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NIST and USCG Issue New Maritime Industry Cybersecurity Profile

In 2013, President Obama issued Executive Order 13636 and directed the Director of the National Institute of Standards and Technology (NIST) to “lead the development of a framework to reduce cybersecurity risks to critical infrastructure” (Cybersecurity Framework).  The Cybersecurity Framework was published in February 2014.  A number of industries are integrating the Cybersecurity Framework, including by creating industry-focused Framework Profiles (Profiles) as described in the Cybersecurity Framework.

This month, NIST and the United States Coast Guard (USCG) released a “Maritime Bulk Liquids Transfer Cybersecurity Framework Profile” (Bulk Liquids Transfer Profile) to address the vulnerabilities in the transfer process of bulk hazardous liquids in the maritime industry.  These transfers are often a part of a sophisticated supply chain that uses multiple networked systems, and is therefore vulnerable to attack.   The new profile serves to assist in cybersecurity risk assessments for those entities involved in maritime bulk liquids transfer operations as overseen by the USCG, and is intended to act as “non-mandatory guidance to organizations conducting” maritime bulk liquids transfer operations within facilities and vessels under the regulatory control of the USCG under the Code of Federal Regulations 33 CFR 154-156.

The stated benefits of creating the new Bulk Liquids Transfer Profile include:

  • Compliance reporting becoming a byproduct of running an organization’s security operation;
  • Adding new security requirements will become more straightforward;
  • Adding or changing operational methodology will be less intrusive to ongoing operations;
  • Minimizing future work by future organizations;
  • Decreasing the chance that organizations will accidentally omit a requirement;
  • Facilitating understanding of the bulk liquid transfers environment to allow for consistent analysis of cybersecurity-risk; and
  • Aligning industry and USCG cybersecurity priorities.

Other benefits include strengthening strategic communications between:

  • Risk executives and operational technology integration of cybersecurity capabilities;
  • Personnel involved in cybersecurity governance processes and operational technology oversight; and
  • Enterprises who are just becoming aware of cybersecurity recommended practices with subject matter expertise and the collective wisdom of industry experts.

The new profile can be found here.

NIST and USCG Issue New Maritime Industry Cybersecurity Profile

New York Proposes First-in-the-Nation Cybersecurity Regulation for Financial Institutions

On September 13, 2016, the New York Department of Financial Services introduced a new rule that would require banks, insurance companies and other financial institutions regulated by the Department to establish and maintain a cybersecurity program designed to protect consumers and ensure the safety of New York’s financial services industry.  The proposed regulation is subject to a 45-day notice and public comment period, following the September 28, 2016 publication in the New York State register before final issuance.

Under the proposed rule, regulated financial institutions would be required to:

  • Establish a cybersecurity program;
  • Adopt a written cybersecurity policy;
  • Designate a Chief Information Security Officer responsible for implementing and overseeing the new cybersecurity program and policy; and
  • Have policies and procedures designed to ensure the security of information systems and nonpublic information accessible to third-parties.

Establishment of a Cybersecurity Program

According to the proposed rule, regulated financial institutions will need to establish a “cybersecurity program designed to ensure the confidentiality, integrity and availability of information systems that performs five core cybersecurity functions:”

  • Identification of cyber risks.
  • Implementation of policies and procedures to protect unauthorized access / use or other malicious acts.
  • Detection of cybersecurity events.
  • Responsiveness to identified cybersecurity events to mitigate any negative events.
  • Recovery from cybersecurity events and restoration of normal operations and services.

Additional requirements for each “cybersecurity program” include:

  • Annual penetration testing and vulnerability assessments.
  • Implementation and maintenance of an audit trail system to reconstruct transactions and log access privileges.
  • Limitations and periodic reviews of access privileges.
  • Written application security procedures, guidelines and standards that are reviewed and updated by the CISO at least annually.
  • Annual risk assessment of the confidentiality, integrity, and availability of information systems; adequacy of controls; and how identified risks will be mitigated or accepted.
  • Employment and training of cybersecurity personnel to stay abreast of changing threats and countermeasures.
  • Multi-factor authentication for individuals accessing internal systems who have privileged access or to support functions including remote access.
  • Timely destruction of nonpublic information that is no longer necessary except where required to be retained by law or regulation.
  • Monitoring of authorized users and cybersecurity awareness training for all personnel.
  • Encryption of all nonpublic information held or transmitted.
  • Written incident response plan to respond to, and recover from, any cybersecurity event.

