[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
PROTECTING YOUR PERSONAL DATA: HOW LAW ENFORCEMENT WORKS WITH THE
PRIVATE SECTOR TO PREVENT CYBERCRIME
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FIELD HEARING
before the
SUBCOMMITTEE ON CYBERSECURITY,
INFRASTRUCTURE PROTECTION,
AND SECURITY TECHNOLOGIES
of the
COMMITTEE ON HOMELAND SECURITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
APRIL 16, 2014
__________
Serial No. 113-65
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Printed for the use of the Committee on Homeland Security
[GRAPHIC] [TIFF OMITTED]
Available via the World Wide Web: http://www.gpo.gov/fdsys/
__________
U.S. GOVERNMENT PRINTING OFFICE
88-784 WASHINGTON : 2014
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COMMITTEE ON HOMELAND SECURITY
Michael T. McCaul, Texas, Chairman
Lamar Smith, Texas Bennie G. Thompson, Mississippi
Peter T. King, New York Loretta Sanchez, California
Mike Rogers, Alabama Sheila Jackson Lee, Texas
Paul C. Broun, Georgia Yvette D. Clarke, New York
Candice S. Miller, Michigan, Vice Brian Higgins, New York
Chair Cedric L. Richmond, Louisiana
Patrick Meehan, Pennsylvania William R. Keating, Massachusetts
Jeff Duncan, South Carolina Ron Barber, Arizona
Tom Marino, Pennsylvania Dondald M. Payne, Jr., New Jersey
Jason Chaffetz, Utah Beto O'Rourke, Texas
Steven M. Palazzo, Mississippi Filemon Vela, Texas
Lou Barletta, Pennsylvania Eric Swalwell, California
Richard Hudson, North Carolina Vacancy
Steve Daines, Montana Vacancy
Susan W. Brooks, Indiana
Scott Perry, Pennsylvania
Mark Sanford, South Carolina
Vacancy
Brendan P. Shields, Staff Director
Michael Geffroy, Deputy Staff Director/Chief Counsel
Michael S. Twinchek, Chief Clerk
I. Lanier Avant, Minority Staff Director
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SUBCOMMITTEE ON CYBERSECURITY, INFRASTRUCTURE PROTECTION, AND SECURITY
TECHNOLOGIES
Patrick Meehan, Pennsylvania, Chairman
Mike Rogers, Alabama Yvette D. Clarke, New York
Tom Marino, Pennsylvania William R. Keating, Massachusetts
Jason Chaffetz, Utah Filemon Vela, Texas
Steve Daines, Montana Vacancy
Scott Perry, Pennsylvania, Vice Bennie G. Thompson, Mississippi
Chair (ex officio)
Michael T. McCaul, Texas (ex
officio)
Alex Manning, Subcommittee Staff Director
Dennis Terry, Subcommittee Clerk
C O N T E N T S
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Page
STATEMENTS
The Honorable Patrick Meehan, a Representative in Congress From
the State of Pennsylvania, and Chairman, Subcommittee on
Cybersecurity, Infrastructure Protection, and Security
Technologies................................................... 1
The Honorable Yvette D. Clarke, a Representative in Congress From
the State of New York, and Ranking Member, Subcommittee on
Cybersecurity, Infrastructure Protection, and Security
Technologies................................................... 4
The Honorable Mike Fitzpatrick, a Representative in Congress From
the State of Pennsylvania...................................... 5
WITNESSES
Panel I
Mr. Ari Baranoff, Assistant Special Agent In Charge, Criminal
Investigative Division, United States Secret Service:
Oral Statement................................................. 7
Prepared Statement............................................. 9
Mr. Richard P. Quinn, Assistant Special Agent In Charge,
Philadelphia Field Office, Federal Bureau of Investigation:
Oral Statement................................................. 16
Prepared Statement............................................. 18
Mr. John J. ``Jack'' Whelan, District Attorney, Delaware County,
Pennsylvania:
Oral Statement................................................. 21
Prepared Statement............................................. 23
Panel II
Mr. Frederick ``Ted'' Peters, Chairman and CEO, Bryn Mawr Trust:
Oral Statement................................................. 37
Prepared Statement............................................. 39
Mr. Thomas Litchford, Vice President of Retail Technology,
National Retail Federation:
Oral Statement................................................. 40
Prepared Statement............................................. 42
Mr. Matthew Rhoades, Director, Cyberspace and Security Program,
Truman National Security Project and Center for National
Policy:
Oral Statement................................................. 45
Prepared Statement............................................. 47
PROTECTING YOUR PERSONAL DATA: HOW LAW ENFORCEMENT WORKS WITH THE
PRIVATE SECTOR TO PREVENT CYBERCRIME
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Wednesday, April 16, 2014
U.S. House of Representatives,
Committee on Homeland Security,
Subcommittee on Cybersecurity, Infrastructure Protection,
and Security Technologies,
Philadelphia, PA.
The subcommittee met, pursuant to call, at 10:18 a.m., at
the Paul Peck Alumni Center, Drexel University, 3142 Market
Street, Philadelphia, PA, Hon. Patrick Meehan [Chairman of the
subcommittee] presiding.
Members present: Representatives Meehan, Fitzpatrick, and
Clarke.
Mr. Meehan. The Committee on Homeland Security,
Subcommittee on Cybersecurity, Infrastructure Protection, and
Security Technologies will come to order. We are waiting for a
moment, although we will begin, because by the time I am
concluded with our opening statements and other things--my
partner, Ms. Clarke, the Ranking Member from New York, had a
little bit of trouble with the trains this morning, but she is,
I know, out of the train and on her way up, so I think we will
try to get the hearing started, and I will look forward to
having her make her opening statement as soon as we begin.
I am--want to first express my deep appreciation to Drexel
University for allowing us to use this beautiful venue for this
hearing, and to also take a moment to plug the tremendous work
that Drexel University is doing with the creation of their new
cyber institute, which is not only using research and
development to work with--the educational sector to work with
the private sector and the Government sector in identifying the
newest and best ways to deal with the threat of cyber--with
cybersecurity, and dealing with the threats to information, but
they are also going to be training the next generation of
participants in the process of helping us to create better
protections. I think it is a remarkable new area, and we are
very grateful to have that kind of a commitment here in this
region. I know it is something shared with other universities
as well, but particularly what Drexel is doing is noteworthy
around the country.
I also have to make note of this, guys, and it is not
customary, because of the angles of the sun, it is generally
law enforcement that has people locked in rooms with lights
shining in their faces. Then they, you know, then they ask the
tough questions. So this is kind of turnabout. We will have to
see how you enjoy that aspect of it.
At this moment I am going to ask unanimous consent for
Congressman Mike Fitzpatrick to participate in the hearing.
Hearing no objection, so ordered. I want to express my deep
appreciation to Congressman Fitzpatrick, not only for the work
that he does in the broad spectrum of issues for our region,
but because Congressman Fitzpatrick is growing in his
importance on the Financial Services Committee. This is an area
in which he has been spending time as well, and I am very
grateful for his participation. When my colleague, Ms. Clarke,
arrives, I will take a moment to comment on our relationship.
But allow me to begin by doing an opening statement.
I want to welcome all of the witnesses, and extend my
thanks for participating in today's hearing, and I appreciate
the effort taken on behalf of all of those involved in this
important field hearing. This is an official Congressional
hearing, as opposed to a town hall meeting, or something else
that we would traditionally do, so we have to abide by certain
rules of the Committee on Homeland Security, and the House of
Representatives. This is as if we are sitting in the House
today, so photography, and cameras and other things are limited
to accredited press, and we want to make sure that we respect
the decorum and the rules of the committee.
I am going to give my colleague a moment to collect herself
as I do my opening statement, but I would also--I did want to
take a moment while Congresswoman Clarke was here to share with
you--we have had the great fortune to be working together for
much of the last term on this important committee. While,
certainly, there are a few occasions where we have to zealously
argue for our philosophical positions, the fact of the matter
is it has been a remarkable working relationship. We have had
the ability to collectively identify and work on a number of
issues with respect to cybersecurity, including some very
substantial legislation that has passed the committee
unanimously, and in a bipartisan fashion, and has been a real
joy to be able to work with Congresswoman Clarke in this
capacity. I want to express my deep appreciation for you taking
the time to come down from New York to join with us today at
this field hearing. So I will recognize myself for an opening
statement.
Recent cyber breaches at retailers, including Target,
Nieman Marcus, and Michael's, have once again brought the
public's attention to the threat of criminals accessing their
personal information. Unfortunately, such data breaches are
neither new nor rare. The Target attack alone comprised the
information of approximately 110 million consumers, and it
could be months, or even years, before we know how many of
those customers will eventually be victims of fraud. In 2012,
an estimated 16.6 million Americans experienced identity theft,
costing consumers nearly $25 billion, so this problem is not
going away. Just last week many people learned about the so-
called Heartbleed vulnerability that affects the encryption
software used in many e-commerce sites.
While fraud is nothing new, the techniques and scope have
risen to a new level. Our increasingly interconnected world,
and the advancement of on-line shopping and banking, has made
our lives much more convenient, but it has also meant that a
sophisticated criminal can steal your account information
without ever being in the country. In fact, the biggest hotbed
of hackers is in Eastern Europe, where criminals can buy, sell,
and trade various pieces of software used to attack systems and
steal information.
The question then becomes: What is being done about it?
From the retailers responsible for protecting the information
in their systems, to the banks who are liable for fraudulent
charges, to law enforcement at every level, and that means
local, State, and Federal, who are charged with going after the
criminals, all of the stakeholders here play a role, and are
working hard to counter cyber fraud and identity theft. I add
that this is an issue that is well within the boundaries of our
committee, and I am pleased to be able to work with
Congresswoman Clarke as we engage in a series of hearings that
will unfold in dealing with this important question.
Consumers must also do their part to protect themselves.
Simple steps to increase cyber hygiene including creating
strong passwords and changing them regularly, using anti-virus
software, and keeping it updated, and most importantly, keeping
an eye out for suspicious activity on your computer, and in
bank accounts. So I am looking forward to hearing from all of
our witnesses about the outreach they do to inform consumers to
better protect themselves.
Our first panel of witnesses is directly responsible for
investigating cyber crimes at the Federal and local level. In
addition to its role as the lead agency investigating the
recent retail breaches, we will hear from the Secret Service
about the tools at their disposal, including the National Cyber
Forensics Institute, which trains local law enforcement
officials to investigate and prosecute cyber crimes, the Cyber
Intelligence Section that collects, analyzes, and disseminates
data, and the Electronic Crimes Task Force, that brings
together law enforcement, academia, and the private sector to
combat computer-based threats to our financial systems and
critical infrastructure.
Similarly, I am pleased to have the Federal Bureau of
Investigation, who will testify about their role in
investigating cyber-related crimes, and about the National
Cyber Investigative Joint Task Force, which was created in
partnership with the Department of Defense and the intelligence
community, also including law enforcement and the private
sector, to coordinate and share information. That is critical
as we deal with real-time transactions.
We are also going to hear from the local level, which is
vitally important, and I am pleased that District Attorney Jack
Whelan of Delaware County is able to be here, and he has a
criminal investigation division which leads local efforts to
fight cyber crime. District Attorney Whelan will share with us
thoughts on how he uses his resources to deal with the
investigations which have an effect on the community, and then,
in addition, how we are doing at the Federal level in
coordinating and helping to engage those resources at the local
level.
Our second panel will discuss efforts in the private sector
to prevent and respond to cyber attacks. They are the ones on
the front lines, fighting the problem, and continue to suffer
significant financial losses. I know we will likely hear, 85
percent of the assets that are engaged in the world of cyber
are in the hands of private entities. This partnership is more
critical than perhaps any other area. I am particularly
interested in hearing from them about how they interact with
law enforcement, and how we can help protect their customers. I
look forward to hearing from all of our witnesses today, and
want to thank everybody for their attendance.
Let me just conclude by saying one last thing. There are so
many different aspects of cyber. You know, we deal with the
threat of terrorism on a regular basis. We have State-sponsored
activities, which is quite sophisticated, and often deals with
the question of cyber espionage, and other kinds of things.
There is the reality that the cyber world is a new dimension
for warfare. In fact, there is a great deal of activity that
takes place with the Department of Defense, the intelligence
community, and others that operate in that domain.
But today we are focused on, how does this question come
back to the local level, to the local consumer, to the person
out there, to the small businessman, to the community banker?
Because in the aftermath of the major issues that we have
recently seen, such as Target, we realize that real lives are
affected, and so our purpose today is to focus in that unique
area, and I am grateful for the tremendous witnesses we have.
So I now recognize the Ranking Minority Member of the
subcommittee, the gentlelady from New York, Ms. Clarke, for any
statement she may have.
Ms. Clarke. I want to thank you, Mr. Chairman, for holding
this field hearing in Philadelphia today, a place I know that
is close to your heart, and I might say the City of Brotherly,
and I might add ``Sisterly'', Love, here on the campus of
Drexel University. It is certainly my honor and privilege to
come, and to hear from the witnesses today, and to thank you
for taking us into the field, where we will have an opportunity
to really reflect on how this type of cyber activity impacts on
our local communities.
Modern-day criminals increasingly rely on the internet and
advanced technologies to spread their criminal operations. I
think everyone would agree that the internet technology has now
emerged as a key factor for the majority of organized crime
activity. For instance, criminals can leverage the properties
of the internet to carry out traditional street crime, such as
distributing illicit drugs and sex trafficking. But what we are
here to talk about today is how criminals exploit the digital
world to assist crimes that are often technology-driven,
including identity theft, payment card fraud, and intellectual
property theft.
As we will hear today, the FBI considers high-tech crimes
to be the most significant crimes confronting the United States
as a Nation, and we, on the subcommittee, have shown an
increasing interest in guaranteeing the Federal Government has
the tools and capabilities to combat modern-day crime,
particularly those with cyber components, while safeguarding
privacy rights.
Today's cyber criminals make their crimes more profitable
by choosing specialties, and creating cyber networks of
colleagues. These types of criminals can victimize individuals
and organizations alike. They generally are motivated by self-
interest and profit, but cyber crimes can have public health
and National security consequences, especially when cyber
crimes are directed towards critical infrastructure, such as
our hospitals, water systems, Governmental entities, or our
Nation's financial systems.
U.S. officials face the challenging task of identifying the
perpetrators of malicious cyber incidents, in which victim and
criminal can be far removed from one another. The person or
persons behind an incident can range from lone actors to
expansive criminal networks, or even nation-states. This
challenge of attribution is further compounded by the anonymity
afforded by the digital realm.
It can sometimes be difficult to determine the actor's
motivation. Is the criminal driven by greed or glory, in the
forms of recognition among fellow criminals in the cyber world,
or does the criminal have broader ideological motives? Finding
the answers to these questions is key to distinguishing between
cyber crimes and other cyber threats, such as cyber attacks,
cyber espionage, and cyber warfare. Relevant distinctions exist
between these various malicious activities in the cyber domain,
just as lines have been drawn between their real-world
counterparts, and today's hearing will help us understand those
distinctions.
In July 2011 the Obama administration released a strategy
to combat transnational organized crime, addressing converging
threats to National security. This strategy provides the
Federal Government's first broad conceptualization of
transnational organized crime, highlighting it as a National
security concern. It highlights 10 primary threat categories
posed by transnational organized cyber crime, penetration of
state institutions, corruption, and the threats to governance,
threats to the economy, threats to U.S. competitiveness in
strategic markets, the nexus between criminals, terrorists, and
insurgents, expansion of drug trafficking, human smuggling,
trafficking in persons, weapons trafficking, intellectual
property theft, and finally, cyber crime.
