known brand names such as these.  Some are as a result of the Equifax breach and organizations who were using Equifax product solutions internally.  Now multiply this by 50 states.

So what?

Our Critical Infrastructure(s) in the United States are something we just take for granted.  Bank ATM's on every corner, bridges across bays and rivers, trains and planes departing from even small cities, trauma hospitals, massive hotels and supermarkets, fiber communications and LTE wireless network connectivity almost everywhere.

Let's come back to where we started.  What are the "Known Vulnerabilities" in your enterprise architecture?  Why are you so certain, that your adversaries are not currently inside your network?

The resilience modernization of your particular enterprise, is going to be expensive.  Mostly, because it has been patched and poorly integrated for a decade or more.  In some cases, simply because your adversaries and competition are more stealthy than you are.  Faster than you are.  Smarter than you are.  Laying in wait.

So what are you going to do about it?  In your home, business, city, state, or country and beyond?

"As a highly connected nation, the United States is especially dependent on a globally secure and resilient internet and must work with allies and other partners toward maintaining the policy set forth in this section. Within 45 days of the date of this order, (May 11, 2017) the Secretary of State, the Secretary of the Treasury, the Secretary of Defense, the Secretary of Commerce, and the Secretary of Homeland Security, in coordination with the Attorney General and the Director of the Federal Bureau of Investigation, shall submit reports to the President on their international cybersecurity priorities, including those concerning investigation, attribution, cyber threat information sharing, response, capacity building, and cooperation."   Presidential Executive Order on Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure 

You are going to find, repair and replace your known vulnerabilities.  Then repeat.  When you think you are finished, you can begin the next project, on your UNKNOWN vulnerabilities.

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.

Utility of Attack: Target Selection and Execution...

The threat spectrum for Operational Risk Management (ORM) professionals is wide and they are constantly evaluating opportunities to learn.  Recent data breaches, terrorist attacks and the strategies utilized by adversaries online and on the ground, has surfaced another key lesson learned:

u·til·i·ty n. (pl. -ties) 1 the state of being useful, profitable, or beneficial (in game theory or economics) a measure of that which is sought to be maximized in any situation involving a choice.  The New Oxford American Dictionary

Here are two data breach examples:

1. On May 30, 2016, Omni Hotels discovered they were the victim of malware attacks on their network affecting specific point of sale systems on-site at some Omni properties. The malware was designed to collect certain payment card information, including cardholder name, credit/debit card number, security code and expiration date. They have no indication that reservation or Select Guest membership systems were affected.  50,000 records are impacted.
    
2. Prior to May 2016, identity thieves stole tax and salary data from big-three credit bureau Equifax Inc., according to a letter that grocery giant Kroger sent to all current and some former employees. The nation’s largest grocery chain by revenue appears to be one of several Equifax customers that were similarly victimized this year. Atlanta-based Equifax’s W-2 Express site makes electronic W-2 forms accessible for download for many companies, including Kroger — which employs more than 431,000 people.  According to a letter Kroger sent to employees dated May 5 2016, thieves were able to access W-2 data merely by entering at Equifax’s portal the employee’s default PIN code, which was nothing more than the last four digits of the employee’s Social Security number and their four-digit birth year.

Here are two terrorist attack examples:

In two major domestic terrorism events in the United States this past year, "Utility" was a major factor and should not be discounted, in analyzing motivations and "modus operandi" of homegrown violent extremists.  In San Bernardino, CA the adversaries were planning a major attack and had already stockpiled explosives and ammunition.  In Dallas (Mesquite), TX the adversary was planning a major attack and had already stockpiled a cache of explosives as well.

In both of these cases, the adversaries had accumulated and trained to use explosives in an attack.  Then they came upon a choice.  A utility.

1. In San Bernardino, an incident with government co-workers motivated the employee attacker to deviate from the intended plans and to capitalize on the "Utility" of a workplace holiday gathering at the county facilities.
2. In Dallas, a peaceful protest march that would attract a significant government presence of police officers, motivated the attacker to deviate from future plans and to capitalize on the "Utility" of a public gathering.

