After interviewing 5,000 folks, the latest annual Javelin study claims that the number of identity fraud victims in the United States increased 12 percent to 11.1 million adults in 2009, while the total annual fraud amount increased by 12.5 percent (or $6 billion) to $54 billion.
The report claims that small businesses are sustaining the most hits: “They suffer identity fraud at one and a half times the rate of all other adults. By using their own personal accounts for business transactions, they are at a greater risk of exposing themselves to identity fraud.” And, the report suggests that because small businesses are more at risk they “need to implement safety precautions online and offline, and should consider employee background screening checks as a precautionary measure.”
According to the report:
The economic downturn is partially to blame for the rise in identity theft, and identity thieves are increasingly using more sophisticated and varied methods to obtain the personally identifiable information (PII) of consumers. Fraudsters are becoming more sophisticated and more aggressive, and their organized approach to online fraud through a myriad of threats and scams makes it harder to detect. Fraudsters are also increasingly targeting – and taking over – multiple accounts of their victims, collectively going after checking accounts, credit card accounts, mobile phone accounts, and Internet accounts in one full sweep.
Using a combination of sophisticated malware, keystroke logging, and phishing attacks, fraudsters are able to use organized crime to steal identities. And social networking has introduced yet another means for consumers to exposure their personal information to wider audiences, providing another avenue for fraudsters to conduct their scams.
When it comes to pointing out security threats and exposures, the report’s above descriptions do not really shine a light on anything new or startling. What is helpful, however, is their pointing out just how widespread and pervasive these exposures are to small businesses – helpful commentary that cannot repeated often enough.
Twitter disclosed yesterday that it had to reset some passwords due to an exploit that really could have hit any company. In essence, certain visitors to a fake peer-to-peer search engine signed up for an account using the same username and password they used on their Twitter accounts. The owners of the fake P2P search engine used this information to access the users’ Twitter accounts. This exploit is not surprising given that a majority of online banking customers reuse their login credentials on other websites. Accordingly, standing alone, this would have little impact on Twitter’s security standing. Unfortunately, there have been more incidents.
On January 5, 2009, several dozen Twitter accounts were hacked, including one belonging to our president. On May 21, 2009, Twitter’s name was used in a phishing exploit that sent users emails notifying them of new followers and included a link to a fake Twitter site. There were also security incidents in April and June. In fact, one analyst has gone so far as to claim Twitter’s security posture is weak enough to be called “security Swiss cheese.”
Why pick on Twitter? Afterall, yesterday our Director of National Intelligence told members of the Senate’s Select Intelligence Committee that malicious online activity is growing at an unprecedented rate. As Dennis Blair put it, “in the dynamic of cyberspace, the technology balance right now favors malicious actors rather than legal actors, and is likely to continue that way for quite some time.”
The reason to mention Twitter is because their new user growth has slowed down. Big time. According to a Hubspot Report, Twitter’s new user rate of growth has gone from 13% in March 2009 to 3.5% for October 2009 (the last month tracked).
Although Twitter may have lost steam as a social networking tool simply because the novelty has worn thin, it is also likely the case that its public security failings have slowed growth. It is very likely that the current stagnation in growth is even worse given that it is estimated about 25% of accounts have no followers and about 40% of accounts have never sent a single Tweet. Why bother signing up for something you likely will not even use if you are skeptical of its security? Simply put, there is no reason to take a chance on a new company if public security lapses make you feel insecure about your data.
All of this points to the need for better security; and more importantly, the use of a directed marketing message that highlights security best practices. This strategy would not only serve to benefit social networking companies. All companies holding personally identifiable information need to get their network security and privacy (NSAP) marketing message out to potential clients. In other words, NSAP processes and procedures are not just tied to risk management and compliance, they directly relate to a marketing message that should lead to an increase in profitable new business.
Just wondering. Is the Chinese Government being set up? One has to wonder why a year-old report by a British spy agency was only recently leaked to the press. Among other things, the report claims that free USB memory sticks loaded with trojan software was given to business leaders and lawyers at various Chinese trade events. Another report recently in the press indicates that classified documents from government and private organizations “including the computers of the Dalai Lama and Tibetan exiles” were hacked into. Really? The Dalai Lama? Another report indicates that oil drilling data was purloined by servers in China.