Adoption of a Cybersecurity Policy

The new rule would require regulated financial institutions to adopt a written cybersecurity policy, setting forth “policies and procedures for the protection of their information systems and nonpublic information that addresses, at a minimum, the following:”

  • Information security.
  • Data governance and classification.
  • Access controls and identity management.
  • Business continuity and disaster recovery planning and resources.
  • Capacity and performance planning.
  • Systems operations and availability concerns.
  • Systems and network security.
  • Systems and network monitoring.
  • Systems and application development and quality assurance.
  • Physical security and environmental controls.
  • Customer data privacy.
  • Vendor and third-party service provider management.
  • Risk assessment.
  • Incident response.

Creation of Chief Information Security Officer

The new rule would require regulated financial institutions to designate a qualified individual to serve as a CISO, responsible for “overseeing and implementing the institution’s cybersecurity program and enforcing its cybersecurity policy.”  The new rule also would require the CISO to “report to the board, at least bi-annually to:”

  • Assess the confidentiality, integrity and availability of information systems.
  • Detail exceptions to cybersecurity policies and procedures.
  • Identify cyber risks.
  • Assess the effectiveness of the cybersecurity program.
  • Propose steps to remediate any inadequacies identified.
  • Include a summary of all material cybersecurity events that affected the regulated institution during the time period addressed by the report.

Third Party Protections

The new rule also would require regulated financial institutions to have policies and procedures designed to ensure the security of information systems and nonpublic information accessible to, or held by, third-parties, including the following:

  • Identification and risk assessment of third-parties with access to such information systems or such nonpublic information.
  • Minimum cybersecurity practices required to be met by such third-parties.
  • Due diligence processes used to evaluate the adequacy of cybersecurity practices of such third-parties.
  • Periodic assessment, at least annually, of third-parties and the continued adequacy of their cybersecurity practices.

A draft of the proposed rule is here.

New York Proposes First-in-the-Nation Cybersecurity Regulation for Financial Institutions

CASL compliance undertakings continue to mount

Another company that is well-known to consumers has agreed to enter into a compliance undertaking with the CRTC for alleged CASL violations.  Kellogg Canada Inc. has paid a monetary penalty of $60,000 and undertaken to enter into a compliance program to better address elements such as:

  • written CASL compliance policies and procedures;
  • training programs for employees;
  • tracking CASL complaints and resolution; and
  • monitoring and auditing mechanisms to assess compliance.

Notably, the compliance issues arose from messages that were sent: not only by Kellogg, but also by its third party service providers, and not long after CASL entered into force in July 2014.  This was a time when many companies were early on in the process of familiarizing themselves with the many CASL requirements, and implementing programs to make sure that databases, third party agencies (marketing companies and other service providers) and internal procedures were all in line.

The CRTC’s Notice regarding Kellogg’s 2014 compliance issues comes only a month after the CRTC issued its Enforcement Advisory to businesses and individuals on how to keep records of consent (see our recent blog post here), and less than a year before the Private Right of Action becomes available in Canada under CASL legislation, meaning that the CRTC will not be the only one taking businesses to task for CASL compliance.

CASL compliance undertakings continue to mount

Privacy Shield gets approval: certainty at last?

The European Commission yesterday issued an adequacy decision adopting the EU-US Privacy Shield, which replaces Safe Harbor as a framework for protecting European data transferred to the United States. Adoption had been expected since the European Commission announced on Friday that Member States had given their “strong support” to the new framework (although we note that Austria, Bulgaria, Croatia and Slovenia abstained from voting).

Are there any final changes?

There have been some tweaks to the Privacy Shield regime since the draft adequacy decision was issued in February. These include:

  • additional clarifications on the bulk collection of data. In particular, the Office of the Director of National Intelligence has clarified that the bulk collection of EU data can only be used under specific preconditions and must be “as targeted and focused” as possible;
  • introducing more explicit obligations on companies as regards limits on retention and collection of data. Specifically, companies now have to delete data that no longer serves the purpose for which it was collected; and
  • strengthening the Ombudsperson mechanism. In its press release, the Commission makes clear that the Ombudsperson is independent from the US intelligence services.

What were the criticisms?

The changes are intended to address a critique of Privacy Shield issued in April by European data protection regulators (aka the Article 29 Working Party), which concluded that Privacy  Shield – while a huge improvement on Safe Harbor – still did not meet EU privacy standards. This was largely because:

  • massive and indiscriminate data collection by American authorities was still not fully excluded;
  • the Privacy Shield lacked an explicit data retention principle; and
  • the powers and independent position of the Ombudsperson (who deals with national security-related complaints) were not made clear.

What does the future look like for Privacy Shield?

The Commission’s tweaks will address the A29WP’s concerns to some degree, but that mightn’t be enough to keep the privacy wolves at bay.

Privacy Shield may well be subject to a future challenge on the basis of “equivalence” with EU law, and it will almost certainly undergo further A29WP review. Potential issues remain, such as the fact that Privacy Shield (like Safe Harbor) is largely self-certified. Indeed, one of the main privacy advocates in the European Parliament (MEP Jan Philipp Albrecht) commented that the European Commission has “just signed a blank cheque for the transfer of personal data of EU citizens to the US, without delivering equivalent data protection rights”.  Max Schrems has said he will challenge it.