Dr. Erroll Southers is correct:

While the impetus for attack is rooted in beliefs, a terrorist’s selection of how and where to attack is based on a consideration of utility. This is the estimate of an attack’s consequences with respect to the intended target’s value as a domestic or international interest and the political impact the attack will have on the intended audience. Utility is a primary consideration for extremists during preparation for an attack, weighing desired results against the investment in activities to plan, rehearse and execute an operation. Always mindful of the aftermath, utility weighs heavily in the decision-making process of target selection, possible attack paths, methodologies and execution.  Southers, Erroll (2014-09-25). Homegrown Violent Extremism (pp. 9-10).

In both cases, the adversaries accelerated their plans.  They abandoned their use of explosives and a future planned event, to act on their emotions and motivations of the moment.  Domestic Terrorism in the United States will continue at a rapid pace without a more serious focus, on Homegrown Violent Extremism.

Whether it be online with the trust of your data systems or offline with the safety and security of your citizens, employees and facilities, beware of the changing opportunities for your adversaries, to launch their attack...

Utility, leveraged by your adversaries, is a consideration that must be continuously evaluated and analyzed in your particular threat environment. 

Know Your Customer: ISP Future Horizon...

The American public is changing their behavior as a result of the privacy and security failures across the private sector business policy landscape.  As the latest NTIA survey data reveals again, online commerce is being impacted and government agencies are now trying to further communicate there is a growing problem:

Lack of Trust in Internet Privacy and Security May Deter Economic and Other Online Activities
May 13, 2016 by Rafi Goldberg, Policy Analyst, Office of Policy Analysis and Development

Every day, billions of people around the world use the Internet to share ideas, conduct financial transactions, and keep in touch with family, friends, and colleagues. Users send and store personal medical data, business communications, and even intimate conversations over this global network. But for the Internet to grow and thrive, users must continue to trust that their personal information will be secure and their privacy protected.

NTIA’s analysis of recent data shows that Americans are increasingly concerned about online security and privacy at a time when data breaches, cybersecurity incidents, and controversies over the privacy of online services have become more prominent. These concerns are prompting some Americans to limit their online activity, according to data collected for NTIA [1] in July 2015 by the U.S. Census Bureau. This survey included several privacy and security questions, which were asked of more than 41,000 households that reported having at least one Internet user.

Perhaps the most direct threat to maintaining consumer trust is negative personal experience. Nineteen percent of Internet-using households—representing nearly 19 million households—reported that they had been affected by an online security breach, identity theft, or similar malicious activity during the 12 months prior to the July 2015 survey. Security breaches appear to be more common among the most intensive Internet-using households.

This survey is indeed only one facet of a much larger topic and pervasive problem.  Digital Trust is the output of making affirmative "Trust Decisions" with computing devices. Whether they are machine-to-machine, person-to-machine, or machine-to-person requires several technology engineering elements and business rules, that are understood and agreed upon.  The question is by whom?

Consumers who are using the Internet for communications and commerce and are the victims of Identity theft, stolen funds or other fraudulent schemes, are just the first wave of targets for transnational organized crime (TOC).  We have known this since the invention of virus scanners and bug bounty programs, in the early days of the 21st century.

Yet fifteen plus years later, the government is doing a study on the consumers feelings about privacy and security.  As a business or a consumer, we understand that the speed of commerce and technology is always far ahead of the regulations and the laws.  When enough people or businesses seem to be harmed, then the momentum begins for policy shifts and new laws are sometimes enacted after thousands of pages of semantic negotiation.

The answers and the outcomes we seek will come.  However, they will not first be solved by politicians and lawyers.  They will be mostly solved by our brilliant mathematicians, software engineers and data scientists.  At this point in time, we are getting so much closer to achieving digital trust through new innovations and inventions.  Just look at IBM Watson.

It is now time for business and commerce to begin the process of finding the truth.  Why do we continue to allow the levels of known bad actors to operate inside and within our networks?  It's a numbers game and it is because the criminals also employ the smartest social engineers and data scientists.

Digital Trust in the next fifteen years will mean something different than it does today.  We will have found the formula along the journey, the new equations and the rules agreed upon by all to make online and digital commerce more safe and secure.  So what will we do today and tomorrow, until the engineers and scientists save the day?