Given none of these attacks have any real direct linkage to the Chinese Government, the only two factors being used to implicate the Chinese Government relates to the sophistication of the attacks and the fact they originated on servers based in China. This is hardly persuasive evidence that the government was involved. There are any number of governments and large corporations able to perform these attacks. Moreover, the fact that servers in China are being used also does not really indicate anything. According to a report in Information Week, the country that hosted the most phishing sites in the third quarter of 2009 was not China. It was not even close. For example, in September 2009, the United States hosted 75.76 percent of all reported phishing sites. China came in third place with 3.44 percent. It is likely that of the US-based servers used, many were used by foreign attackers looking to cover their tracks.
Similarly, it seems like a odd coincidence that oil data theft and so many other intellectual property hacking incidents are only being traced to Chinese servers when the Chinese Government – if culpable – could have easily used US-based servers to cover their tracks. In other words, let’s not be so quick to blame the Chinese Government for attacks that could very easily have been done by other sophisticated hackers or simply Chinese citizens working on their own initiative.
More and more security firms are pushing their products towards the SMB market. In a recent press release, Blackhat Solutions looks to sell its services by warning “small to medium businesses of their financial and legal susceptibility in the face of increasingly sophisticated data hacking.” This is no surprise given Forrester Research projects that about 40 percent of SMBs are planning to increase their IT security budgets for 2010. In its $1,749 report, Forrester outlines why network security and data security top the IT investment and attention for SMBs. The goal in increasing funding is to protect data rather than just finding broader operational savings – a past common driver of IT initiatives.
SMBs should also be looking to make a little lemonade with their added expenses. Why not take this increase in data security expenditure and turn it into a profit-making marketing edge? Most smaller firms who are able to position themselves as security stalwarts will eventually increase their market share no matter what industry they are in. It’s that simple. When building out their enhanced security capabilities, there is no reason SMBs cannot also get this marketing message out to their clients, business partners and employees.
According to a news report, BlueCross BlueShield of Tennessee admitted on January 25th that it has spent more than $7 million to address an October theft of 57 computer hard drives. The company said that it may have to spend millions more to assess what was on the missing computer records and to provide identity protection for affected customers. According to its website, the company has notified 220,000 BCBS customers in Tennessee and other states where persons covered by BCBS of TN plans may work. Further, determining what was on the stolen hard drives as required by the HITECH Act and state notification requirements has required the hiring of more than 700 contract and BlueCross workers.
If we are to accept the Ponemon Institute’s most recent Cost of Breach report, this breach will ultimately cost BCBS of TN over $44 million. Given that 67% of the $204 per record cost consists of lost customers and other indirect costs, it looks like BCBS of TN has another $7.8 million to go on its notification, credit monitoring, forensics and other direct expenses.
This breach is a stark reminder that even though the lawsuits are being won by breach defendants, costs incurred prior to the first lawsuit can be very significant. Having a post-breach gameplan in place to address these costs has certainly become absolutely crucial during the past few years. After all, nothing hurts a bottom line as quickly as a significant unfunded expense.
Update: March 14, 2012
BCBS of TN agrees to pay HHS $1.5 million under the HITECH Act’s breach notification settlement. When coupled with the $17 million in first-party expenses already paid, this incident remains a stark reminder as to the benefits of a network security and privacy insurance policy.
The facts are starting to surface regarding the recent attacks against Google, Yahoo! and Microsoft – all of which have been linked to Chinese interests. According to one recent report, the attackers selected employees with access to proprietary data, determined their social networking friends and then hacked into those accounts. Once in control of the friends’ accounts, the attackers (posing as friends) sent their actual targets instant messages with links to sites that installed spying software on their computers.
This sort of criminal strategy could be applied to any company – large or small. In fact, it is much easier to assume that the president of a large middle market firm has more valuable intelligence on his computer than a strategic employee at a larger company. Having knowledge of this sort of attack is important given the overall number of attacks against business has been increasing. According to a recent CSO Survey, 37% of businesses polled have seen an increase in attacks during the past 12 months.