The President's strategy outlies, excuse me, outlines key
actions to counter the range of threats posed by building
international capacity, cooperation, and partnerships, and
taking shared responsibility to identify what actions Federal,
State, and local entities can take to protect against the
threat, and impact on transnational cyber crime.
We are here today to discuss complex prosecutorial and
investigative problems that face law enforcement officials and
companies when dealing with cyber crime, and I look forward to
your testimony. With that, Mr. Chairman, I yield back.
Mr. Meehan. I want to thank the Ranking Member for her
opening statement, and I want to express now my deep
appreciation to my colleague from Bucks County, Congressman
Fitzpatrick, for joining us today, and I recognize him for any
opening statement he may like to make.
Mr. Fitzpatrick. This is an issue that affects just about
every sector of our lives, sector of our industry. As the
Chairman did thank Drexel University, not only for hosting us,
but for your interest in the issue of cyber terrorism, for what
you have done so far in teaching students, and being involved
in the community, and what we know you will continue to do in
the future.
The committee on which I serve, which is Financial
Services, held a subcommittee hearing on this exact subject
just last month, and we were also joined at the subcommittee
hearing by law enforcement and financial service industry
representatives, and it was a really informative hearing.
The subject of this morning's hearing is an important
subject that we cannot spend enough time on. Cybersecurity has
privacy, financial, law enforcement, and, quite frankly,
National defense implications. This is a critical issue that is
not only--that is only going to grow in importance as we come
to rely even more on digital and cyber infrastructure, and
cyber transactions.
During the Financial Services hearing I mentioned, the
feedback that I was hearing, and from small community financial
institutions back home in my district in Bucks County,
Pennsylvania, was how they and their customers are increasingly
concerned about cybersecurity. For them, the cost is not just
the money that is stolen, but they are also responsible for
notifying customers and for replacing credit cards and debit
cards after the incident occurs. That takes manpower. That has
material costs. These costs are borne by financial institutions
of all sizes, but are disproportionately burdensome to
community banks and small financial institutions, and credit
unions as well.
Protecting personal information and financial data is a
shared responsibility. It is going to take collaboration and
cooperation among retailers, private institutions, and
financial service providers. As this hearing will explore, the
Government has an important role to play not only in law
enforcement, but ensuring that individuals, businesses, and
public property are protected. After all these are homeland
security issues. It is not just criminals who are seeking to
exploit security lapses, but also nation-states, and non-state
enemies of the United States who could, and have, attacked our
banking sectors, as well as other critical infrastructure
areas.
So, again, I am very interested in this topic. I appreciate
the Chairman calling the hearing here in the City of Brotherly
Love, the city of Philadelphia. We are all looking forward to
the testimony of the two panels today, and I appreciate the
chance to participate.
Mr. Meehan. I thank the Congressman for being here. We are
pleased as well to have two distinguished panels of witnesses
before us today on this important topic. I am going to
introduce the first panel, and then recognize each of you for
your testimony.
First, to my left, is Mr. Ari Baranoff. He is an assistant
special agent in charge of the criminal investigative division
with the United States Secret Service. Mr. Baranoff has had
over 19 years of Federal law enforcement experience, the
majority of which has been with the Secret Service. He is
currently assigned to the Secret Service headquarters in
Washington, DC, and is the manager of the cyber investigations
branch, where he has overseen the investigation and capture of
the Secret Service's most wanted financial criminals.
Prior to assuming command of the cyber investigations
branch, Mr. Baranoff led the New York Electronic Crimes Task
Force, and it is a--I am greatly appreciative that you would
travel from Washington to be with us here today. All of our
witnesses are among the Nation's top experts in these areas.
Richard Quinn, from the Federal Bureau of Investigation, is
an assistant special agent in charge here in the Philadelphia
field office. He focuses on National security issues. Prior to
his work in the Philadelphia field office, Mr. Quinn was an FBI
counterterrorism agent in New York. Mr. Quinn witnessed the
horrific attacks on the World Trade Center on September 11,
2011, and was one of five agents assigned to the primary team
to investigate the aftermath. That is the kind of an incident
that always lingers in our minds, and I think one day after the
first anniversary of the Boston bombings as well, we still live
with a very real recognition that--a lot of why we are here
today, and the great work you are doing protecting our homeland
from the threat of terror, in addition to things like the cyber
threat.
Here from the local law enforcement community, representing
his colleagues from across the region, is district attorney for
Delaware County, Pennsylvania, Jack Whelan. Jack was elected in
November 2011. As a district attorney, DA Whelan's responsible
for the prosecution of criminal offenses within the
jurisdiction of Delaware County, including homicides and drug
enforcement, as well as cyber crime. Before becoming district
attorney, Mr. Whelan served as the chairman of the Delaware
County Council, where he took a lead on many public safety
issues that focused on homeland security. I might add, the
Internet Crimes Against Children Task Force is housed in the
District Attorney's Office for the State-wide region in
Delaware County, and it has been a mechanism by which that
office, working with a consortium, has been at the cutting edge
of cyber investigations across the board.
So I want to thank all of you for being here. The full
written statements of the witnesses will appear in the record.
So we don't have the usual demands that we might customarily
have because of the size of our committee here this morning,
but I will still ask you to do your best to stay within the
time frames, to the extent that you can. So, at this point, I
will recognize Mr. Baranoff for your opening statement.
STATEMENT OF ARI BARANOFF, ASSISTANT SPECIAL AGENT IN CHARGE,
CRIMINAL INVESTIGATIVE DIVISION, UNITED STATES SECRET SERVICE
Mr. Baranoff. Thank you, sir. Good morning, Chairman
Meehan, Ranking Member Clarke, and distinguished Members of the
subcommittee. Thank you for the opportunity to testify here at
Drexel University on behalf of the Department of Homeland
Security regarding the cyber crime threats our Nation faces,
and how law enforcement works with the private sector to
prevent cyber crime.
Our modern financial system depends on information
technology for convenience and efficiency. Accordingly,
criminals motivated by greed have adapted their methods, and
are increasingly using cyber space to exploit our Nation's
financial payment systems to engage in fraud and other illicit
activities. The widely-reported payment card data breaches of
Target, Nieman Marcus, White Lodging, and other retailers are
just recent examples of this trend. The U.S. Secret Service is
investigating these recent data breaches, and we are confident
that we will bring the criminals responsible to justice.
However, what you don't hear in the news coverage is the
numerous data breaches the Secret Service prevents by
discreetly working with businesses to disrupt and thwart the
plans of cyber criminals. This year is the 30th anniversary of
when Congress first defined as specific Federal crimes both
unauthorized access to computers and access device fraud, while
explicitly assigning the Secret Service authority to
investigate these crimes. Over the past 3 decades the Secret
Service has continuously innovated in how we investigate these
crimes to defeat the criminal organizations responsible for
major data breaches.
In support of the Department of Homeland Security's mission
to safeguard and secure cyber space, the Secret Service uses a
variety of investigative methods to develop information
regarding the most capable cyber threat actors. To prevent
losses, we share information with victim companies of on-going
or planned network intrusions to prevent any financial losses.
To accomplish this mission, the Secret Service currently
operates a network of 35 electronic crimes task forces, which
in 2001 Congress assigned the mission of preventing, detecting,
and investigating various forms of electronic crimes, including
potential terrorist attacks against critical infrastructure and
financial payment systems. In addition, through our
department's National Cybersecurity and Communications
Integration Center, the NCCIC, the Secret Service also widely
shares technical cybersecurity information, while protecting
civil rights and civil liberties in order to enable other
organizations to reduce their cyber risks by mitigating
technical vulnerabilities. As a result of our cyber crime
investigations over the past 4 years, the Secret Service has
arrested nearly 5,000 cyber criminals. In total, these
criminals were responsible for over a billion dollars in fraud
losses. We estimate our investigations prevented over $11
billion in fraud losses.
Secret Service is committed to building the cybersecurity
capacity of our Nation, and developing a greater understanding
of cybersecurity threats. Universities and research
institutions like Drexel, and its recently-opened cybersecurity
institute, are critical partners of the Secret Service in these
efforts. Drexel University continues to be a valued member of
our Philadelphia Electronic Crimes Task Force, and this highly-
productive partnership is an excellent example of the sort of
relationships the Secret Service has developed with over 200
academic institutions Nation-wide to our electronic crimes task
forces. The Secret Service also partners with the private
sector and academia to research cyber threats, and publish
information on cyber crime trends, through reports like the
Carnegie-Mellon CERT Insider Threat Study, the Verizon Data
Breach Investigations Report, and the Trustwave Global Security
Report.
Secret Service develops the capability of State and local
law enforcement to investigate cyber crime. At our National
Computer Forensics Institute in Hoover, Alabama, the Secret
Service trains hundreds of State and local law enforcement in
methods for investigating cyber crime. Since opening in 2008,
the institute has held over 150 cyber and digital forensics
courses in 16 separate subjects, and trained and equipped more
than 3,000 police investigators, prosecutors, and judges from
all 50 States, and three U.S. territories. These graduates
represent more than 1,000 agencies Nation-wide, and include 52
law enforcement officials right here in the Philadelphia
Metropolitan area.
Secret Service has a long history of protecting our
Nation's financial system from threats. In 1865 the threat we
were founded to address was that of counterfeit currency. As
our financial payment system has evolved from paper, to
plastic, to now digital information, so too has our
investigative mission. The Secret Service is committed to
continuing to protect our Nation, even as criminals
increasingly use cyber space to engage in criminal activity.
Thank you for the opportunity to testify on this important
topic, and I look forward to your questions.
[The prepared statement of Mr. Baranoff follows:]
Prepared Statement of Ari Baranoff
April 16, 2014
Good morning Chairman Meehan, Ranking Member Clarke, and
distinguished Members of the subcommittee. Thank you for the
opportunity to testify here at Drexel University on the risks and
challenges the Nation faces from cyber crime and the importance of
partnering with the private sector to address these challenges. Based
on the United States Secret Service's (Secret Service) 3 decades of
experience investigating cyber crime and the understanding we have
developed regarding the modern transnational organized cyber crime
threat to our Nation, I hope to provide this subcommittee useful
insight into these issue from a Federal law enforcement perspective.
the role of the secret service
The Secret Service was founded in 1865 to protect the U.S.
financial system from the counterfeiting of our National currency. As
the Nation's financial system evolved from paper to plastic to
electronic transactions, so too has the Secret Service's investigative
mission. Today, our modern financial system depends heavily on
information technology for convenience and efficiency. Accordingly,
criminals have adapted their methods and are increasingly using cyber
space to exploit our Nation's financial payment system by engaging in
fraud and other illicit activities. This is not a new trend; criminals
have been committing cyber financial crimes since at least 1970.\1\
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\1\ Beginning in 1970, and over the course of 3 years, the chief
teller at the Park Avenue branch of New York's Union Dime Savings Bank
manipulated the account information on the bank's computer system to
embezzle over $1.5 million from hundreds of customer accounts. This
early example of cyber crime not only illustrates the long history of
cyber crime, but the difficulty companies have in identifying and
stopping cyber criminals in a timely manner--a trend that continues
today.
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Congress promulgated 18 USC 1029-1030 as part of enacting the
Comprehensive Crime Control Act of 1984. Those subsections explicitly
assigned the Secret Service authority to investigate these criminal
violations.\2\ They first established as specific Federal crimes
unauthorized access to computers \3\ and the fraudulent use, or
trafficking of, access devices \4\--defined as any piece of information
or tangible item that is a means of account access that can be used to
obtain money, goods, services, or other thing of value.\5\
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\2\ See 18 USC 1029(d) & 1030(d)(1).
\3\ See 18 USC 1030.
\4\ See 18 USC 1029.
\5\ See 18 USC 1029(e)(1).
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Secret Service investigations have resulted in the arrest and
successful prosecution of cyber criminals involved in the largest known
data breaches, including those of TJ Maxx, Dave & Buster's, Heartland
Payment Systems, and others. Over the past 4 years Secret Service cyber
crime investigations have resulted in over 4,900 arrests, associated
with approximately $1.37 billion in fraud losses and the prevention of
over $11.24 billion in potential fraud losses, with a 99.5% conviction
rate in cases that go to trial. Through our work with our partners at
the Department of Justice (DOJ), in particular the local U.S. Attorney
Offices, the Computer Crime and Intellectual Property Section (CCIPS),
the International Organized Crime Intelligence and Operations Center
(IOC-2), and others, we are confident we will continue to bring the
cyber criminals that perpetrate major data breaches to justice.
the transnational cyber crime threat
Advances in computer technology and greater access to personally
identifiable information (PII) via the internet have created on-line
marketplaces for transnational cyber criminals to share stolen
information and criminal methodologies. As a result, the Secret Service
has observed a marked increase in the quality, quantity, and complexity
of cyber crimes targeting private industry and critical infrastructure.
These crimes include network intrusions, hacking attacks, malicious
software, and account takeovers leading to significant data breaches
affecting every sector of the world economy. The recently reported data
breaches of Target and Neiman Marcus are just the most recent, well-
publicized examples of this decade-long trend of major data breaches
perpetrated by cyber criminals who are intent on targeting our Nation's
retailers and financial payment systems.
The increasing level of collaboration among cyber criminals allows
them to compartmentalize their operations, greatly increasing the
sophistication of their criminal endeavors as they develop expert
specialization. These specialties raise both the complexity of
investigating these cases, as well as the level of potential harm to
companies and individuals. For example, illicit underground cyber crime
marketplaces allow criminals to buy, sell, and trade malicious
software, access to sensitive networks, spamming services, payment card
data, PII, bank account information, brokerage account information,
hacking services, and counterfeit identity documents. These illicit
digital marketplaces vary in size, with some of the more popular sites
boasting membership of approximately 80,000 users. These digital
marketplaces often use various digital currencies, and cyber criminals
have made extensive use of digital currencies to pay for criminal goods
and services or launder illicit proceeds.
The Secret Service has successfully investigated many underground
cyber criminal marketplaces. In one such infiltration, the Secret
Service initiated and conducted a 3-year investigation that led to the
indictment of 11 perpetrators allegedly involved in hacking nine major
U.S. retailers and the theft and sale of more than 40 million credit
and debit card numbers. The investigation revealed that defendants from
the United States, Estonia, China, and Belarus successfully obtained
credit and debit card numbers by hacking into the wireless computer
networks of major retailers--including TJ Maxx, BJ's Wholesale Club,
Office Max, Boston Market, Barnes & Noble, Sports Authority, and Dave &
Buster's. Once inside the networks, these cyber criminals installed
``sniffer'' programs \6\ that would capture card numbers, as well as
password and account information, as they moved through the retailers'
credit and debit processing networks. After the data was collected, the
conspirators concealed the information in encrypted computer servers
that they controlled in the United States and Eastern Europe. The
credit and debit card numbers were then sold through on-line
transactions to other criminals in the United States and Eastern
Europe. The stolen numbers were ``cashed out'' by encoding card numbers
on the magnetic strips of blank cards. The defendants then used these
fraudulent cards to withdraw tens of thousands of dollars at a time
from ATMs. The defendants were able to conceal and launder their
illegal proceeds by using anonymous internet-based digital currencies
within the United States and abroad, and by channeling funds through
bank accounts in Eastern Europe.\7\
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\6\ Sniffers are programs that detect particular information
transiting computer networks, and can be used by criminals to acquire
sensitive information from computer systems.