At this point in time, it is simply called "Know-Your-Customer"(KYC).  If this was utilized more effectively across critical infrastructure sectors beyond finance in our digital economy, then we would be making some progress.  Where are we talking about next? 

The FTC and FCC are well on their path to defining those critical elements of improving the trust that consumers have using their digital tools with ICT and on service providers web sites.  Yet even to this day, you still can find the criminals using and leveraging our own Internet Service Providers (ISP) to launch their attacks and perpetuate their fraudulent schemes.  How will this ever be deterred?  Could a version of KYC work with the ISP's?

Even with a global banking system in place you have pockets of greed and deceit.  Rogue nations or territories that have become the go-to-locations for the transnational organized crime syndicates to flourish.  Yet we can do much better, than we are today.

Just ask any "BlackHat" hacker from Eastern Europe who they prefer to do business with.  Query the experts that exist on the dark side and you will find the ISPs they prefer to do business with.  One day the regulators will realize this is where the business of e-crime has an opportunity for change and additional reform.  It will be more than just opening an account to gain access to the Internet.  It will be about scaling up our systems to a future horizon with new rules and robust real-time behavioral predictive analytics.  In the mean time:

May 11, 2016 

In testimony before Congress today, the Federal Trade Commission outlined its work over the past 40 years to protect consumers’ privacy at a hearing convened to examine privacy rules proposed by the Federal Communications Commission.

Chairwoman Edith Ramirez and Commissioner Maureen Ohlhausen testified on behalf of the Commission. The testimony before the Senate Judiciary Committee’s Subcommittee on Privacy, Technology and the Law provided background on FTC law enforcement efforts, policy work and consumer and business education programs related to protecting consumers’ privacy.

The testimony highlighted the FTC’s extensive history of privacy-related work. The testimony noted that the agency has brought more than 500 privacy-related enforcement cases in its history against online and offline companies of varying sizes, including companies across the internet ecosystem. In addition, the testimony highlighted a number of recent cases of note.

The testimony also provided information on the FTC’s policy work in the privacy area, going back to its first internet privacy workshop in 1996. The testimony noted that recent policy work has been based on principles featured in the FTC’s 2012 privacy report, and also highlighted workshops and reports related to the Internet of Things, big data, and other issues, including cross-device tracking.

The testimony also described the FTC’s extensive consumer and business education efforts related to privacy, including the FTC’s Start With Security campaign for businesses, and the newly-updated IdentityTheft.gov.

Too Big to Fail: Basel III to ID Theft...

Now that the Basel III wheels are in motion and the "Top 29" vital Global banking institutions have been identified, Operational Risk Management is on everyones mind. The capital reserves will continue to assist them in becoming more resilient to the systemic volatility ahead. Are you feeling the uncertainty starting to disappear? Not for a minute.

As these banking institutions try to withstand the economic impact of a nation state failure like Greece, the consumers who are the customers of the "Top 29" too big to fail, are being simultaneously barraged and systemically targeted by international crime rings. Identity thieves have set up transnational operations, that will continue to plague millions of consumers at these same banking institutions. Their own governments continue to try and deal with the nexus of criminal elements, consumer privacy and law enforcement. How bad is it for the U.S. Treasury, as one example:

Identity theft involving tax fraud is increasing faster than law enforcement and government officials can deal with it, according to testimony today before a House oversight subcommittee. Identity theft to scam fraudulent tax refunds from the government has increased 100 percent in just three years.

”As of Aug. 31 of this past year, IRS incident tracking reports indicated that the numbers of taxpayers affected by identity theft has more than doubled since 2008 to over 580,000 taxpayers this year alone,” said J. Russell George, Treasury Department inspector general for tax administration.

The crime has become too easy. It’s like a party, according to Rep. Richard Nugent, R-Fla., whose district has a problem with tax-related identity theft.

“Tampa Police Department has busted what the lawbreakers call ‘make it rain’ parties, where criminals get together in a hotel room with Internet access and file fake return after fake return,” Nugent told the committee.