In the medium term, inconsistencies between Privacy Shield and the upcoming GDPR requirements could also limit Privacy Shield’s shelf life. Therefore, the climate seems ripe for challenge. Max Schrems has also sought to challenge model clauses in an application by the Irish DPA to the Irish High Court.

Privacy observers will also be keeping an eye on how Brexit plays out: will the UK find itself negotiating its own form of Privacy Shield to ensure EU adequacy?

Even so, Privacy Shield will be a valid solution for transfers to the US.  American companies may begin to self-certify with the US Commerce Department from 1 August, and we expect to see many large US vendors taking up this option. Microsoft has concluded on its official blog that the Privacy Shield “meets each of [the] requirements…of… European data protection law”.

Privacy Shield gets approval: certainty at last?

The TPP Agreement and Privacy

The Trans-Pacific Partnership Agreement (the “TPP Agreement”) is a regional trade and investment agreement negotiated by 12 Pacific Rim countries representing 40 percent of the global economy. Canada, the United States, Mexico, Japan, Malaysia, Vietnam and Australia are signatories. The TPP Agreement, which has 30 Chapters, ushers in a comprehensive program of tariff reduction for goods and services and establishes binding rules in a wide-range of subject areas, including financial services, cross border trade in services, investment, competition policy, intellectual property, telecommunications and electronic commerce. The TPP Agreement also touches on a number of privacy-related issues, including the cross-border flow of information, spam and encryption technology.

Cross-Border Flow of Information

The free flow of information across borders is important for international commerce and the trade in services, particularly information technology services. However, a number of countries regulate the export of data to other jurisdictions and/or require that service providers use local data servers, equipment and infrastructure as a condition of doing business. This has raised concerns that restrictions on cross-border information flows and data localization requirements may be misused as disguised trade barriers to favour domestic service providers.

Under the TPP Agreement, each Party must allow the cross-border transfer of information by electronic means, including personal information, in the course of business activities. In addition, no Party can require a service provider to use or locate computing facilities in its territory as a condition for conducting business in the territory. Exceptions are permitted in order to achieve a legitimate public policy objective, provided that the measure adopted is proportional to the objective and the measure is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade.

Unsolicited Commercial Electronic Messages

Unsolicited commercial electronic messages (CEMs) – also known as spam – can be exploited to deliver malware, spyware and other related network threats, which can undermine network security and privacy. The TPP Agreement requires each Party to adopt or maintain measures to minimize unsolicited CEMs, but provides each Party with flexibility on how to address the problem. A Party may either require organizations that send CEMs to obtain prior consent from recipients or provide recipients with the ability to prevent ongoing reception of those messages (unsubscribe mechanism).

Canada’s current anti-spam legislation (“CASL”) meets (and far exceeds) the obligations under the Agreement. CASL generally requires both opt-in consent and an unsubscribe mechanism for CEMs and sets out a myriad of disclosure and form requirements. It also implemented a strict enforcement regime.

Encryption

Encryption protects the security, confidentiality and privacy of data by converting data (plaintext) into unreadable data (ciphertext) through the use of a cryptographic algorithm. The use of encryption technology is a major policy issue with technology companies adopting strong encryption for devices (full-disk encryption) and communications on the internet (end-to-end encryption) to ensure data security and protect user privacy. National security agencies and law enforcement allege though, that the use of encryption undermines their ability to investigate criminals and terrorists, and are subsequently pressuring technology companies (and lawmakers) to allow for access to decrypted data (“backdoors”).

The TPP Agreement wades into this debate to ensure that encryption policies are not obstacles to trade, particularly with respect to Information and Communication Technology (ICT) products. Under the Agreement, a Party is not permitted to require a manufacturer or supplier of a commercial product that uses encryption to transfer a decryption key to the Party or integrate a particular encryption in the product as a condition for conducting business in the territory.

However, there are a number of important exceptions to this rule. First, the section does not apply to products used by a government entity. Second, the section does not preclude law enforcement authorities from requesting unencrypted communications pursuant to lawful authority (i.e. court order).  Third, the section does not apply to investigations by financial market regulators. Finally, the section is subject to the Security Exception in Chapter 29 of the TPP Agreement that permits a Party to apply any measure that it considers necessary to maintain or restore international peace and security, including the protection of its own essential security interests.

The TPP Agreement demonstrates that with the growth in digital trade and electronic commerce, international trade and investment agreements will increasingly address privacy-related issues.

For more information on the TPP Agreement or any of the subjects covered in this note, please contact a member of our team.

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The TPP Agreement and Privacy