\7\ Additional information on the criminal use of digital
currencies can be referenced in testimony provided by U.S. Secret
Service Special Agent in Charge Edward Lowery before the Senate
Homeland Security and Governmental Affairs Committee in a hearing
titled, ``Beyond Silk Road: Potential Risks, Threats, and Promises of
Virtual Currencies'' (November 18, 2013).
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In data breaches like these the effects of the criminal acts
extended well beyond the companies compromised, potentially affecting
millions of individual card holders. Proactive and swift law
enforcement action protects consumers by preventing and limiting the
fraudulent use of payment card data, identity theft, or both. Cyber
crime directly impacts the U.S. economy by requiring additional
investment in implementing enhanced security measures, inflicting
reputational damage on U.S. firms, and direct financial losses from
fraud--all costs that are ultimately passed on to consumers.
secret service strategy for combating this threat
The Secret Service proactively investigates cyber crime using a
variety of investigative means to infiltrate these transnational cyber
criminal groups. As a result of these proactive investigations, the
Secret Service is often the first to learn of planned or on-going data
breaches and is quick to notify financial institutions and the victim
companies with actionable information to mitigate the damage from the
data breach and terminate the criminal's unauthorized access to their
networks. One of the most poorly understood facts regarding data
breaches is that it is rarely the victim company that first discovers
the criminal's unauthorized access to their network; rather it is law
enforcement, financial institutions, or other third parties that
identify and notify the likely victim company of the data breach by
identifying the common point of origin of the sensitive data being
trafficked in cyber crime marketplaces.
A trusted relationship with the victim is essential for confirming
the crime, remediating the situation, beginning a criminal
investigation, and collecting evidence. The Secret Service's global
network of field offices, including our 35 Electronic Crimes Task
Forces (ECTFs), are essential for building and maintaining these
trusted relationships, along with the Secret Service's commitment to
protecting victims' privacy and the confidentiality of their
information.
When the Secret Service identifies a potential network intrusion,
the Secret Service contacts the owner of the suspected compromised
computer systems in order to assess the data breach and to stop the
continued theft of sensitive information and the exploitation of a
network. Once the victim of a data breach confirms that unauthorized
access to their networks has occurred, the Secret Service works with
the local U.S. Attorney's office, or appropriate State and local
officials, to begin a criminal investigation of the potential violation
of 18 USC 1030. During the course of this criminal investigation, the
Secret Service identifies the malware and means of access used to
acquire data from the victim's computer network. In order to enable
other companies to mitigate their cyber risk based on current cyber
crime methods, we quickly share information concerning the
cybersecurity incident with the widest audience possible, while
protecting grand jury information, the integrity of on-going criminal
investigations, and the victims' privacy and confidentiality. We share
this cybersecurity information through:
Our Department's National Cybersecurity & Communications
Integration Center (NCCIC);
The Information Sharing and Analysis Centers (ISAC);
Our ECTFs;
The publication of joint industry notices;
Our numerous partnerships developed over the past 3 decades
in investigating cyber crimes; and,
Contributions to leading industry and academic reports like
the Verizon Data Breach Investigations Report, the Trustwave
Global Security Report, and the Carnegie Mellon CERT Insider
Threat Study.
As we share cybersecurity information discovered in the course of
our criminal investigation, we also continue our investigation in order
to apprehend and bring to justice those involved. Due to the inherent
challenges in investigating transnational crime, particularly the lack
of cooperation of some countries with law enforcement investigations,
occasionally it takes years to finally apprehend the top tier criminals
responsible. For example, Dmitriy Smilianets and Vladimir Drinkman were
arrested in June 2012, as part of a multi-year investigation by the
Secret Service, while they were traveling in the Netherlands thanks to
the assistance of Dutch law enforcement. The alleged total fraud loss
from their cyber crimes exceeds $105 million.
As a part of our cyber crime investigations, the Secret Service
also targets individuals who operate illicit infrastructure that
supports the transnational organized cyber criminal. For example, in
May 2013 the Secret Service, as part of a joint investigation through
the Global Illicit Financial Team, shut down the digital currency
provider Liberty Reserve. Liberty Reserve is alleged to have had more
than 1 million users worldwide and to have laundered more than $6
billion in criminal proceeds. This case is believed to be the largest
money laundering case ever prosecuted in the United States and is being
jointly prosecuted by the U.S. Attorney's Office for the Southern
District of New York and DOJ's Asset Forfeiture and Money Laundering
Section. In a coordinated action with the Department of the Treasury,
Liberty Reserve was identified as a financial institution of primary
money laundering concern under Section 311 of the USA PATRIOT Act,
effectively cutting it off from the U.S. financial system.
collaboration with other federal agencies and international law
enforcement
While cyber criminals operate in a world without borders, the law
enforcement community does not. The increasingly multi-national, multi-
jurisdictional nature of cyber crime cases has increased the time and
resources needed for successful investigation and adjudication. The
partnerships developed through our ECTFs, the support provided by our
Criminal Investigative Division, the liaison established by our
overseas offices, and the training provided to our special agents via
Electronic Crimes Special Agent Program are all instrumental to the
Secret Service's successful network intrusion investigations.
One example of the Secret Service's success in these investigations
is the case involving Heartland Payment Systems. As described in the
August 2009 indictment, a transnational organized criminal group
allegedly used various network intrusion techniques to breach security
and navigate the credit card processing environment. Once inside the
networks, they installed ``sniffer'' programs to capture card numbers,
as well as password and account information. The Secret Service
investigation, the largest and most complex data breach investigation
ever prosecuted in the United States, revealed that data from more than
130 million credit card accounts were at risk of being compromised and
exfiltrated to a command-and-control server operated by an
international group directly related to other on-going Secret Service
investigations. During the course of the investigation, the Secret
Service uncovered that this international group committed other
intrusions into multiple corporate networks to steal credit and debit
card data. The Secret Service relied on various investigative methods,
including subpoenas, search warrants, and Mutual Legal Assistance
Treaty (MLAT) requests to identify three main suspects. As a result of
the investigation, these primary suspects were indicted for various
computer-related crimes. The lead defendant in the indictment pled
guilty and was sentenced to 20 years in Federal prison. This
investigation is on-going with over 100 additional victim companies
identified.
Recognizing these complexities, several Federal agencies are
collaborating to investigate cases and identify proactive strategies.
Greater collaboration within the Federal, State, and local law
enforcement community enhances information sharing, promotes efficiency
in investigations, and facilitates efforts to de-conflict in cases of
concurrent jurisdiction. For example, the Secret Service has
collaborated extensively with DOJ's CCIPS, which ``prevents,
investigates, and prosecutes computer crimes by working with other
government agencies, the private sector, academic institutions, and
foreign counterparts.''\8\ The Secret Service's ECTFs are a natural
complement to CCIPS, resulting in an excellent partnership over the
years. In the last decade, nearly every major cyber investigation
conducted by the Secret Service has benefited from CCIPS contributions.
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\8\ U.S. Department of Justice. (n.d.). Computer Crime &
Intellectual Property Section: About CCIPS. Retrieved from http://
www.justice.gov/criminal/cybercrime/.
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The Secret Service also partners with numerous international law
enforcement agencies, including the FBI. For example, in August 2010, a
joint operation yielded the seizure of 143 computer systems--one of the
largest international seizures of digital media obtained by U.S. law
enforcement--consisting of 85 terabytes of data, which was transferred
to law enforcement authorities in the United States. The data was
seized from a criminal internet service provider located in Odessa,
Ukraine, also referred to as a ``Bullet Proof Hoster.''
The case of Vladislav Horohorin is another example of successful
cooperation between the Secret Service and its law enforcement partners
around the world. Mr. Horohorin, one of the world's most notorious
traffickers of stolen financial information, was arrested while
traveling in France on August 25, 2010, pursuant to a request for his
provisional arrest with a view toward extradition to the United States.
Mr. Horohorin created the first fully-automated on-line store which
held stolen credit card data for sale. Both CCIPS and the Office of
International Affairs at DOJ played critical roles in this
apprehension.
Apprehending transnational cyber criminals like these is made
possible by the Secret Service's 24 international field offices
developing close partnerships with numerous foreign law enforcement
agencies in order to combat transnational crime. To strengthen our
ability to investigate transnational cyber crime, the Secret Service
maintains ECTFs in London and Rome, has assigned agents to INTERPOL and
EUROPOL, and operates cyber crime working groups in the Netherlands,
Estonia, Lithuania, Latvia, Ukraine, and Germany. The Secret Service
also trains numerous international partners on investigating cyber
crime; in the past 3 years the Secret Service has trained over 500 law
enforcement officials representing over 90 countries in investigating
cyber crimes.
The Secret Service investigations of transnational crime are
facilitated by the dedicated efforts of both the Department of State
and the DOJ's Office of International Affairs to execute MLATs and
other forms of international law enforcement cooperation, in addition
to the personal relationships that develop between Secret Service
agents and their foreign counterparts through these working groups and
training efforts.
Within DHS, the Secret Service benefits from a close relationship
with Immigration and Customs Enforcement's Homeland Security
Investigations (ICE-HSI). Since 1997, the Secret Service, ICE-HSI, and
IRS-CI have jointly trained on computer investigations through the
Electronic Crimes Special Agent Program (ECSAP). ICE-HSI is also a
member of Secret Service ECTFs, and ICE-HSI and the Secret Service have
partnered on numerous cyber crime investigations including the recent
take-down of the digital currency Liberty Reserve.
To further its cybersecurity information-sharing efforts, the
Secret Service has strengthened its relationship with the National
Protection and Programs Directorate (NPPD), including the NCCIC. As the
Secret Service identifies malware, suspicious IPs, and other
information through its criminal investigations, it shares information
with our Department's NCCIC. The Secret Service continues to build upon
its full-time presence at NCCIC to coordinate its cyber programs with
other Federal agencies.
As a part of these efforts, and to ensure that information is
shared in a timely and effective manner, the Secret Service has
personnel assigned to the following DHS and non-DHS entities:
NPPD's National Cybersecurity & Communications Integration
Center (NCCIC);
NPPD's Office of Infrastructure Protection;
DHS's Science and Technology Directorate (S&T);
The National Cyber Investigative Joint Task Force (NCIJTF);
Each FBI Joint Terrorism Task Force (JTTF), including the
National JTTF;
Department of the Treasury--Office of Terrorist Financing
and Financial Crimes (TFFC);
Department of the Treasury--Financial Crimes Enforcement
Network (FinCEN);
Central Intelligence Agency;
DOJ's International Organized Crime and Intelligence
Operations Center (IOC-2);
Drug Enforcement Administration's Special Operations
Division;
EUROPOL; and
INTERPOL.
The Secret Service is committed to ensuring that all its
information-sharing activities comply with applicable laws,
regulations, and policies, including those that pertain to privacy,
confidentiality, and civil liberties.
secret service framework
To protect our financial infrastructure, industry, and the American
public, the Secret Service has adopted a multi-faceted approach to
aggressively combat cyber and computer-related crimes.
Electronic Crimes Task Forces
In 1995, the Secret Service New York Field Office established the
New York Electronic Crimes Task Force (ECTF) to combine the resources
of academia, the private sector, and local, State, and Federal law
enforcement agencies to combat computer-based threats to our financial
payment systems and critical infrastructures. In 2001, Congress
directed the Secret Service to establish a Nation-wide network of ECTFs
to ``prevent, detect, and investigate various forms of electronic
crimes, including potential terrorist attacks against critical
infrastructure and financial payment systems.''\9\
---------------------------------------------------------------------------
\9\ See Public Law 107-56 Section 105 (appears as note following 18
U.S.C. 3056).
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Secret Service field offices currently operate 35 ECTFs, including
two based overseas in Rome, Italy, and London, England. Membership in
our ECTFs includes: Over 4,000 private-sector partners; over 2,500
international, Federal, State, and local law enforcement partners; and
over 350 academic partners. By joining our ECTFs, our partners benefit
from the resources, information, expertise, and advanced research
provided by our international network of members while focusing on
issues with significant regional impact.
Cyber Intelligence Section
Another example of our partnership approach with private industry
is our Cyber Intelligence Section (CIS) which analyzes evidence
collected as a part of Secret Service investigations and disseminates
information in support of Secret Service investigations world-wide and
generates new investigative leads based upon its findings. CIS
leverages technology and information obtained through private-sector
partnerships to monitor developing technologies and trends in the
financial payments industry for information that may be used to enhance
the Secret Service's capabilities to prevent and mitigate attacks
against the financial and critical infrastructures. CIS also has an
operational unit that investigates international cyber criminals
involved in cyber intrusions, identity theft, credit card fraud, bank
fraud, and other computer-related crimes. The information and
coordination provided by CIS is a crucial element to successfully
investigating, prosecuting, and dismantling international criminal
organizations.
Electronic Crimes Special Agent Program
A central component of the Secret Service's cyber crime
investigations is its Electronic Crimes Special Agent Program (ECSAP),
which is comprised of nearly 1,400 Secret Service special agents who
have received at least one of three levels of computer crimes-related
training.
Level I--Basic Investigation of Computers and Electronic Crimes
(BICEP).--The BICEP training program focuses on the investigation of
electronic crimes and provides a brief overview of several aspects
involved with electronic crimes investigations. This program provides
Secret Service agents and our State and local law enforcement partners
with a basic understanding of computers and electronic crime
investigations and is now part of our core curriculum for newly-hired
special agents.
Level II--Network Intrusion Responder (ECSAP-NI).--ECSAP-NI
training provides special agents with specialized training and
equipment that allows them to respond to and investigate network
intrusions. These may include intrusions into financial sector computer
systems, corporate storage servers, or various other targeted
platforms. The Level II trained agent will be able to identify critical
artifacts that will allow for effective investigation of identity
theft, malicious hacking, unauthorized access, and various other
related electronic crimes.
Level III--Computer Forensics (ECSAP-CF).--ECSAP-CF training
provides special agents with specialized training and equipment that
allows them to investigate and forensically obtain digital evidence to
be utilized in the prosecution of various electronic crimes cases, as
well as criminally-focused protective intelligence cases.
These agents are deployed in Secret Service field offices
throughout the world and have received extensive training in forensic
identification, as well as the preservation and retrieval of
electronically-stored evidence. ECSAP-trained agents are computer
investigative specialists, qualified to conduct examinations on all
types of electronic evidence. These special agents are equipped to
investigate the continually evolving arena of electronic crimes and
have proven invaluable in the successful prosecution of criminal groups
involved in computer fraud, bank fraud, identity theft, access device
fraud, and various other electronic crimes targeting our financial
institutions and private sector.
National Computer Forensics Institute
The National Computer Forensics Institute (NCFI), located in
Hoover, AL, is the result of a partnership between the Secret Service,
NPPD, the State of Alabama, and the Alabama District Attorney's
Association. The goal of this facility is to provide a National
standard of training for a variety of electronic crimes investigations.
The program offers State and local law enforcement officers and
prosecutors the training necessary to perform computer forensics
examinations, respond to network intrusion incidents, and to conduct
electronic crimes investigations, while judges receive general
education in these areas. Since opening in 2008, the institute has held
over 150 cyber and digital forensics courses in 16 separate subjects
and trained and equipped more than 3,000 State and local officials,
including more than 2,300 police investigators, 840 prosecutors, and
230 judges from all 50 States and three U.S. territories. These NCFI
graduates represent more than 1,000 agencies Nation-wide.
State and local agencies greatly benefit from this Secret Service-
provided education on investigating cyber crime. In some of the
advanced forensics and network intrusion courses, students are issued
all of the hardware, software, and licenses necessary to conduct
investigations. NCFI students receive the same equipment and advanced
software as U.S. Secret Service special agents--a considerable benefit
as it allows both the local officer and the Federal agent to operate on
common systems.