How does paying out billions of dollars to these fraud crime rings using your social security number and date of birth increase the operational risks on our banking institutions? Everyone who is a consumer at one of these banks who is a victim of fraud, will one day deal with the aftermath. If the fraudsters are filing a fraudulent tax return that impacts you, then the odds are that you may end up paying a higher interest rate and this will not be the only place they are using your ID Theft misfortune for financial gains.

For the victims of tax fraud identity theft, the people who had fraudulent tax returns filed in their names, getting the problem fixed and their lawful refund paid could take a year and a half.

“A typical path for an identity theft refund case that is not complex may take as long as 18 months to resolve,” said J. Russell George, Treasury Department Inspector General for tax administration.

The cost of dealing with Identity Theft has so many dimensions. The protection of Personal Identifiable Information (PII). The fact that the IRS and law enforcement have difficulty sharing information on the consumers themselves due to privacy laws. The technology and online Internet forums for buying and selling fraudulent identities is prevalent. The continuous salvo of attacks on financial institutions to compromise the cyber defenses that they have established is a 24 x 7 battle.

To exacerbate the problem, the "Death Master File" (DMF) is the genesis for much of the Identity Theft and tax fraud when this information gets into the wrong hands. The U.S. Social Security Administration has been publishing this list of 90 million dead Americans since 1980 to help the "Top 29" fight fraud. At the same time, the Identify Theft fraudsters are using the same data to perpetuate their schemes:

Identity thieves are cashing in on dead children across the nation, stealing their Social Security numbers to collect fraudulent tax refunds from the Internal Revenue Service.

Grieving families — including the Watters family of Lake Forest — say their anguish is amplified by the realization that the crooks get help from an unexpected source: the Social Security Administration’s “Death Master File,” which records and lists information about everyone who dies in the United States.

Armed with the deceased child’s Social Security number and other personal information, crooks falsely claim them as dependents and have the refunds routed to them.

One reason that the financial institutions, government agencies and law enforcement are going in circles is because "Operational Risk Management" processes and tools are still not as robust as they could be. As the Basel III regulatory mandates kick in along with other new laws, methods and tools, all of the impacted parties will get better at deterring, detecting, defending and documenting in this complex information age.

In the mean time, consumer beware. Look long and hard at the "Top 29" list and decide if you need to move your funds to somewhere else. And before you do, look at the online banking login page for that institution. Are they still using only a single factor user name and password? Multi-factor authentication is not fool proof, yet it does tell us whether the institution is serious about Operational Risks in the area of Information Security. This is a key indicator of their ability and capability to try and keep your data out of the hands of the transnational eCrime rings.

Finally, you have to take the monitoring of your own Identity, and all of your family members identities seriously. It will be far more proactive, than anything else that will be done by governments or financial institutions alone. Regardless how fast they implement the latest tools and technology the fraudsters are moving just as fast. By adding your own diligence on top of the banking institution, government agency or other entity (Doctors / Lawyers / Dentists/ Insurers) that may have your Personal Identifiable information, you are decreasing your odds of becoming an Identity Theft and fraud victim.

Financial risks for the banks and the consumers will continue to be the current state-of-play. Basel III alone will not eliminate the threat of failure or the possibility of a serious bank fraud. Monitoring services or checking your credit report on a quarterly basis, will not keep the ID Theft criminals from stealing your PII. Implementing both on a proactive and pervasive basis will make a positive difference over time. This is what Operational Risk Management is all about, in the global institution board room and at your own home office.

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Degree in OPS Risk: The New Normal...

The discipline of Operational Risk Management is becoming more of a requirement in a multitude of companies outside the financial industry. In the United States, this is due to the fact that Fortune 500 enterprises and even small to medium size businesses, are now disclosing that they are in a silent and soon to be more acknowledged, battle against significant loss events. Information Capital Loss Events.

This decade long hush hush silent war, with cyber criminal syndicates, fraud rings operating in the "Cloud" and the advanced persistent threat (APT) orchestrated by sophisticated cells of nation states, is growing ever so more pervasive. Public companies shareholders and small business owners investors, are still asking more questions about the information loss risk of stolen intellectual property, corporate secrets, R & D and even cash. The reporting of hundreds of thousands of dollars per incident, that is being stolen via cyber malware attacks in concert with unauthorized banking ACH transactions, is already a classic case of asymmetric warfare. The banks are not the only critical infrastructure vulnerable to the silent war being waged by well funded units within the governments of China or Russia. Why do you think that US Cyber Command is housed within USSTRATCOM?