One sure way to reduce the risk of a corporate attack is to limit social networking access to those individuals in marketing or sales who have a corporate reason to go to those sites. Even those individuals should have proper training so that they would know, for example, not to click on links that have strange URLs or link to content that does not serve a distinct corporate purpose. Also, try hard to avoid clicking on an image. It may be hard to do. Our propensity to click on whatever online content we see is a habit not easily kicked.
According to the latest Ponemon COB report, data breach attacks have doubled this past year while the average cost of a data breach has increased to $204 per compromised record. The Ponemon Institute looked at several variables when determining this $204 number, including: lost business; legal fees; disclosure expenses; consulting help, including forensics; and remediation expenses such as improved technology and training. Page 16 of the report indicates that lost business is the most significant component of this number – representing $135 of the $204 amount. In other words, those firms disclosing to the Ponemon Institute information regarding their breach have had a signficant documented loss of business. In addition to providing this valuable insight regarding brand damage caused by a breach, the report is also instructive given it offers information regarding the causes of 2009 breaches.
According to this Ponemon Insitute report, data breaches generally have three primary causes: third party negligence; malicious attacks such as coordinated botnet attacks; and negligent insider behavior. In fact, the Ponemon Institute points out that 42 percent of all cases in the study involved third-party negligence. Although this overall number (as well information in the report) is based on information provided by only 45 businesses willing to speak in detail with the Ponemon Institute, the number should not be taken lightly – especially since it is not that far off from numerous other studies and surveys done over the years.
The two lessons here – breaches lead to lost business and third-party negligence is a signficant cause of breaches – actually have more to do with marketing then with risk management. In a prolonged down economy, small and middle market companies need to differentiate by showcasing their network security and privacy strengths. Instead of shying away from the efforts needed to improve your network risk profile, embrace the endeavor by realizing it will only be a matter of time before you are required to do what you are voluntarily doing now. As with most corporate best practices, being one step ahead of your competition when it comes to network security and privacy can turn into a significant marketing advantage. Depending on your business goals and what you do to generate revenue, this advantage can easily turn into a sustained competitive edge.
As pointed out by this article, when it comes to network security, small business owners are often “hampered by a lack of resources, fewer qualified security personnel, less money to buy necessary products, and more difficulties complying with regulations that often were written without companies of their size in mind.” And, as pointed out in this article, a small business can be more of an attractive target for “spammers, botnet operators, and other attackers than a home user mainly because it has a treasure trove of valuable data without the sufficient IT and security resources to protect it.” In fact, as reported by Business Week, some small businesses can even become victims of identity theft.
Unfortunately, given the increase in sophisticated attacks made against small business owners, it is becoming more and more difficult for these owners to deploy suitable resources. One available option today to smaller companies is the “outsourcing” of security to a managed service provider. MSPs who are focused on security and IT management for small business owners have network security resources and expertise built as their core competency. Although it may seem to be the last thing a company would want to do, i.e., have another company take ownership over its network security, so long as the MSP is properly vetted and has clear staying power, there is little difference between using a MSP for data security or using a bank for financial security.
Although law firms have been hit with network security attacks over the years and sustained significant losses in the process, it has never been the case that they were targeted simply because they chose the wrong side in a litigation. That is until now. According to this report, an exploit took place weeks after “filtering software firm CYBERsitter announced that it had retained Gipson Hoffman & Pancione to sue the Chinese government, two Chinese software developers and seven PC makers for allegedly distributing its software code as part of the Chinese state-sponsored filtering and monitoring program known as Green Dam Youth Escort.”
There are reports of other attacks that were recently launched against Google and Yahoo! in order to retrieve account information regarding Chinese dissidents. According to a report in The Economic Times, McAfee has stated that the Google attack exploited an Explorer flaw. It will be interesting to see how these “China” exploits pan out in the coming weeks.
With unemployment now stretching past 10%, the Ponemon Institute “Data Loss Risks During Downsizing” survey conducted last year is more relevant than ever. This survey found that 59% of employees who leave or are asked to leave a company are stealing proprietary or sensitive corporate data. Moreover, 79% of these respondents admit that their former employer did not permit them to leave with company data. Not surprisingly, 67% of respondents used their former company’s proprietary information to leverage a new job.