by Douglas Brent, Attorney at Stoll Keenon Ogden PLLC
Annie Malka, Summer Associate at Stoll Keenon Ogden PLLC
We wrote earlier this spring about startling increases in the frequency and severity of cyber-attacks targeting financial institutions. Malware-based account takeovers have grabbed headlines all year, and most recently, one European airline recently had five million dollars swept from its bank account in an event bearing signs of the Dyre Wolf Trojan uncovered by IBM security researchers in April.
Against that backdrop, the Federal Financial Institutions Examination Council (FFIEC) recently issued a new round of guidelines aimed at minimizing both the risk of cyber criminals gaining unauthorized access to credential information, and also system exposure to vicious malware. And on June 3, the Comptroller of the Currency told the industry to expect a new assessment tool for improving protection against such threats, while hinting that the tool would “complement” a regulatory examination program.
While this form of guidance may be non-binding, we’ve previously noted that “best practices” guidance from industry standards groups can become the common law standard of care in litigation between banks and victimized customers. While the recent FFIEC statement claims to not contain “any new regulatory expectations” it is worth considering whether FFIEC’s latest missives raise the liability bar for banks. Moreover, if FFIEC delivers an assessment tool modeled on NIST cybersecurity standards, future court decisions adopting those standards could end up determining legal consequences for cyber-based claims.
FFIEC Risk Mitigation Guidelines
In a March 30, 2015 Joint Statement on attacks against customer credentials the FFIEC member agencies recommended the following to aid financial institutions in stopping cyber-attacks:
•Secure systems and services. Logical network segmentation, backups, air gapping, maintaining an inventory of authorized devices and software, physical segmentation of critical systems and other controls may mitigate the impact of a cyber-attack involving destructive malware.
•Test incident response and business continuity plans. Test the effectiveness of incident response plans at the financial institution and with 3rd-party processors to ensure that all employees understand their responsibilities. Simulate a cyber-attack involving destructive malware.
•Never stop assessing risk. Maintain an ongoing security risk assessment program that considers new and evolving threats and adjust consumer authentication, layered security, and other controls in response to identified risks.
•Monitor and prevent. Keep intrusion detection systems up-to-date. Establish a baseline environment to enable the detection of abnormal conduct.
•Protect against unauthorized access. Limit the number of persons with elevated privileges across the institution, review access rights periodically to confirm approvals are still appropriate to the job function and establish stringent expiration periods for unwarranted credentials. Establish authentication rules or implement multifactor authentication protocols for web-based control panels. (We’ve previously commented about the cases where lack of multifactor authentication led to liability.)
•Test critical systems regularly. Ensure controls are implemented based on risk. Limit sign-on attempts for critical systems and lock accounts once thresholds are exceeded.
•Enhance information security awareness and training programs. Require security awareness training across the institution, including how to identify and prevent phishing attempts.
•Participate in industry information-sharing forums, such as the Financial Services Information Sharing and Analysis Center. Incorporate information sharing with other financial institutions and service providers into risk mitigation strategies to identify, respond to and mitigate cyber security threats and incidents.
FFIEC Warns of Enterprise Risk from Destructive Malware
In a Second Joint Statement the FFIEC member agencies warned of possible destruction of critical banking infrastructure through cyber-attacks on the institutions themselves, whereby the paradigm shifts from attempts to steal to attempts to destroy. While the FFIEC’s general warning did not cite attacks on entities its members supervise, it likely alludes to the destructive malware that crippled operations at Sony Pictures late last year. Subsequent law enforcement bulletins described the devastation caused by the so-called “wiper” malware, noting it was capable of overriding all data on computer hard drives and immobilizing entire systems, effectively shutting down a business.
Because the banking industry is so prominent among U.S. critical infrastructure segments logically targeted by nation state actors, FFIEC’s reminder on enterprise risk is quite timely. Institutions left reeling for several days due to inoperable systems face more than customer defections – and public entities may be vulnerable to legal claims filed by the institution’s stockholders.
Historically, business continuity plans have focused on reinstating business operations following physical events such natural disasters. However, in today’s hastily evolving cyber world, resiliency hinges on a financial institution’s ability to quickly identify and minimize damage, recover compromised data, and rapidly restore operations from a broader set of events that include cyber-attacks involving destructive malware.
Cyber Assessment Tool Promised for Summer 2015
In remarks before the BITS Emerging Payments Forum on June 3, Comptroller Thomas J. Curry said a top priority is “to address the risks that cyber threats pose to individual banks and the banking system.” Curry described FFIEC’s efforts over the past year to conduct assessments at more than 500 institutions, the subsequent recommendation for institutions of all sizes to participate in the FS-ISAC, then explained that as a “follow-up” FFIEC will “soon be releasing a Cybersecurity Assessment Tool that financial institutions will find useful in evaluating their inherent cybersecurity risks, including those in existing and emerging payment areas, and their risk management capabilities.”
Curry’s call to action? Explaining that use of the new risk assessment tool will “shed light” on how well existing protection measures comport with a bank’s risk, the Comptroller said the threats are real and “the time to act is now.” The action he refers to includes not only the use of the tools, but the OCC’s “complementary cybersecurity examination program.” Our takeaway? Common law standards will continue to be forged by more insistent statements of agency guidance.
Banks that undertake a cyber-risk assessment should be aware that consultants’ work product and communications may be entitled to confidentiality when counsel retains the consultant for the purpose of giving legal advice. A lawyer from Stoll Keenon Ogden’s banking practice can help in protecting your review of your current processes. Our team can also review customer communications to evaluate and defend against litigation as a result of criminal cyber theft. We monitor the lawsuits, legislation and regulatory activity that will matter when your bank is attacked. Our Privacy and Information Security team stays current with changing regulations and guidance that can make the difference in your business practices and, if necessary, in court.