Now the Securities and Exchange Commission (SEC) wants information capital and data losses to be monetized and is encouraging the companies to acknowledge this silent battle and to be more transparent on incidents, regardless of the impact to the bottom line:

Cybersecurity: SEC outlines requirement that companies report cyber theft and attack

By Ellen Nakashima and David S. Hilzenrath, Published: October 14

Cyberspies and criminals steal what is estimated to be tens of billions of dollars worth of data from U.S. companies each year. Yet experts say few companies report these losses to shareholders.

Now the Securities and Exchange Commission is pressing for more disclosure, issuing new guidelines this week that make clear that publicly traded companies must report significant instances of cybertheft or attack, or even when they are at material risk of such an event.

“Investors have been kept completely in the dark,” said Sen. John D. Rockefeller IV (D-W.Va.), chairman of the Senate commerce committee, which urged the SEC to take the action. “This guidance changes everything. It will allow the market to evaluate companies in part based on their ability to keep their networks secure.”

The SEC guidance clarifies a long-standing requirement that companies report “material” developments, or matters significant enough that an investor would want to know about them. The guidance spells out that cyberattacks are no exception.

For example, the SEC says, a company probably will need to report on costs and consequences of material intrusions in which customer data are compromised. The company’s revenue could suffer, and it could be forced to spend money to beef up security or fight lawsuits. In addition, if a company is vulnerable to cyberattack, investors may need to be informed of the risk, the SEC said.

Operational Risk Management is a discipline that encompasses science, methodology and art. No different than other academic pursuits. Each organization that realizes that loss events are inevitable across a spectrum of risks has already designated people and processes to mitigate, minimize or even accept these risks. Litigation and legal risks have been part of the disclosure to shareholders for some time. The process of negotiating with plaintiffs to settle law suits is in itself a strategy to minimize losses to the institution. So why are the SEC disclosure guidelines going to make these same institutions nervous? They aren't.

Public companies that now may have to be more transparent, because they trade shares on the stock exchange or because of their respective tax status with the Internal Revenue Service, will do this on an increasing basis. It will be just one more risk to the enterprise that is disclosed and has a cost associated with it. That cost is in many cases the remediation measures put in place for the members or the customers, because of other privacy laws such as SB 1386 or the HITECH Act that require notification and in some cases assistance for avoiding the risk of Identity Theft. How many letters did you get in the mail this last year like this? The number is growing and soon the whole American public will need to have their credit monitored at the cost of the institution who has disclosed the theft of personal identifiable information (PII). So, perhaps you could offset this cost by charging your customers $5.00 each month to use a debit card.

The SEC is just one more U.S. government agency that is capable of putting the pressure on the private sector, to comply with existing laws regarding the "material" incidents going on within the public company. The private sector should not even blink at this and will voluntarily do so just as it has with other material items. Or will it?

The fact is that there is no government or private sector company that "HAS NOT" been breached or had data exfiltrated from their information systems. This is a given. We are in the age where our personal information is being socially shared with advertisers and so called analytics firms on a daily basis. This data is being sold to whoever will pay for it. The playing field is set and the baselines are clear. We have all been compromised in some way or some form and now it is just a matter of the magnitude.

Operational Risk professionals know this and we have been raising our hands for years asking for more resources to keep the perimeters secure and to prevent people from behaving badly. Yet substantial funding to ramp up "Cyber Security" tools and services in the institution will not put a dramatic dent in the real business issues at hand. Human Behavior. Humans acting with disregard to the rules sets or ignorant to the known risks, will not change.

So what is the answer for the SEC or even US Cyber Command? Only one thing. A greater attention to the science, methodology and art of the discipline of Operational Risk Management. We have institutions of higher learning teaching Homeland Security, Cyber Security and even Forensic Accounting. Maybe we need to establish a Bachelors Degree and Masters in Operational Risk Management, to pave the way to a more safe and secure global business environment in the next half of the millenium.

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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.

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