New Bill Promises to Penalize Companies for Security Breaches

On September 22, the Senate Judiciary Committee approved and passed Sen. Richard Blumenthal’s (D, Conn.) bill, the “Personal Data Protection and Breach Accountability Act of 2011,” sending it to the Senate floor. The bill will penalize companies for online data breaches and was introduced on the heels of several high profile security breaches and hacks that affected millions of consumers. These included the Sony breach which compromised the data of 77 million customers, and the DigiNotar breach which resulted in 300,000 Google GMail account holders having their mail hacked and read. The measure addresses companies that hold the personal information of more than 10,000 customers and requires them to put privacy and security programs in place to protect the information, and to respond quickly in the event of a security failure.

The bill proposes that companies be fined $5,000 per day per violation, with a maximum of $20 million per infringement. Additionally, companies who fail to comply with the data protection law (if it is passed) may be required to pay for credit monitoring services and subject to civil litigation by the affected consumers. The bill also aims to increase criminal penalties for identity theft, as well as crimes including the installing of a data collection program on someone’s computer and concealing any security breached in which personal data is compromised.

Key provisions in the bill include a process to help companies establish appropriate minimum security standards, notifications requirements, information sharing after a breach and company accountability.

While the intent of the bill is admirable, the problem is not a lack of laws to deter breaches, but the insufficient enforcement of these laws. Many of the requirements espoused in this new legislation already exist in many different forms.

SANS is the largest source for information security training and security certification, and their position is that we don’t need an extension to the Federal Information Security Management Act of 2002 (FISMA) or other compliance regulations, which have essentially encouraged a checkbox mentality: “I checked it off, so we are good.” This is the wrong approach to security but companies get rewarded for checking off criteria lists. Compliance regulations do not drive improvement. Organizations need to focus on the actual costs that can occur by not being compliant:

  • Loss of consumer confidence: Consumers will think twice before they hand over their personal data to an organization perceived to be careless with that information which can lead to a direct hit in sales.
  • Increased costs of doing business as with PCI-DSS: PCI-DSS is one example where enforcement is prevalent, and the penalties can be stringent. Merchants who do not maintain compliance are subject to higher rates charged by VISA, MasterCard, etc.
  • Negative press: One need only look at the recent data breaches to consider the continuing negative impact on the compromised company’s brand and reputation. In one case (DigiNotar), the company folded.

The gap does not exist in the laws, but rather, in the enforcement of those laws. Until there is enforcement any legislation or requirements are hollow threats.

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