Graduates of the NCFI return to their respective agencies and apply
their newly-acquired skills and equipment to investigating computer-
based crimes. Additionally, these graduates are offered the chance to
participate in the Secret Service's Electronic Crimes Task Force (ECTF)
program. State and local ECTF members work alongside other Federal
agencies and private-sector entities to combat the systemic flood of
cyber-related crimes targeting both private citizens and our Nation's
financial infrastructure. These ECTF members also serve as force
multiplier for the U.S. Secret Service ECSAP program.
Partnerships with Academia
The Secret Service has a long history of closely partnering with
academia as a part of our mission. For example, Drexel University is a
valued member of our Philadelphia ECTF, and this highly productive
partnership to address the challenges of cyber crime is an excellent
example of the sort of partnerships the Secret Service has developed
with over 200 academic institutions Nation-wide through our ECTFs. The
Secret Service is continually expanding its partnerships with academia
through its 35 Electronic Crimes Task Forces. In addition to the
numerous universities that are ECTF members, the Secret Service has a
close, collaborative relationship with both Carnegie Mellon and the
University of Tulsa.
In August 2000, the Secret Service and Carnegie Mellon University
Software Engineering Institute (SEI) established the Secret Service
CERT \10\ Liaison Program to provide technical support, opportunities
for research and development, as well as public outreach and education
to more than 150 scientists and researchers in the fields of computer
and network security, malware analysis, forensic development, training,
and education. Supplementing this effort is research into emerging
technologies being used by cyber-criminals and development of
technologies and techniques to combat them.
---------------------------------------------------------------------------
\10\ CERT--not an acronym--conducts empirical research and analysis
to develop and transition socio-technical solutions to combat insider
cyber threats.
---------------------------------------------------------------------------
The primary goals of the program are: To broaden the Secret
Service's knowledge of software engineering and networked systems
security; to expand and strengthen partnerships and relationships with
the technical and academic communities; partner with CERT-SEI and
Carnegie Mellon University to support research and development to
improve the security of cyberspace and improve the ability of law
enforcement to investigate crimes in a digital age; and to present the
results of this partnership at the quarterly meetings of our ECTFs.
In August 2004, the Secret Service partnered with CERT-SEI to
publish the first ``Insider Threat Study'' examining the illicit cyber
activity and insider fraud in the banking and finance sector. Due to
the overwhelming response to this initial study, the Secret Service and
CERT-SEI, in partnership with DHS Science & Technology (S&T), updated
the study and released the most recent version just last year, which is
published at http://www.cert.org/insider_threat/.
To improve law enforcement's ability to investigate crimes
involving mobile devices, the Secret Service opened the Cell Phone
Forensic Facility at the University of Tulsa in 2008. This facility has
a three-pronged mission: (1) Training Federal, State, and local law
enforcement agents in embedded device forensics; (2) developing novel
hardware and software solutions for extracting and analyzing digital
evidence from embedded devices; and (3) applying the hardware and
software solutions to support criminal investigations conducted by the
Secret Service and its partner agencies. To date, investigators trained
at the Cell Phone Forensic Facility have completed more than 6,500
examinations on cell phone and embedded devices Nation-wide. Secret
Service agents assigned to the Tulsa facility have contributed to over
300 complex cases that have required the development of sophisticated
techniques and tools to extract critical evidence.
These collaborations with academia, among others, have produced
valuable innovations that have helped strengthen the cyber ecosystem
and improved law enforcement's ability to investigate cyber crime. The
Secret Service will continue to partner closely with academia and DHS
S&T, particularly the Cyber Forensics Working Group, to support
research and development of innovative tools and methods to support
criminal investigations.
legislative action to combat data breaches
While there is no single solution to prevent data breaches of U.S.
customer information, legislative action could help to improve the
Nation's cybersecurity, reduce regulatory costs on U.S. companies, and
strengthen law enforcement's ability to conduct effective
investigations. The administration previously proposed law enforcement
provisions related to computer security through a letter from OMB
Director Lew to Congress on May 12, 2011, highlighting the importance
of additional tools to combat emerging criminal practices. We continue
to support changes like these that will keep pace with rapidly-evolving
use of information technology and associated cybersecurity risks.
conclusion
The Secret Service is committed to safeguarding the Nation's
financial payment systems by investigating and dismantling criminal
organizations involved in cyber crime. Responding to the growth in
these types of crimes and the level of sophistication these criminals
employ requires significant resources and greater collaboration among
law enforcement and its public and private-sector partners.
Accordingly, the Secret Service dedicates significant resources to
improving investigative techniques, providing training for law
enforcement partners, and raising public awareness. The Secret Service
will continue to be innovative in its approach to cyber crime and
cybersecurity and is pleased that the subcommittee recognizes the
magnitude of these issues, the evolving nature of these crimes, and the
importance of academic institutions, like Drexel University, in
addressing these issues.
Mr. Meehan. I want to thank Mr. Baranoff for his testimony,
and the Chairman now recognizes Mr. Quinn for your testimony.
STATEMENT OF RICHARD P. QUINN, ASSISTANT SPECIAL AGENT IN
CHARGE, PHILADELPHIA FIELD OFFICE, FEDERAL BUREAU OF
INVESTIGATION
Mr. Quinn. Good morning, Chairman Meehan, Ranking Member
Clarke. Thank you for inviting me here today to discuss the
FBI's role in cybersecurity, and for your on-going support----
Mr. Meehan. Special Agent, is--would you check to see if
your mike is pushed on?
Mr. Quinn. Test.
Mr. Meehan. Just pull it closer to you, then, please.
Mr. Quinn. Got it. Very good. How is this? Very good. Well,
good morning, Chairman Meehan, and Ranking Member Clarke, and
Congressman Fitzpatrick. Thank you for inviting me here today
to discuss the FBI's role in cybersecurity, and for your on-
going support of the Bureau.
The purpose of this hearing is to discuss Federal, State,
and local partnerships with private industry as it relates to
cybersecurity. To that end, it is important to note that the
FBI recognizes that in order to effectively combat the cyber
threat, it is imperative we significantly enhance our
collaboration not only with other Government entities, but with
the private sector. On one hand, our Nation's companies are the
primary victims of cyber intrusions, and their networks contain
the evidence of countless attacks. On the other hand, the
private sector is the key to defeating this threat. The private
sector possesses the information, expertise, and knowledge to
be a crucial partner in this endeavor.
One of the challenges in the past has been that, while
private industry has provided us information about the attacks,
we have not always provided information in return. It is in
establishing and refining an exchange of valuable information
about cybersecurity issues that will allow us to leverage the
capabilities of both public and private sector in defeating
cyber threats. The FBI's newly established Key Partnership
Engagement Unit manages a targeted outreach program focused on
building relationships with senior executives of key private-
sector corporations.
Through utilizing a tiered approach, the FBI is able to
prioritize our efforts to better correlate potential National
security threat levels with specific critical infrastructure
sectors. The Key Partnership team promotes the FBI's whole-of-
Government and industry approach to cybersecurity in
investigations by developing a robust information exchange
platform with corporate partners. Through the FBI's Infraguard
program, the FBI develops partnerships and working
relationships with private sector, academic, and other public/
private entity subject-matter experts. Primarily geared towards
the protection of critical National infrastructure, Infraguard
promotes on-going dialogue and timely communication between a
current active membership base of approximately 26,000.
Infraguard members are encouraged to share information with
Government that enhances its mission to prevent and address
criminal and National security issues, and, through the
utilization of the Guardian for Cyber program, active members
are able to report cyber intrusion incidents in real time to
the FBI. Infraguard members also benefit from access to robust
on- and off-line learning courses, connectivity with other
members and special interest groups, and relevant Government
intelligence and updates that enable them to broaden threat
awareness, and protect their assets.
The FBI's Cyber Initiative and Resource Fusion Unit
maximizes and develops intelligence and analytical resources
received from law enforcement, academia, international and
critical corporate private-sector subject-matter experts to
identify and combat significant actors involved in current and
emerging cyber-related criminal and National security threats.
CIRFU's core capabilities include a partnership with the
National Cyber Forensics and Training Alliance in Pittsburgh,
Pennsylvania, where the unit is co-located. NCFTA acts as a
neutral platform through which the unit develops and maintains
a liaison with hundreds of formal and informal working partners
who share real-time threat information, best practices, and
collaborate on initiatives to target and mitigate cyber threats
domestically and abroad.
The FBI recognizes that industry collaboration and
coordination is critical in combating cyber threats
effectively. As part of our enhanced private-sector outreach,
we have begun to provide partners with Classified threat
briefings and other information, and tools to better help them
repel intruders. Earlier this year, in coordination with the
Treasury Department, we provided a Classified briefing on
threats to the financial services industry to executives of
more than 40 banks, who participated via secured video
teleconferences in FBI offices across the country. We provided
yet another Classified briefing on threats to the financial
services industry in April 2014, with 100 banks participating
via secure video teleconference in those FBI field offices.
Another illustration of the FBI's commitment to private-
sector outreach is our increase in production of our external
use products, such as the FBI liaison alert system, and private
industry notification. We continue to counter the threats we
face in engaging in an unprecedented level of collaboration
with the United States Government, the private sector, and we
are grateful for the committee's support, and look forward to
continuing to work with you, and expand our partnerships, as we
determine a successful course forward for the Nation to defeat
our cyber adversaries. Thank you.
[The prepared statement of Mr. Quinn follows:]
Prepared Statement of Richard P. Quinn
April 16, 2014
Good morning Chairman Meehan and Ranking Member Clarke. I thank you
for holding this hearing today and I look forward to discussing the
FBI's role in cybersecurity. On behalf of the men and women of the FBI,
let me begin by thanking you for your on-going support of the Bureau.
Today's FBI is a threat-focused, intelligence-driven organization.
Each employee of the FBI understands that to mitigate the key threats
facing our Nation, we must constantly strive to be more efficient and
more effective. Just as our adversaries continue to evolve, so, too,
must the FBI. We live in a time of acute and persistent terrorist,
state-sponsored, and criminal threats to our National security, our
economy, and our communities. These diverse threats facing our Nation
and our neighborhoods underscore the complexity and breadth of the
FBI's mission.
We remain focused on defending the United States against terrorism,
foreign intelligence, and cyber threats; upholding and enforcing the
criminal laws of the United States; protecting civil rights and civil
liberties; and providing leadership and criminal justice services to
Federal, State, local, and international agencies and partners.
the cyber threat & fbi response
We face cyber threats from state-sponsored hackers, hackers for
hire, global cyber syndicates, and terrorists. They seek our state
secrets, our trade secrets, our technology, and our ideas--things of
incredible value to all of us. They may seek to strike our critical
infrastructure and our economy.
Given the scope of the cyber threat, agencies across the Federal
Government are making cybersecurity a top priority. Within the FBI, we
are prioritizing high-level intrusions--the biggest and most dangerous
botnets, state-sponsored hackers, and global cyber syndicates. We want
to predict and prevent attacks, rather than simply react after the
fact.
FBI agents, analysts, and computer scientists are using technical
capabilities and traditional investigative techniques--such as sources
and wiretaps, surveillance, and forensics--to fight cyber crime. We are
working side-by-side with our Federal, State, and local partners on
Cyber Task Forces in each of our 56 field offices and through the
National Cyber Investigative Joint Task Force (NCIJTF). Through our 24-
hour cyber command center, CyWatch, we combine the resources of the FBI
and NCIJTF, allowing us to provide connectivity to Federal cyber
centers, Government agencies, FBI field offices and legal attaches, and
the private sector in the event of a cyber intrusion.
We also work with the private sector through partnerships such as
the Domestic Security Alliance Council, InfraGard, and the National
Cyber Forensics and Training Alliance. And we are training our State
and local counterparts to triage local cyber matters, so that we can
focus on National security issues.
In addition, our legal attache offices overseas work to coordinate
cyber investigations and address jurisdictional hurdles and differences
in the law from country to country. We are supporting partners at
Interpol and The Hague as they work to establish international cyber
crime centers. We continue to assess other locations to ensure that our
cyber personnel are in the most appropriate locations across the globe.
We know that to be successful in the fight against cyber crime, we
must continue to recruit, develop, and retain a highly-skilled
workforce. To that end, we have developed a number of creative staffing
programs and collaborative private-industry partnerships to ensure that
over the long term we remain focused on our most vital resource--our
people.
As the committee is well aware, the frequency and impact of cyber
attacks on our Nation's private sector and Government networks have
increased dramatically in the past decade, and are expected to continue
to grow. Since 2002, the FBI has seen an 82 percent increase in the
number of computer intrusion investigations.
recent successes
While the FBI and our partners have had multiple recent
investigative successes against the threat, we are continuing to push
ourselves to respond more rapidly and prevent attacks before they
occur.
One area in which we recently have had great success with our
overseas partners is in targeting infrastructure we believe has been
used in Distributed Denial of Service (DDOS) attacks, and preventing
that infrastructure from being used for future attacks. A DDOS attack
is an attack on a computer system or network that causes a loss of
service to users, typically the loss of network connectivity and
services by consuming the bandwidth of the victim network. Since
October 2012, the FBI and the Department of Homeland Security (DHS)
have released nearly 168,000 Internet Protocol addresses of computers
that were believed to be infected with DDOS malware. We have released
this information through Joint Indicator Bulletins (JIBs) to more than
130 countries via DHS's National Cybersecurity and Communications
Integration Center (NCCIC), where our liaisons provide expert and
technical advice for increased coordination and collaboration, as well
as our Legal Attaches overseas.
These actions have enabled our foreign partners to take action and
reduced the effectiveness of the botnets and the DDOS attacks. We are
continuing to target botnets through this strategy and others.
In April 2013, the FBI Cyber Division initiated an aggressive
approach to disrupt and dismantle the most significant botnets
threatening the economy and National security of the United States.
This initiative, named Operation Clean Slate, is the FBI's broad
campaign to implement appropriate threat neutralization actions through
collaboration with the private sector, DHS, and other United States
Government partners, and our foreign partners. This includes law
enforcement action against those responsible for the creation and use
of the illegal botnets, mitigation of the botnet itself, assistance to
victims, public-service announcements, and long-term efforts to improve
awareness of the botnet threat through community outreach. Although
each botnet is unique, Operation Clean Slate's strategic approach to
this significant threat ensures a comprehensive neutralization
strategy, incorporating a unified public/private response and a whole-
of-Government approach to protect U.S. interests.
The impact botnets has been significant. Botnets have caused over
$113 billion in losses globally, with approximately 378 million
computers infected each year, equaling more than 1 million victims per
day, translating to 12 victims per second.
To date, Operation Clean Slate has resulted in several successes.
Working with our partners, we disrupted the Citadel Botnet. This botnet
was designed to facilitate unauthorized access to computers of
individuals and financial institutions to steal on-line banking
credentials, credit card information, and other personally identifiable
information. Citadel was responsible for the loss of over a half
billion dollars. As a result of our actions, over 1,000 Citadel domains
were seized, accounting for more than 11 million victim computers
worldwide. In addition, working with foreign law enforcement, we
arrested a major user of the malware.
Building on the success of the disruption of Citadel, in December
2013, the FBI, Europol, together with Microsoft and other industry
partners, disrupted the ZeroAccess Botnet. ZeroAccess was responsible
for infecting more than 2 million computers, specifically targeting
search results on Google, Bing, and Yahoo search engines, and is
estimated to have cost on-line advertisers $2.7 million each month.
