Intro To Data Identity Theft Liability For Businesses


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Data identity theft has surpassed illegal drug trafficking as the top criminal moneymaker. Most businesses do not understand the extent of their liability in both statutory fines and potential civil liability to the victims. Businesses cannot entirely eliminate their risk of exposure, but they can institutionalize procedures that minimizes this risk. This is an introduction to the Texas law which is similar to laws in 40 other states.

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Intro To Data Identity Theft Liability For Businesses

  1. 1. Managing Risk: What Business Owners Must Know about Their Data Breach Liability<br />Paula S. deWitte, J.D., Ph.D., P.E.<br />Paula deWitte, P.L.L.C.<br />
  2. 2. Objective<br /><ul><li>Help business owners understand their liability to protect sensitive personal information (SPI) under the Texas Identity Theft Enforcement and Protection Act.
  3. 3. Provide practical steps to safeguard your operations.</li></ul>What you don’t know can hurt you. <br />
  4. 4. Identity Theft Is Growing<br /><ul><li>U.S. Dept. of Veterans Affairs = 1,800,000 (11/07)
  5. 5. Countrywide Home Loan == 2,000,000 (08/08)
  6. 6. CO Div. of Motor Vehicles = 3,400,000 (7/08)
  7. 7. Overall U.S. identities lost since Jan 2005 => 250,000,000
  8. 8. Estimated $1 Trillion worth of data stolen (2008)
  9. 9. Cybercrime up 53%
  10. 10. Cost to repair average 2008 data = $6,600,000</li></ul>Statistics credited to USAF Lt Gen (ret) Harry Raduege, Chairman, Center for Network Innovation, Deloitte, July 2009, World Affairs Council, Houston, TX.<br />
  11. 11. Who Are You?<br />A business owner<br />Who owns/licenses or maintains “sensitive personal information” (SPI).<br />You may have security, both for the premises and for your computer/network.<br />You may be liable to Texas and to the victim for security/data breaches – even if they do not result in identity theft.<br />
  12. 12. What is Sensitive Personal Information (SPI)?<br />First initial and last name OR First name and last name <br />Combined with any of:<br />Social security number OR <br />Drivers license number OR <br />Account or credit card number in combination with any required security code, access code, or password that would permit access to that account.<br />
  13. 13. What Can Trigger Your Duties<br /><ul><li>Lost or stolen computer or laptop
  14. 14. Improperly trashed or donated computers or computer parts without proper preparation
  15. 15. Lost mobile devices, USBs, or CDs
  16. 16. Weak, limited, or no data encryption
  17. 17. Weak passwords
  18. 18. E-mailing sensitive data to personal accounts
  19. 19. Security or data breaches by someone who intentionally targets your organization</li></li></ul><li>Texas Identity Theft Enforcement and Protection Act<br /><br />Runs almost eight pages <br />
  20. 20. Manage Your Risk<br />Know the terms:<br />Sensitive Personal Information<br />Encryption <br />Business duty <br />Reasonable procedures <br />Know what is required to comply with the law.<br />You may be liable under the laws of another state! <br />Currently, Massachusetts has the strictest law.<br />
  21. 21. Business Duty 1: Use “reasonable procedures”…<br /><ul><li>“..including appropriate corrective action to protect unlawful use or disclosure of any SPI collected or maintained by the business in the regular course of business.”
  22. 22. Cannot be delegated.
  23. 23. Liable for the actions of their employees, regardless. </li></li></ul><li>What Is Reasonable?<br />Reasonable to what standard?<br />The business owner?<br />The SPI owner (i.e., the potential victim)<br />IT personnel?<br />Information assurance (IA) experts?<br />Prevailing public perception? <br />Is there a standard?<br />
  24. 24. Reasonable Procedures<br /><ul><li>Must be in writing.
  25. 25. Protect against anticipated threats or hazards.
  26. 26. Consider administrative, technical, and physical.
  27. 27. Consider all aspects of the SPI -- collection, storage, access, use, transmission, and protection.
  28. 28. Institutionalize procedures.
  29. 29. Audit.</li></li></ul><li>Continuous Process <br />Have a written information security program (WISP).<br />Have a third party test your systems.<br />Document the problems. <br />Fix the problems.<br />Conduct periodic reviews.<br />
  30. 30. Business Duty 2: Destroy or Arrange for the Destruction…<br />“…of customer records by shredding, erasing, or “otherwise modifying the sensitive PI in the records to make the information unreadable or indecipherable through any means”<br />
  31. 31. How to Properly Destroy<br />What works? <br />What doesn’t work? <br />
  32. 32. Business Duty 3: Notify Potential Victims <br />“… after discovering or receiving notification of that breach … as quickly as possible”<br />
  33. 33. Notification<br />How do you discover a breach?<br />What constitutes “receiving notification of that breach”? <br />What does “quickly as possible” mean?<br />How do I notify potential victims?<br />
  34. 34. What Does the Attorney General Tell an Identity Theft Victim To Do<br /><br />Create a written criminal report to protect themselves from being denied credit.<br />File report with the Federal Trade Commission.<br />Collect as much evidence as possible. This evidence can be used against you!<br />
  35. 35. Your Liability<br /><ul><li>Statutory fines to Texas
  36. 36. To the SPI Owner:
  37. 37. Lost income
  38. 38. Expenses of fixing credit
  39. 39. Attorney fees
  40. 40. Possible treble damages under DPTA
  41. 41. Your consequences:
  42. 42. Loss of revenue and reputation</li></li></ul><li>What SPI Do You Routinely Maintain?<br /><ul><li>Employee Records
  43. 43. Every employee record has the employee’s name and social security number
  44. 44. Customer Information
  45. 45. Credit card numbers
  46. 46. Discovery Documents
  47. 47. Statutory exceptions:
  48. 48. Statue excludes publicly available information available from federal, state, or local governments
  49. 49. Excludes encrypted data
  50. 50. No statutory definition for “encryption”</li></li></ul><li>Do Not Rely on the Encryption Exception<br />Encryption is not a yes/no category.<br />Encryption is a continuum from weak to strong.<br />True encryption requires encryption throughout system; one piece of your system that is not encrypted renders the entire system vulnerable. <br />
  51. 51. Your Biggest Hidden Security Threats<br />Social engineering: Unintentional and by those you trust<br /> OR<br />Insider threat: Intentional and by those internal to your enterprise<br />
  52. 52. What Do You Do?<br /><ul><li>Understand your risk.
  53. 53. Understand what the law requires.
  54. 54. Use industry best practices to protect SPI.
  55. 55. Institute a continuous security process.
  56. 56. Designate an in-house data security coordinator.
  57. 57. Conduct periodic audits to review your systems.
  58. 58. Have a written plan/process.
  59. 59. Store only SPI that your business needs.
  60. 60. Buy insurance.</li></li></ul><li>Conclusions<br />It is too big of a risk to businesses to ignore their potential liability <br />The law is evolving while the problem with identity theft grows. <br />
  61. 61. Contact<br />Paula deWitte, P.L.L.C.<br /><br />Office: 713.706.6248<br />Cell: 512.633.3791<br />