In January 2014, Aleksandry Andreevich Panin, a Russian national,
pled guilty to conspiracy to commit wire and bank fraud for his role as
the primary developer and distributer of the malicious software known
as ``Spyeye'' which infected over 1.4 million computers in the United
States and abroad. Based on information received from the financial
services industry, over 10,000 bank accounts have been compromised by
Spyeye infections in 2013 alone. Panin's co-conspirator, Hamza
Bendelladj, an Algerian national who helped Panin develop and
distribute the malware, was also arrested in January 2013 in Bangkok,
Thailand.
next generation cyber initiative
The need to prevent attacks is a key reason the FBI has redoubled
our efforts to strengthen our cyber capabilities while protecting
privacy, confidentiality, and civil liberties. The FBI's Next
Generation Cyber Initiative, which we launched in 2012, entails a wide
range of measures, including focusing the Cyber Division on intrusions
into computers and networks--as opposed to crimes committed with a
computer as a modality; establishing Cyber Task Forces in each of our
56 field offices to conduct cyber intrusion investigations and respond
to significant cyber incidents; hiring additional computer scientists
to assist with technical investigations in the field; and expanding
partnerships and collaboration at the NCIJTF.
At the NCIJTF--which serves as a coordination, integration, and
information sharing center among 19 U.S. agencies and our Five Eyes
partners for cyber threat investigations--we are coordinating at an
unprecedented level. This coordination involves senior personnel at key
agencies. NCIJTF, which is led by the FBI, now has deputy directors
from the NSA, DHS, the Central Intelligence Agency, U.S. Secret
Service, and U.S. Cyber Command. In the past year we have had our Five
Eyes partners join us at the NCIJTF. Australia embedded a liaison
officer in May 2013, the United Kingdom in July 2013, and Canada in
January 2014. By developing partnerships with these and other nations,
NCIJTF is working to become the international leader in synchronizing
and maximizing investigations of cyber adversaries.
While we are primarily focused with our Federal partners on cyber
intrusions, we are also working with our State and local law
enforcement partners to identify and address gaps in the investigation
and prosecution of internet fraud crimes.
Currently, the FBI's Internet Crime Complaint Center (IC3) collects
reports from private industry and citizens about on-line fraud schemes,
identifies emerging trends, and produces reports about them. The FBI
investigates fraud schemes that are appropriate for Federal prosecution
(based on factors like the amount of loss). Others are packaged
together and referred to State and local law enforcement.
The FBI is also working to develop the Wellspring program in
collaboration with the International Association of Chiefs of Police,
the Major City Chiefs Association, and the National Sheriff's
Association to enhance the internet fraud targeting packages IC3
provides to State and local law enforcement for investigation and
potential prosecution. During the first phase of this program's
development, IC3 worked with the Utah Department of Public Safety to
develop better investigative leads for direct dissemination to State
and local agencies.
Through IC3, Operation Wellspring provided Utah police 22 referral
packages involving over 800 victims, from which the FBI opened 14
investigations. Additionally, another 9 investigations were opened and
developed from the information provided.
The following are reported loss totals:
IC3-referred investigations = $2,135,264;
Cyber Task Force initiated investigations = $385,630;
Operation Wellspring/Utah Total = $2,520,894.
The FBI's newly-established Guardian for Cyber application, being
developed for Cyber use by the Guardian Victim Analysis Unit (GVAU),
provides a comprehensive platform that coordinates and tracks U.S.
Government efforts to notify victims or targets of malicious cyber
activity.
The FBI is working toward the full utilization of Guardian for
Cyber across FBI, OGA's, State, local, Tribal and territorial
governments (SLTT's) as well as industry partners, in order to increase
awareness of vulnerabilities in infrastructure, forward understanding
of cyber-related threats and facilitate a coordinated overall cyber
incident response by the U.S. Government.
private sector outreach
In addition to strengthening our partnerships in Government and law
enforcement, we recognize that to effectively combat the cyber threat,
we must significantly enhance our collaboration with the private
sector. Our Nation's companies are the primary victims of cyber
intrusions and their networks contain the evidence of countless
attacks. In the past, industry has provided us information about
attacks that have occurred, and we have investigated the attacks, but
we have not always provided information back.
The FBI's newly-established Key Partnership Engagement Unit (KPEU)
manages a targeted outreach program focused on building relationships
with senior executives of key private-sector corporations. Through
utilizing a tiered approach the FBI is able to prioritize our efforts
to better correlate potential National security threat levels with
specific critical infrastructure sectors.
The KPEU team promotes the FBI's Government and industry
collaborative approach to cybersecurity and investigations by
developing a robust information exchange platform with its corporate
partners.
Through the FBI's InfraGard program, the FBI develops partnerships
and working relationships with private sector, academic, and other
public-private entity subject-matter experts. Primarily geared toward
the protection of critical, National infrastructure, InfraGard promotes
on-going dialogue and timely communication between a current active
membership base of 25,863 (as of April 2014).
Members are encouraged to share information with Government that
better allows Government to prevent and address criminal and National
security issues. Through the utilization of the Guardian for Cyber
program, active members are able to report cyber intrusion incidents in
real time to the FBI. InfraGard members also benefit from access to
robust on- and off-line learning resources, connectivity with other
members and special interest groups, and relevant Government
intelligence and updates that enable them to broaden threat awareness
and protect their assets.
The FBI's Cyber Initiative & Resource Fusion Unit (CIRFU) maximizes
and develops intelligence and analytical resources received from law
enforcement, academia, international, and critical corporate private-
sector subject-matter experts to identify and combat significant actors
involved in current and emerging cyber-related criminal and National
security threats. CIRFU's core capabilities include a partnership with
the National Cyber Forensics and Training Alliance (NCFTA) in
Pittsburgh, Pennsylvania, where the unit is collocated. NCFTA acts as a
neutral platform through which the unit develops and maintains liaison
with hundreds of formal and informal working partners who share real-
time threat information, best practices, and collaborate on initiatives
to target and mitigate cyber threats domestically and abroad. In
addition, the FBI, Small Business Administration and the National
Institute of Standards and Technology (NIST) partner together to
provide cybersecurity training and awareness to small business as well
as citizens leveraging the FBI InfraGuard program.
The FBI recognizes that industry collaboration and coordination is
critical in our combating the cyber threat effectively. As part of our
enhanced private-sector outreach, we have begun to provide industry
partners with Classified threat briefings and other information and
tools to better help them repel intruders. Earlier this year, in
coordination with the Treasury Department, we provided a Classified
briefing on threats to the financial services industry to executives of
more than 40 banks who participated via secure video teleconference in
FBI field offices. We provided another Classified briefing on threats
to the financial services industry in April 2014, with 100 banks
participating. Another illustration of the FBI's commitment to private-
sector outreach is our increase in production of our external use
products such as the FBI Liaison Alert System (FLASH) reports and
Private Industry Notifications (PINs).
conclusion
In conclusion Chairman Meehan, to counter the threats we face we
are engaging in an unprecedented level of collaboration within the U.S.
Government, with the private sector, and with international law
enforcement.
We are grateful for the committee's support and look forward to
continuing to work with you and expand our partnerships as we determine
a successful course forward for the Nation to defeat our cyber
adversaries.
Mr. Meehan. Thank you, Special Agent Quinn. The Chairman
now recognizes the district attorney of Delaware County, Jack
Whelan.
STATEMENT OF JOHN J. ``JACK'' WHELAN, DISTRICT ATTORNEY,
DELAWARE COUNTY, PENNSYLVANIA
Mr. Whelan. Thank you, Chairman Meehan, Congresswoman
Clarke, Congressman Fitzpatrick. Good morning. I would like to
thank you for the opportunity to discuss cybersecurity, and how
we can work together to better protect the identities of our
Delaware County residents. It is a great opportunity for me to
share a local perspective.
As the committee is well aware, identity theft is the
Nation's fastest-growing crime. In law enforcement, we define
cyber crime as any crime where a computer or the internet is
used to commit or to conceal a crime. In Delaware County our
detectives seen cyber crime first-hand in cases where identity
thieves steal personal information and use it to gain access to
a victim's financial resources. These thieves may steal mail,
hack into computers, or even enlist employees at companies that
have legitimate access to personal information. They also use
e-mail or telephone scams to commit the crime, which is most
often seen here in Delaware County, and it affects our most
vulnerable population, our senior citizens.
With relatively little information, even low-tech,
inexperienced criminals can begin opening accounts in another
person's name and run up substantial charges. In one case we
arrested Dorothy J. Miller of Haverford Township for stealing
more than $150,000 from her employee--employer, Summers
Hardwood Floors, located in Sharon Hill. After she assumed the
identity of the company's owner, John Summers, who had passed
away, Miller opened a credit card in his name and forged
numerous checks, using his and his wife's signature. Through
handwriting analysis, our detectives were able to charge Miller
with multiple felony counts of theft, forgery, identity theft,
and conspiracy.
In Delaware County we also see criminals using the internet
to trick people into giving them money or merchandise. These
scams run from the small-time bait-and-switch schemes that you
might see on Craigslist to more sophisticated false websites
that are set up to look like genuine websites, such as major
banks.
Computers can also be used as instruments of stalking, or
harassment via e-mail, or social networking sites. Targeting
another vulnerable population, computers are used in crimes
against our children, where the internet is used to traffic
child pornography, and by predators who entice our children to
meet them for sexual purposes. Dramatic increases in technology
and its availability on the consumer level, coupled with a
decline in cost, have given those who would exploit children a
remarkable, effective, and far-reaching ability with which to
do so.
To combat these crimes, detectives with the Delaware County
Criminal Investigation Division, Economic Crime Unit, and the
office's forensic crime lab, they investigate financial crime.
The unit receives complaints from our local law enforcement
agencies, the private sector, as well as the public. Financial
crimes can refer to any number of nonviolent criminal offenses
that involve obtaining financial gain through fraud, deceit,
misrepresentation, or other forms of deception.
Financial crime is constantly evolving with the times, and
is hitting new frontiers with the age of the internet. Identity
theft can be committed against a single individual,
corporation, or multiple victims. It may even be more complex
because there can be more than one victim. Frequently the crime
may not be discovered until long after it was committed.
Perpetrators may not live in the same jurisdiction as the
victim, and may commit the crime in several jurisdictions
simultaneously, making it difficult for law enforcement to
detect patterns, and the actual extent of the crime. For
example, identity theft could be committed against a Delaware
County resident by a perpetrator in Florida who has committed
the same crime against several other victims across the State.
Given all of the above, it is clear that identity theft is a
crime that presents unique challenges to law enforcement to
investigate and to prosecute.
The complexities of identity theft cases can slow down, or
even hinder investigation because of the lack of resources
available to conduct a cross-jurisdictional investigation.
Evidence needed by police to solve a cyber crime is often held
by the private industry, outside of the police's jurisdiction.
For this reason, strong partnerships are essential to making
cross-jurisdictional cooperation work. Investigation and
prosecution can be very time-consuming, due to the volumes of
records required to be examined, and the time required to
obtain documents from banks and other financial institutions.
The unit collaborates with and assists Federal, State, and
local law enforcement in enforcing State, Federal, and local
criminal laws relating to computer-related crime through
forensic collection, recovery, processing, preservation,
analysis, storage, maintenance, and the presentation of digital
evidence.
As more and more people engage in on-line financial
activities, such as shopping, banking, investing, bill-paying,
our residents are becoming more vulnerable to sophisticated on-
line identity thieves who target personal identification
information. Identity theft can happen off-line too. In
Delaware County we have seen low-tech, inexperienced criminals
successfully open credit cards, and other financial accounts in
another's name by stealing mail, personal items from a wallet,
or even rummaging through trash for personal identification
information.
In closing, no one, no individual, and no institution is
immune from these type of crimes, and so increasing our
awareness of the issue is one important function of our
Economics Crime Unit. We alert the public to steps that must be
taken to ensure their computers are secure, and their personal
information is safe by sharing information through public
service announcement videos, brochures, along with public
presentations and seminars held in partnership with our
financial institution, local businesses, and community
partnerships. Thank you.
[The prepared statement of Mr. Whelan follows:]
Prepared Statement of John J. ``Jack'' Whelan
April 16, 2014
Good morning Chairman Meehan and Members of the House committee. I
would like to thank you for the opportunity to discuss cybersecurity
and how we can work together to better protect the identities of
Delaware County residents.
As the committee is well aware, identity theft is the Nation's
fastest-growing crime. In law enforcement, we define cyber crime as any
crime where a computer or the internet is used to commit or conceal a
crime.
In Delaware County, our detectives see cyber crime first-hand in
cases when identity thieves steal personal information and use it to
gain access to a victim's financial resources. These thieves may steal
mail, hack into computers, or enlist employees at companies that have
legitimate access to personal information. They also use e-mail or
telephone scams to commit a crime, which is most often seen in crimes
committed against Delaware County's most vulnerable population, our
senior citizens. With relatively little information, even low-tech,
inexperienced criminals can begin opening accounts in another person's
name and run up substantial charges.
In one case, we arrested Dorothy J. Miller of Havertown for
stealing more than $150,000 from her employer, Summers Hardwood Floors,
Inc. located in Sharon Hill, PA. After assuming the identity of the
company owner John Summers, who had passed away, Miller opened a credit
card in his name and forged numerous checks using his and his wife's
signature. Through handwriting analysis, our detectives were able to
charge Miller with multiple felony counts of theft, forgery, identity
theft, and conspiracy.
In Delaware County, we also see criminals using the internet to
trick people into giving them money or merchandise. These scams run
from the small-time bait-and-switch schemes as you might see on
Craigslist, to sophisticated false websites that are set up to look
like genuine websites, such as major banks. Computers can also be used
as instruments of stalking or harassment via e-mail or social
networking sites. Targeting another vulnerable population, computers
are also used in crimes against children where the internet is used to
traffic child pornography and by predators to entice our children to
meet them for sexual purposes. Dramatic increases in technology and its
availability on the consumer level, coupled with a decline in cost,
have given those who would exploit children a remarkably effective and
far-reaching ability with which to do so.
To combat these crimes, detectives with the Delaware County
District Attorney's Criminal Investigation Division (CID) Economic
Crime Unit and the office's forensic crime lab investigate financial
crimes. The Unit receives complaints from our local law enforcement
agencies, the private sector as well as the public. Financial crimes
can refer to any number of nonviolent criminal offenses that involve
obtaining financial gain through fraud, deceit, misrepresentation, or
other forms of deception. Financial crime is constantly evolving with
the times, and is hitting new frontiers with the age of the internet.
Identity theft can be committed against a single individual,
corporation, or multiple victims. It may be even more complex because
there can be more than one victim. Frequently, the crime may not be
discovered until long after it was committed. Perpetrators may not live
in the same jurisdiction as the victim and may commit the crime in
several jurisdictions simultaneously, making it difficult for law
enforcement to detect patterns and the actual extent of the crime. For
example, identity theft could be committed against a Delaware County
resident by a perpetrator in Florida who has committed the same crime
against several other victims across the State. Given all of the above,
it is clear that identity theft is a crime that presents unique
challenges to law enforcement to investigate and prosecute.
The complexities of identity theft cases can slow down or hinder
investigations because of the lack of resources available to conduct
the cross-jurisdictional investigation.
Evidence needed by police to solve a cyber crime is often held by
private industry outside of police's jurisdiction. For this reason,
strong partnerships are essential to making cross-jurisdiction
cooperation work. Investigation and prosecution can be time-consuming
due to the volume of records required to be examined and the time
required to obtain documents from banks and other financial
institutions. The unit collaborates with and assists Federal, State,
and local law enforcement in enforcing Federal, State, and local
criminal laws relating to computer-related crime through forensic
collection, recovery, processing, preservation, analysis, storage,
maintenance, and presentation of digital evidence.
As more and more people engage in on-line financial activities such
as shopping, banking, investing, and bill paying, our residents become
more vulnerable to sophisticated on-line identity thieves who target
personal identification information. Identity theft can happen off-line
too. In Delaware County, we have seen low-tech, inexperienced criminals
successfully open credit cards and other financial accounts in
another's name by stealing mail, personal items such as a wallet, or
even rummaging through trash for personal identification information.
In closing, no one, no individual, and no institution, is immune
from these kinds of crimes. And so, increasing awareness of the issue
is one important function of our Economic Crimes Unit. We alert the
public to the steps they must take to ensure that their computers are
secure and their personal information is safe by sharing information
through PSA videos, brochures, along with public presentations and
seminars held in partnership with financial institutions, local
businesses, and our community partnerships.
Thank you.
Mr. Meehan. I want to thank the District Attorney. I thank
each of the witnesses for their testimony. So I now recognize
myself for 5 minutes of questions.
I am grateful for your oversight, and we are here talking
today about how law enforcement can work together at the
Federal and local level as well. I started by saying that we
have issues with terrorism, nation-states who are using the
internet as a method for, you know, global reach, but our focus
here today is on the criminal side of this activity, because
that is what most directly affects our communities, especially
communities here, the individual who has had their identities
taken, the small banker who has to deal with the implications
of a fraud, like Target.
So that is where people are beginning, for the first time,
to see how they are actually affected by the kinds of
sophisticated schemes that we see. We have looked at four
different kinds of examples that have just come to mind, most
significantly the Target breach, about 110 million identities,
40 million actual identities stolen through the point of
service that was--well, the service mechanisms. The key thing
being there that they were able to access this entire system by
going through a heating and air conditioning contract that had
access to the major system. Nieman Marcus, some 350,000
victims, the University of Maryland, 300,000 alumni, and
students, having significant identification taken. It is not
just the, you know, the private sector, or large universities,
or others. The Government itself, the South Carolina Department
of Revenue, 40 million identities that have been taken.
Now, I am struck by two things, and I would like to ask you
guys to talk about this. As I look back, I see, first,
particularly with respect to the Nieman Marcus, some of these
viruses, or other kinds of malware, had been in the systems for
months before detected--before activity takes place. In fact,
they suggested at Nieman Marcus for 8 months it had been in
there. In addition, we have seen this with Target, that there
were numerous times in which there were signs, or other kinds
of things, in which there could have been opportunities to
catch some of this activity before it either manifested itself,
or at least manifested itself to the degree that it did. There
is a suggestion that as many as 300,000 pings, so to speak, in
the Nieman Marcus should have tipped somebody off to look
better.
In light of that, what do we need to be doing better to be
able to identify those kinds of malware and other things that
are living within systems for long periods of time before they
are identified, and what do we need to be doing better, along
the kill chain or otherwise, to be taking advantage of the
signals that do arise to be able to impact these kinds of
threats before they reach the scope that they are? I conclude
by saying I do appreciate that many times what we don't hear
about is when you have successfully prevented some kind of
remarkable thing, but I am asking you to give me your insights
on that particular question. What do we need to be doing
better, both with the time in there, as well as taking better
advantage of the signals that are given? Mr. Baranoff.
Mr. Baranoff. I will get it started. First I will say that
we are dealing with a very----
Mr. Meehan. Once again, would you make sure that your
microphone is on?
Mr. Baranoff. Is that better?
Mr. Meehan. Yeah.
Mr. Baranoff. Okay. We are dealing with a very
sophisticated actor, organized actor. We are able to defeat
very sophisticated, organized systems. That is why we encourage
business to really reverse the model, in terms of where
investment is. First and foremost, to response and recovery, as
well as a relationship with a law enforcement agency with
jurisdiction. It is extremely important that we are getting a
full breadth of the landscape of what is taking place. If
companies aren't reporting to us, that limits us as to the
picture, threat picture.
Second, the one thing that we have found in almost every
breach--actually, in every single major breach that we have
investigated, there has been pre-attack behavior that has taken
place. If you are able to identify those pre-attack anomalies,
that will also help in the success of containing the issue.
Then, obviously, continued investment and prevention, such as
traditional prevention, like firewalls, proper segmentation,
those help as well. But, again, the--probably the most critical
element is the first piece, because it is not a matter of if,
it is a matter of when you will suffer some type of breach.
Mr. Meehan. Yeah, I think you identified that--when we are
talking about entrance into the systems, it requires, as you
said, to reverse the process, to go almost down to the front
end, to see the signals that are coming in, and to have some
sort of shared responsibility in here. I noted at the outset
this came in through a contractor, a subcontractor, that had
access to a system.
But are we doing enough to make available to the small
businessperson, to the local District Attorney's office, you
know, to the small financial services organization who holds
these, are we doing enough to both get them the kind of
information that allows them to see the signal that is being
shared so that they can react in time? I mean, one of the
criticisms that we are hearing is this most recent act,
Heartbleed. I am informed that there may have been knowledge of
that for months before anybody shared that with a broader
spectrum of people.
Mr. Baranoff. There are many more--there are many
vulnerabilities that exist beyond the Heartbleed Secure Socket
Layer vulnerability. I think that, really, there are two parts
here. First, the consumer has to take it upon themselves--the
end result of a lot of these breaches is identity theft, and,
unfortunately, the consumer needs to take it upon themselves to
be viewing their credit reports, and to use cyber hygiene, as
you mentioned in your opening statement. So I think that is of
utmost importance.
Mr. Meehan. Now, Mr. Quinn, you see these from the global
perspective. Again, as I said, oftentimes these are going back
to Eastern European organizations. Certainly that is the
suspicion with regard to the, you know, the--Target. What is
your perspective on those questions about how we can----
Mr. Quinn. Well, Chairman, first and foremost, I concur
with ASAC Baranoff on some of his suggestions. You had alluded
to terrorism before, and I approach things mostly from a
terrorism background. One of the things--the analogous things
that we need to do is institute trip wires within the company.
There are a couple of things that I see from a local level that
happened. First and foremost, the consumer, or the potential
victims, aren't necessarily educated about what the
consequences are for some of these things. September 11 is
often attributed to a failure of imagination. If I look at the
cyber threat, and we haven't had a cyber equivalent of 9/11,
and I hope we don't, but if I were to look at our
vulnerabilities, it is a failure of imagination, but it is also
a failure of appreciation, and perhaps recognition of the
consequences.
I think some of the larger institutions do recognize the
dangers and the consequences, but what you are talking about is
what we anecdotally refer to as mom-and-pop operations. So it
really breaks down at the local level to making sure that you
have instituted trip wires, which is nothing more than
effective outreach to them to educate them not only on the
consequences and the threat itself, but prophylactic measures
that they can take to guard against this. So for them, it won't
become a catastrophic event.
Mr. Meehan. I see. When you use trip wires, now, I mean--
but clearly we saw a contractor, and by all analysis this
contractor was--even though there were standards within the
industry, they may have not been as up-to-date in terms of
practicing those standards. So that becomes sort of the Trojan
horse way into the kingdom. But once in there, there were
signals that were sent, both with respect to trip wires that
were set off----
Mr. Quinn. Yes.
Mr. Meehan [continuing]. At Target that were not followed
up on appropriately as they set the malware that went through
all the point-of-service, you know, transactions. Then also,
with knowledge that they were inside the system, to some
extent, the exfiltration was a second time in which there were
a number of opportunities to prevent the scope of information
escaping. So where is the responsibility, not just on the local
level, but are we getting too many circumstances in which, you
know, people--well, there is another, you know, that is just
another alarm going off. It almost sounds like false alarms,
and people are not following up on them.
Mr. Quinn. It is a fair point. I can't necessarily speak to
the Target investigation intimately because I am not involved
in that at the National level, but what I can tell you is one
of the challenges, when it comes to dealing with companies, is
getting them to take--when the trip wires are tripped, to take
that seriously. There has to be a shared responsibility. We in
the Government do have a responsibility not only to
investigate, but to the extent--try to mitigate ahead of time
any of the consequences.
That said, once we do that, the potential victims share a
responsibility in making sure that their security protocols are
not only up-to-date, but adhered to. Because, quite frankly,
from a risk management perspective, if you don't adhere to your
own security protocols, or if you don't even have them in place
to begin with, that is a liability. You create your own
vulnerability. So I don't want to minimize what we in the
Government have to do. We definitely have to educate the
private sector, but we also have to convey the message to them
to take this seriously, because if you don't, the consequences
are catastrophic. The old saying about a stitch in time saves
nine, it applies 100 percent to cybersecurity.
Mr. Meehan. My time has expired, and I will have some
follow-up questions in what will be a second round, but at this
point in time I want to turn to the Ranking Member for
questions that she may have.
Ms. Clarke. Thank you once again, Mr. Chairman, and to our
expert panelists who have come today. Just wanted to sort-of
backpedal just a little to break this thing down as
fundamentally as we can. Because, again, we are here at the
local level, and when you look at the case scenario that the
Target incident provides for us, it is a layered process that
got us to that massive breach, and it didn't take all week to
accomplish that.
I think that part of the challenge for a modern-day society
is, how do we address it categorically? How does everyone see
their responsibility, their obligations? How do we kind of
connect the dots for each individual and/or entity in their
particular space to be able to recognize what needs to be done
to either mitigate a situation once it has occurred, or prevent
it, ideally, from occurring?
I think that is part of the challenge for our society right
now. You know, I--you talked about imagination, Mr. Quinn. The
thing about technology is you don't have to have a whole lot of
imagination. It will help you to facilitate whatever it is that
you want to do, and people don't see imagination necessarily
juxtaposed with intuition, right? So you intuitively--we use
technology to a certain degree. You know you want to--you start
here, and you know you want to go there, and you just figure
out the tools for doing that. But most people don't go beyond,
to use the imagination to say, well, what if? Except the bad
actors, right?
So the question becomes, for the innocent one, how do we
sound the alarm for them? That is part of the challenge in the
physical world, as well as in the world of technology, and the
use of the internet. Then we talked about there were trip
wires, and there were indicators, but, you know, I have been in
buildings where you will hear the emergency alarm go off, and
no one budges. Particularly people who are used to being in an
environment where perhaps the emergency alarm goes off, and
everyone knows it just goes off. However, the practice of
actually responding is where the failure comes in.
So the question becomes, from your point of view, how do we
develop, and this is for the entire panel, a clearer
understanding of exactly what constitutes cyber crime? You
know, is there a categorical difference in what we are dealing
with? It is prevalence, the levels of harm to consumers and
companies, I mean, we have kind of got to get into the weeds.
Because--think about just the layers in the Target scenario
alone. That small contractor, who--how many people worked for
that contractor, and who was the person, ultimately, you know,
that slipped up, in terms of the cyber hygiene?
You know, and what are the implications for that? What are
the implications for the consumer that didn't respond, though
they know they shopped at Target, you know, and now, you know,
they are in financial distress. How do we break this down
categorically, and how can we better equip policymakers to
debate this, the adequacy of Federal law? I joke about this a
lot. I don't do it to demean it, but I still have colleagues
with flip phones, you know, so just dealing with the ideas
involved in cyber becomes almost a foreign concept. How do we
break it down for people? How do we make it real, and how do we
strip away these layers and make it categorical? That is my
question.
Mr. Baranoff. Should I get it started?
Ms. Clarke. Yes.
Mr. Baranoff. Okay. Let me just say this, just in the first
quarter of this year, the Secret Service has responded Nation-
wide to over 100 data breaches. Most of those companies are
small and medium-sized businesses. They are not the large
retailers that you hear about in the news. I read a recent
statistic that stated that the average small to medium-sized
business, when they suffer a data breach, will lose about
$200,000. Eighty percent of those companies, within 6 months,
will go out of business. Well, mitigating that statistic is
extremely important to the Secret Service, which is why, as we
collect cybersecurity information, we push it through our
Department's NCCIC to get it out to the greater industry.
Ms. Clarke. So, I mean, it is one thing being informed, it
is one thing to find a way to get people to put this--put your
recommendations into practice. Because, you know, that is a
$200,000 hit, and you are not aware of what to do, or how to
prevent it from happening in the future, becomes the challenge
in the environment that we are talking about.
Mr. Baranoff. Well, I think a lot of that work is done at
the State and local level, quite frankly, which is why we train
State and local police officers, prosecutors, and judges at our
National Cyber Forensic Institute in Hoover, Alabama. A lot of
those front-line officers, and judges, and prosecutors are
handling the multitude and the lion's share of this work. That
is what I would say on that.
Mr. Quinn. Well, in addition to what Mr. Baranoff had said,
I think the key is making the consequences viscerally
compelling. With other crimes, such as terrorism, you know
immediately what the impact is. Had a Target store been blown
up, and it was an act of terrorism, immediately people would
have acted. It is making the abstract, the terabytes, and
things of that sort, tangible.
So the way we approach it, and, again, I am speaking from a
local level, at the Philadelphia level, is we have two
mechanisms by which we do this. We have our cyber task forces,
which are comprised of agents, analysts, and computer
scientists, as well as other members of the Federal, State, and
local law enforcement community. That in and of itself is an
educational process. We take that expertise, and we try to
leverage it through our Infraguard program. For instance, in
Philadelphia we have roughly 1,500 members of Infraguard. In
Harrisburg it is about 650. They are the gateways to both the
significant and the more mom-and-pop operations, because the
way we are evolving that is we are trying to break it down by
sector. If we can communicate within the Infraguard program to
all of the entities that potentially could be impacted, we take
care of the educational component.
Now, how you--now, we are always going to be seeking to
prevent, first and foremost. Mitigation is a different story,
and that is something that we share across the board as a
Government, and with the private sector. So that is--my answer
to your question is making the abstract tangible, letting
people know where it hurts them, potentially.
Mr. Whelan. From a prosecutor's standpoint, in the local
level, unfortunately, we get into situations, and I agree with
Mr. Quinn, where economic crime, cyber crime, is dealt with on
the court level more leniently, and I agree that we need to
educate our judges as to the devastating impact of cyber crime.
We typically are dealing with some serious violent cases, and
judges treat those violent cases accordingly. However, in
economic crime cases, they may not be as aggressively
prosecuted or treated only because of the ramifications,
compared to the violent crime aspect. So we are encouraging our
judges--I have instructed our prosecutors in cases of this
nature, to make sure that they are aggressively prosecuting,
but we also deal with sentencing guidelines, which sets a
standard range, a mitigated range, and an aggravated range, as
to where the court should sentence in these type of cases.
We also--in addition to aggressively prosecuting the crime,
we deal proactively with many of these situations by engaging
in prevention, by going out to our senior citizen communities,
going out to our parents, our PTAs, our Rotary clubs, and
explaining to them how to be proactive in preventing themselves
from being victims of identity theft, which is very important.
We periodically go to our business community and have
forums in the business community. We invite guest speakers,
such as our FBI--our local FBI office to come in and talk about
cyber crime, and how they can better protect their business as
a result of what we are seeing occurring on a National level,
as well as a local level. So I think we need to continue with
both the aggressive prosecution, as well as the prevention
efforts.
Mr. Meehan. I thank the--and the Chairman now recognizes
the gentleman from Bucks County, Mr. Fitzpatrick.
Mr. Fitzpatrick. I thank the Chairman again, and we really
appreciate the testimony of the law enforcement, and the law
enforcement perspective of the witnesses here today.
I wanted to follow up on, Agent Baranoff, something you
stated, that, you know, a great majority of the security
breaches, the victims are small and medium-sized businesses. We
hear in the news about the significant security breaches, the
retailer--Target organization, we have all heard about that. We
have come to understand from news reports that many times
when--could be an educational institution, or a retailer, or a
merchant, is a victim of a security breach, of a cyber attack,
that there is a lag time, that there is a lapse, if you will,
between when that organization becomes the victim, when the
incident occurs, and when they understood that it occurred.
Many times they are informed of the attack, of the
victimization, by a third party. You know, could be their bank,
credit institution, a financial services institution. Many
times it is law enforcement informing the victim that they are,
in fact, a victim. I was wondering if each of you, from your
different perspectives, could comment on why you think there is
that lapse. Is it that we are not identifying the security
breach? What is it that Congress can do to help law
enforcement, or help, perhaps, these institutions or merchants
to understand quicker? Because it is one thing to become, you
know, as a small business, to become a victim of a $200,000
hit, and the victims, you know, Chairman Meehan wanted to bring
this down to a local perspective, is that small business in our
community, the customers that rely on that business, the
families, you know, of the employees who rely on that paycheck,
they all become victims of that particular attack.
It is one thing that--to have that attack occur, but then
to not recognize it, and have it occur perhaps many times,
until somebody actually informs them. So I was wondering if you
could just comment on why is it the lapse occurs, and what can
we do better to speed up that realization?
Mr. Baranoff. Well, some of the lapse may be resulting from
investment by the companies. The small or medium-sized
companies, it is very expensive to have the proper cyber
mitigation in place. I agree with what you stated earlier, that
both the Trustwave and Verizon reports that we participate in,
the most--they are two of the most widely-read data breach
reports that exist today, they both have found in their
studies, along with us, that a majority of the notification is
made by an outside party, so the victim isn't knowing that they
are being victimized as the event is taking place.
I think, again, the notification to law enforcement is
paramount. We don't hear from a lot of folks, and I think that,
you know, aside from the larger retailers, and the larger
companies, the smaller ones are just as important. Again, it
will give us a breadth of what is taking place. It also will
help us empower the NCCIC, in pushing out its information to
the broader industry, to include the financial services
information sharing and analysis centers, as well as the multi-
State ISACS. So I think that notification to law enforcement is
extremely important.
In terms of deterrent, if we were to go down to the road of
deterrent, we would certainly support legislation that
strengthens 18 U.S. Code 1030, which is the Computer Data
Breach statute, perhaps having it as a predicate to a RICO
charge, which is a much stronger charge. So that type of
legislation would be helpful as well.
Mr. Quinn. Thank you, Congressman. I echo my colleague's
statements, but I also would point out that the delay sometimes
could be a result of the companies themselves not being state-
of-the-art when it comes to training, or even identify
vulnerabilities or malware that is in their system. But I also
think it would be, you know, disingenuous of me to say that--or
to not acknowledge that some companies may be reluctant to
notify law enforcement. It is that--that is where we kind of
have--it is incumbent upon us, and the Federal, State, and
local systems, to disabuse them of the notion that, when we
come in, we are going to throw their operations into chaos, and
that it is going to be a chaotic atmosphere, or something that
is overly intrusive to them.
It is cliche to say that the Federal Government is here, we
are here to help you, but we really do have to market ourselves
in that respect, is that we are here to help you prevent, we
are here to help you mitigate. We will maintain as small of a
footprint as possible, and try to minimize the impact on your
operations, and that is the investment that will keep you from
losing out long-term.
Mr. Whelan. Certainly, from our perspective, it is
devastating to our local businesses when this occurs. We do see
individuals that affects. Recently, over the last year-and-a-
half, two of the three detectives that we have hired were hired
as experts in computer forensics, and we are now looking at
hiring more analysts, lay individuals, not sworn officers, that
can assist us in dealing with the issue of cyber crime, so that
when a business reacts, and when an individual is affected, we
have the necessary tools to go out and address it. So it is
becoming very expensive, from our level, to continue to fight,
but the good news is that we have a great relationship with the
FBI, and--in cases that are cross-jurisdictional, and in cases
where we just need the assistance of the FBI, where--we reach
out to our local Newtown Square office, and they have been very
helpful for us.
Mr. Fitzpatrick. So what is your experience in Delaware
County? Is it that, in most cases, law enforcement is notifying
the victim, or the victim is contacting the District Attorney's
office? Now, you mentioned in your testimony that many of these
cases of identity theft and cyber terrorism, it is occurring in
not just two jurisdictions, but across several jurisdictions,
so you are dealing with many, many different law enforcement
agencies. Does that add to the lag time and notification?
Mr. Whelan. Absolutely, and that poses problems from an
investigation, as well as a prosecutorial standpoint, so that
does become a factor. For the most part, we are being notified,
and hopefully as early as possible. Then we send our team of
forensic experts in to look at the situation, make a
determination as to where it originates, how it is affecting
the company or the individual, and then act accordingly whether
we are going to ask for additional help either on the State or
Federal level, or can we locally handle it, prosecute it,
investigate it to our fullest extent?
Mr. Fitzpatrick. I appreciate what you are doing. Thank
you.
Mr. Meehan. I thank the gentleman from Bucks County. I have
some follow-up--a follow-up question related to the discussion
that we just had. That is a staggering statistic there that was
just mentioned, that there is--$200,000 is a loss, and that
oftentimes we see within months that company goes out of
business. To me, that really recognizes the impact of this on a
local level. We are talking about the social costs of cyber
crime. We often discuss on the macro level, you never know when
you didn't get the project because somebody stole your bid
information before it was placed. The cyber espionage can be
real, but this statistic where, you know, we have a local
company, and the margins are so thin. So in addition to the
financial crime, we are losing jobs associated with this. This
is having a real impact.
I met yesterday with a local 501(c)(3) organization, you
know, a non-profit entity, with a staggering $650,000 hit that
came through a network in which their network was compromised
without their knowledge. Now, insurance is going to carry about
a third of that, and they may be able to litigate, but it is
going to take them years to get a resolution. Meanwhile, they
are on the hook for $400,000, and this is a non-profit entity.
So how do we deal with financial institutions, small
businesses? Where is this sweet spot? Because we are asking
them to engage more in their home cyber protection, but how do
they know what is the right amount? Because you could--it could
be an endless process of trying to protect the fortress, so to
speak.
So in line with this dynamic process, in which we pick up
information at different points in time, how are we getting to
the people that we know are impacted, because we know there is
information from their systems, and giving them real-time
information that allows them to catch up with everybody else in
a timely fashion before they find themselves victimized?
Mr. Baranoff. Well, the sharing of that cybersecurity
information is probably one of the most paramount preventative
methods that you can have. That is why we encourage folks to
join our electronic crimes task forces, to attend our meetings.
We push out cybersecurity information through our electronic
crimes task forces just as quickly as we do through the FSISAC,
through the Departments, NCCIC, and so on.
Mr. Meehan. So is the key, I mean, to work through--again,
because, while you may have a local--I keep going back to
banks. You know, you may have a local bank that is sizeable
that, on a monthly basis, attends your meetings there, or
Infraguard, but, you know, you have small community-based
organizations that may have four or five branches, and how do
they find the time to take somebody out once a month to, you
know, spend the better part of a day getting that? Where--how
do we get down--through what mechanisms do we get down to the
local level to get to the people who need the information?
Mr. Baranoff. Well, in terms of our task forces, they are
regionally-based, so the issues that are affecting the
Southwest are different than the issues affecting the
Northeast. Those particular issues, related to the region that
they are in, are addressed by that particular task force. So
whether it is cybersecurity information related to the banking
industry, or cybersecurity information related to the oil and
gas industry, that information is shared in real time with
those particular partnerships.
Mr. Meehan. Do we reach out to people, or do we compile
lists so that we know somebody has likely had their system
impacted, and do we go out, even if they are not part of an
association, or part of an ISAC, or part of even a Chamber of
Commerce or something? Do we go--get down to trying to let
victims know that they have been victimized?
Mr. Baranoff. We absolutely do, and one thing that we take
pride in at the Secret Service is that when we call you, we
have information that is actionable. We have information, you
know, we know where the needle is, and what haystack to look
under. That is based on the proactive nature of our
investigations. We are willing to burn a source, for example,
to maintain the resiliency of an organization. Prosecution for
us, quite frankly, is secondary. So we do get out to the
industry, and we do provide that information in real time to
save that company. I can tell you last year alone we saved
several small or medium-sized banks from going under because of
the information that we provided.
Mr. Meehan. Special Agent Quinn, do you have some thoughts
on that?
Mr. Quinn. I concur wholeheartedly. I mean, our mechanism
is a little bit different, but it is the same principle. We
utilize the Cyber Task Force and the Infraguard chapters that
are within, and, quite frankly, we outsource messaging to them.
We identify sector chiefs--we're in the process of identifying
sector chiefs because what can happen is, and it is alluded to
already, a lot of these small to medium-sized businesses may
not ever know. If we get a tip, it is incumbent upon us to get
out there to notify them to--important to mitigate, but also
prepare them, to prevent something like that from happening
again. Also share it among--across sectors in the event that it
might be a continuing threat against other sectors.
Mr. Meehan. DA, do you--how do you perceive information
being taken down to your level, with your colleagues in law
enforcement, or the entities that come to you with concerns or
complaints?
Mr. Whelan. Well, certainly we have come across situations
where individuals will approach us and ask us as to how they
can be better protected, and what issues can they take? We
certainly refer them to the resources that are available for
that particular information, whether it be through the State
level, or through the Bureau level, with the FBI and the Secret
Service.
However, many times what we are dealing with is going out
into the community through our white collar crime unit. In
addition to investigating the crime, we will go out there and
meet with various business entities. We will also meet with
various individuals that may be vulnerable to crime, and
address some of the concerns that they have, and they will
relate information to them. So, from that perspective, we are
proactive, but, for the most part, unfortunately, from our
perspective in the prosecutor's office, we are reacting when a
person already becomes a victim to a crime. But we have
developed over the years many proactive programs.
Mr. Meehan. Thank you. I turn to the gentlelady from New
York.
Ms. Clarke. I thank you, Mr. Chairman, and, you know, we
know that private-sector companies, individuals, and law
enforcement efforts are complicated by the borderless nature of
cyber crime. It is like--it is insidious when there is the
ability to be able to tamper with the systems that exist, that
are all connected to the internet. It is almost like
quicksilver, because we all know that cyber criminals are not
hampered by physical proximity. There can be regional,
national, international borders involved. We know that they can
be physically located in one nation or state, and direct their
crime through computers in multiple nations or states, and
store evidence of crime on computers in yet another nation or
state.
So my question to you is a couple of things. No. 1: Does
this beg for us to develop a new level of law enforcement and
jurisprudence to address just the nature of how this operates?
Is there a particular stratification that needs to develop to--
so that, you know, it doesn't take the DA, you know, 2 weeks
before he is able to begin an investigation, trying to capture
forensic evidence that may be in his jurisdiction, but could
easily be shifted? I want us to think about that picture,
because I have a hard time viewing what we are dealing with
right now as a society under the current boundaries of the laws
that exist.
I mean, crime is crime, yes, but the nature of this one,
the ability to do things so quickly, is not something that we
are all accustomed to. I want to raise that with you and get
your----
Mr. Baranoff. I would agree. The international component is
essential. The vast majority of our greatest threat actors in
cyber are located overseas. The most sophisticated actors are
overseas, attacking our infrastructure. Fortunately, the Secret
Service has an outstanding relationship with some of the best
cyber units located abroad, to include the Dutch National High
Tech Crime Unit, the German BK, and the like. We rely on them
to work with us to both capture these individuals, as well as
collect evidence. A lot of the evidence ends up in overseas
countries. So that international component is essential, and we
need to continue to grow and expand that international presence
to bring these cases to a good conclusion.
Mr. Quinn. Ranking Member, law will always lag behind
technology. We see it across all programs, all investigative
programs. I see it most significantly on the National security
side, when it comes to new techniques, and how to accommodate--
things of that sort. But like Mr. Baranoff had said, what we
do--and because of that, it is--it is paramount that the
relationships that you have overseas, both through--within the
FBI, our FBI legal attache network--we have roughly 64 legal
attaches across the world, with 200 sub-offices.
They are crucial, because it is their relationships with
their foreign government counterparts that enable us to dual--
accomplish the dual objectives of attribution, which is
important, but when you think about it, what is the value of
attribution if you can't do anything against them? We rely
heavily upon our foreign service partners to execute some type
of law enforcement action against them. So until the law
captures or catches up to that, we have to rely upon the
personal relationships.
Mr. Whelan. Once our cyber detectives make a determination
that a crime is committed, what they will do first is try to
preserve that evidence, collect it, investigate it, preserve
it. Once we recognize that it has crossed jurisdictional lines,
we will contact the FBI, give them the information that we
have, and cooperate with the FBI with everything we can do from
the local level, and work with them as a--on the National
issues, based on the evidence we have already presented to
them.
Ms. Clarke. So I guess I am hearing from everyone that our
current laws are sufficient for us to be able to do what we
need to do in order to protect our citizenry, and address
actors that may be seeking to do us harm, that we are in a
place where we are not yet ready to approach these concerns in
a way in which--the one thing about laws is they serve a lot of
purposes. One, it is to help redress the harm that may have
been done to someone, but oftentimes people see them as a
deterrent to types of behaviors that, if you know what the
consequences are, you know, because it is in statute or law,
you are going to think twice, or you are going to understand
what the implications are.
My concern is that I don't know that people actually
understand the implications of a lot of what is taking place on
the internet, in terms of law, and I don't know where we are
going to catch up with it. In the interim, there are just some
legal breaches that are happening along the way to individuals
that are just using this technology, some meaning to do harm,
others sort of stuck in the gray area, some kids, you know,
that get on the internet and act stupid. How do we approach
this now, if what we are saying is, ``Well, the laws are always
going to lag behind the technology''? Any ideas?
Mr. Quinn. Well, I can venture just--you--because that is--
I am the one that said that the laws will always lag behind
technology. Keep in mind that the value of a law is only as
good as your ability to enforce it. So I think that it is going
to be a whole Government approach. Our ability to enforce
either our own laws, or perhaps leverage the laws of, for
instance, a foreign country, where an actor is committing these
type of cyber crimes, there may be a political and a--there may
need to be political and diplomatic leveraging mechanisms, and
so I don't want to create the impression that reliance upon the
law is going to be an end-all, be-all to that.
Mr. Meehan. I thank the gentlelady. Before I let you go,
let me just ask one other question as we are going through
this, because we are talking about systems that are, you know,
the systems aren't static, and how are we dealing with the
changing technology? I mean now, rather than--protecting
something used to be the computer system within a business. You
know, we are seeing cell phones, we are seeing GPS, we are
seeing skimmers that can be used, or iPads. I mean, people now
have in their hand the full computing power they used to have
in the heart of a business. It seems like it is getting
tougher.
Mr. Baranoff. I would say that, you know, when I first
started in cyber about 7 years ago, the technology changed
probably every 18 months. Today I would say it is a third of
that, probably every 6 months. It is challenging for us, in
that environment, to stay up with technology, certainly with
the training that is needed to investigate a lot of these
crimes.
Mr. Quinn. For us, you are absolutely right, it is probably
one of the bigger challenges that we face. What we have to do
in order to stay on the cutting edge is recruit computer
scientists to come in, and that in and of itself can be a
challenge, because they have opportunities that are unique,
and, quite frankly, more lucrative out in the private sector.
But in addition to training our own workforce, and taking
responsibility for it within, we have to bring others in who
have the expertise, and at the same time leverage partners in
the private sector who can help us do the same things.
Mr. Whelan. We are constantly updating, and having our
detectives, our computer forensic detectives, in new trainings,
new courses, new certifications. It seems like every couple
months the detectives are away from the investigation, or at
schools, to update themselves on the new technology. Now we are
looking at hiring new analysts, and looking at new technology
to bring them in so that they are coming in at a level with the
current technology, as opposed to someone that has been out
there that may not have been updated. So it is a constant
battle, and it is a constant expense for us.
Mr. Meehan. Well, I thank the entire panel for your
presence here today, but not just your testimony, but for your
good work in these areas. As I said at the outset, we don't
hear about the crimes that aren't committed, and so there are
some remarkable things that are being done. I--the takeaway I
get from this is the responsibility that we have to encourage
businesses that aren't coming forward, those who are part of
your Infraguard, to report in, those that are part of your
Electronic Crimes Task Force. The--people that are coming in to
your, you know, they may be dealing with you in the form of
reporting something that is a local crime, but not taking the
time to make sure that they share that with a--with the
National matrix, because you never know where the weakest link
is, and where something is coming in.
So thank you for the good work that you are doing, and I am
particularly appreciative of your being here today. We will
take a moment for the second panel to organize itself.
Let me thank our second panel for your patience in being
with us today, and again for your testimony, or your prepared
testimony. I am very grateful. You tell, and are an important
voice in this dynamic. While we have spoken to law enforcement
about the procedures, you are the ones on the front lines, in
terms of dealing with the implications of this, or looking at
the issues with respect to the totality, but particularly as it
affects the victims that ultimately work through some of the
entities in commerce.
So we have--we are pleased to be joined by three more
panelists to conclude our hearing. The first is Mr. Ted Peters.
He is the chairman and CEO of Bryn Mawr Trust. That is a
company that provides personal and business banking throughout
the State of Pennsylvania. Mr. Peters has more than 30 years'
experience in the banking industry, including many successful
entrepreneurial endeavors. He has been at the helm of Bryn Mawr
Trust since 2001, and certainly has seen the growth in this
area. In addition, Mr. Peters was elected to serve a 3-year
term on the Federal Reserve Board, Bank of Philadelphia Board
of Directors.
Joining Mr. Peters is Mr. Tom Litchford. He is the vice
president of retail technologies at the National Retail
Federation, and the National Retail Federation is the world's
largest retail trade association, representing all varieties of
retail stores across more than 45 countries, and including the
Targets of the world. As vice president, he leads and manages
the NRF's IT leadership community, including its Chief
Information Officer Council. He also oversees the Federation's
Association for Retail Technology Standards as its executive
director, where he develops and enhances domestic and
international relationships between retail and technology
companies. Mr. Litchford, thank you for being with us.
Last, we are joined by Matthew Rhoades, who is the Director
of Cyberspace and Security Programs with the Truman National
Security Project, and the Center for National Policy. In this
role, he leads the program's Steering Committee, and directs
the organization's cybersecurity policy initiatives. Previously
he served as the director of legislative affairs at the Truman
National Security Project, and in that capacity he ran the
Congressional Security Scholars Program, and was the principal
author of the Truman Security Briefing Book. I know you enjoy
an overall perspective on this, and we are looking forward to
your thoughts.
So I thank you all for being here. Your written statements
will appear in the record, so I look forward to your verbal
testimony. Mr. Peters, the Chairman now recognizes you for your
opening statement.
STATEMENT OF FREDERICK ``TED'' PETERS, CHAIRMAN AND CEO, BRYN
MAWR TRUST
Mr. Peters. Yes. Chairman Meehan, Chairperson, or
Chairwoman Clarke, and--excuse me, Chair--Congress--
Congresswoman Clarke, and Congressman Fitzpatrick, thank you
for having me as a witness in this area of critical importance
to our country. As a banker for almost 40 years, I will try to
focus my comments and testimony on issues relating to the
financial services industry and its clients. Some quick
background on Bryn Mawr Trust, where we recently celebrated our
125th anniversary as a Philadelphia area institution, we are a
$9.5 billion organization, with over $2 million of banking
assets, and $7\1/2\ million--excuse me, $7\1/2\ billion of
trust and investment assets, and we serve primarily individuals
and closely-held businesses which operate in this region.
All banks and financial institutions are extremely alarmed
at the actual potential threats of cyber crime. At our bank we
have devoted extraordinary amounts of time, man- and women-
power, and money to protect our bank, all of our clients, from
this growing problem. In fact, it is approximately $1 million a
year we spend on this.
In the United States and world-wide, cyber crime and cyber
threats are multiplying at an alarming rate. These threats come
in the form of hacking, phishing, its more sophisticated
derivative spear phishing, malware intrusion, and the well-
publicized DDOS, or Distributed Denial of Service, attacks,
which have been perpetrated on many larger U.S. financial
institutions.
Who are the bad guys? They are no longer precocious
teenagers operating at 3:00 in the morning in their parents'
rec rooms. Today's perpetrators are high-level professionals
who fall into a number of categories. Organized crime rings are
responsible for over half of all attacks. These are well-
organized groups which occupy in a structured and efficient
manner, with profit and loss statements much like legitimate
businesses. Their sophistication is extremely high, and
improving almost daily.
Next are the State-supported enterprises, which comprise
about a quarter of all attacks. These enterprises have
different motives than organized crimes--crime, and are usually
looking for intelligence information that would give a nation-
state some political or military advantage. Primary offenders
here are China, and the former satellite countries of the
Soviet Union.
A third group would be the hacktivists, and you have
probably heard of some of these groups, such as Anonymous, or
the Tunisian Hackers Team, and these organizations are usually
not seeking financial gain, but are more interested in making
headlines. Although hacktivists only account for a small
percentage of attacks, they have very--been very successful in
creating a series of high-profile DDOS attacks against
financial institutions in the United States.
Last, current and former employees and vendors also provide
a serious threat. I think we have all heard of a gentleman
named Edward Snowden.
One of the biggest threats to banks around the country are
corporate and individual account takeovers, initiated by
malware being secretly installed on a business or person's
computer. Again, you will recognize some of the names of his
malware, Citadel, Trojan, Zeus. Once inside, the perpetrator
will then move money around, and eventually try to clean out
the accounts.
Point-of-sale payment systems are another favorite target
of malware criminals. Once the malware is secretly installed on
a merchant's computer, the malware allows cyber criminals to
access all the unencrypted credit card and debit card
information, and at times the encrypted data as well.
What is the solution? Unfortunately, there is no 100
percent solution. The cyber criminals who are out there always
try to stay one head--one step ahead of the financial services
industry. The following, however, are considered best practices
to reduce the possibility of any attack being successful.
First, businesses, and individuals, and financial institutions,
need to use a multi-layered approach. This means a combination
of many risk-based, predictive, and behavioral technologies
which are out there. Companies, and consumers, and financial
institutions who provide a hardened target will find the cyber
criminal moving on to new and an easier victim. Next, financial
institutions must build a strong feedback loop so that any
intrusion can be identified, and defended accordingly. Last, we
must continue to perform on-going assessments of risk, and
improving our defenses.
With that, Mr. Chairman, my testimony is concluded.
[The prepared statement of Mr. Peters follows:]
Prepared Statement of Frederick (Ted) Peters
April 16, 2014
Thank you for having me as a witness in this area of critical
importance to our country. As a banker for almost 40 years, I will try
to focus my comments and testimony on issues relating to the financial
services industry and its clients.
Some quick background information on the Bryn Mawr Trust Company,
where I currently serve as chairman and CEO. At Bryn Mawr Trust we
recently celebrated our 125th anniversary as a Philadelphia area
financial institution. We are a $9.5 billion organization, with over $2
billion of banking assets and $7.5 billion of trust and investment
assets under management or administration in the States of Pennsylvania
and Delaware. We serve primarily individuals and closely-held
businesses which operate in this region. Not only have we survived
numerous wars, recessions, and depressions, but have thrived and are
one of the highest-performing banks in the Nation.
All banks and financial institutions are extremely alarmed at the
actual and potential threats of cyber crime. At our bank we have
devoted extraordinary amounts of time, man-, and woman-power, and money
to protect our bank and all of our clients from this growing problem.
In the United States and world-wide, cyber crime and cyber threats
are multiplying at an alarming rate. These threats come in the form of
hacking, phishing, its more sophisticated derivative spear-fishing,
malware intrusion, and the well-publicized DDoS or ``Distributed Denial
of Service'' attacks on larger U.S. financial institutions.
Who are the ``bad guys''?
They are no longer precocious teenagers operating at 3 in the
morning in their parents' rec rooms. Today's perpetrators are high-
level professionals and fall into a number of categories.
Organized crimes-rings are responsible for over half of all
attacks. These are well-organized groups which operate in a structured
and efficient manner with profit-and-loss statements much like a
legitimate business. Their sophistication is extremely high and
improving almost daily.
Next are state-supported enterprises which comprise about a quarter
of all attacks. These enterprises have different motives than organized
crime and are usually looking for intelligence information that would
give a nation-state some political or military advantage. Primary
offenders here are China and former satellite countries of the Soviet
Union such as Bulgaria, Romania, and the Ukraine.
A third group would be the ``hacktivists'' and you have probably
heard of some of these groups such as ``Anonymous'' or the ``Tunsian
Hackers Team''. These organizations are usually not seeking financial
gain, but are more interested in making headlines. Although
``hacktivists'' only account for a small percent of attacks, they have
been very successful in creating a series of high-profile DDoS against
financial institutions in the United States.
And lastly, current and former employees and vendors also provide a
serious threat. I think we have all heard of a gentleman named Edward
Snowden.
One of the biggest threats to banks around the country are
``corporate and individual account takeovers'' initiated by malware
being secretly installed on a business or person's computer. Again you
will recognize some of the names of this malware--Citadel, Trojan, and
Zeus. Once inside, the perpetrator will then move money around and
eventually try to clean out the accounts.
``Point of Sale'' payment systems are another target of malware
criminals. Once the malware is secretly installed on a merchant's
computer, the malware allows cyber criminals to access all of the
unencrypted credit card and debit card information, and at times the
encrypted data as well.
What is the solution? Unfortunately there is no 100% solution. The
cyber criminals are out there always trying to stay one step ahead of
the ``good guys''. The following, however, are considered ``best
practices;'' to reduce the possibility of any attack being successful.
First, businesses and individuals need to use a multi-layered
approach. This means a combination of many risk-based, predictive, and
behavioral technologies which are out there. Companies and consumers
who provide a ``hardened target'' will find the cyber criminal moving
on to a new and easier possible victim.
Next, build a strong ``feedback loop'' so that any intrusion can be
identified and defended accordingly.
And lastly, continue to perform on-going assessments of risk and
improving one's defenses.
With that, Mr Chairman, my testimony is concluded.
Mr. Meehan. I thank you, Mr. Peters.
The Chairman now recognizes Mr. Litchford.
STATEMENT OF THOMAS LITCHFORD, VICE PRESIDENT OF RETAIL
TECHNOLOGY, NATIONAL RETAIL FEDERATION
Mr. Litchford. Thank you, Chairman Meehan, Ranking Member
Clarke, and Representative Fitzpatrick. Thank you for giving me
this opportunity to provide you with my thoughts on
safeguarding consumer information from cyber attacks. Again, my
name is Tom Litchford, and I am vice president for retail
technologies at the NRF. In that role, I manage the CIO
Council, the IT Security Council, and the Association for
Retail Technology Standards, and we serve over 12,000 members
around the world in the retail industry.
Regarding the recent cyber attacks, I would first like to
comment on the often-forgotten fact that these breaches are
perpetrated by criminals, and often they are very sophisticated
criminals that are breaking the law. The targeted retailers are
victims in these situations, and these victims care deeply
about maintaining the confidentiality of their customer
information, because if they lose that data, they lose their
customers' trust, and ultimately they lose business.
The retail industry makes significant investments every
year in order to protect confidential customer information.
Collectively, retailers spend billions of dollars annually to
safeguard data and fight fraud. But the NRF also understands
that preventing cyber crime is a complex endeavor, that no
single solution or silver bullet exists. Breaches still occur,
and not just in the retail industry. Indeed, in 2013 more
breaches happened at financial institutions than at retails
stores and websites, and no industry is immune from this.
Regarding the problem here, in retail breaches, the
criminal hackers want to steal consumers' payment card data,
which they can easily then monetize by fencing the stolen
numbers on black market websites. U.S. retailers are targeted
because we not only see the greatest number of cardholders, but
our merchants have to accept 50-year-old, fraud-prone payment
card technology. In the United States, a signature, and a
magnetic stripe with unencrypted card numbers are all that is
needed to authenticate a customer and receive payment
authorization. NRF supports an immediate move to replace the
virtually worthless signature authentication with much more
secure personal identification numbers, or PINs, as is used
most everywhere else in the world. If marginally more security
is needed, then a computer chip technology could be added to
cards and card readers, but with significant to cost to our--
all participants in the payments systems.
It is important to point out that our members', or our
retailers', support for PIN and chip technology does not mean
that we should be forced to adopt what is called EMV
technology. EMV is a proprietary chip technology controlled by
the major card brands. Indeed, EMV stands for Europay
MasterCard and Visa. Worse, in the U.S. market, the EMV
standard does not require a use of a PIN. The card companies
require PINs in Canada, the United Kingdom, Europe, and other
countries, but seek to do chips without PINs in the United
States. While EMV chip without PIN certainly protects the
banks, the card companies' current proposal to continue with
signatures in the United States leaves the fraud door open.
Before the retail industry is expected to spend an
estimated $30 billion for stores to upgrade their readers to
accept partially-protected EMV cards, the NRF has urged the
card networks to incorporate PINs now that focus on addressing
security now so that retailers are protected, and then focus on
addressing security across the entire payment ecosystem,
meaning not only stores, but on-line and mobile.
In addition to addressing the problems with the current
payment systems, a critical step forward is the need to foster
greater collaboration. With that, the NRF believes that a
heightened and well-coordinated information-sharing platform,
such as a retail ISAC, is a vital component for helping
retailers in their fight against cyber attacks. NRF is moving
forward with the creation of such a program, that will provide
retailers access to information on cybersecurity threats
identified by retailers, Government, and law enforcement
agencies, and partners in the financial services sector. The
program, developed in consultation with the Financial Services
Information Sharing and Analysis Center, the FSISAC, will
launch with the establishment of an information-sharing
platform for retail industry information security specialists,
and plans call for a retail ISAC to be established this summer.
Recently representatives from the NRF held in-depth
discussions with the United States Secret Service, and with the
NCCIC, the National Cybersecurity and Communications
Integration Center, and the U.S. CERC, the Computer Emergency
Readiness Center, with the idea to get insight and guidance on
how to improve communication, identify available resources, and
collaborate more effectively to help retailers combat criminal
cyber activity. NRF and its membership recognize that full
robust information sharing is sometimes hampered by
restrictions--legal restrictions. Accordingly, we support
passage of H.R. 624, the Cyber Intelligence Sharing and
Protection Act.
In conclusion, by creating a robust information-sharing
platform through which retailers can better prepare themselves
to defend against cyber crime, NRF is actively engaged in
protecting consumer data. In supporting improved payment card
technology, we seek to move the industry beyond the 50-year-old
technology that makes the U.S. retail industry a prime target
for these breaches. With efforts--with these efforts, as well
as Congress's continued actions to encourage information
sharing, we believe we can make the payment system more secure
for everyone involved.
With that, thank you, and I will be happy to answer any of
your questions.
[The prepared statement of Mr. Litchford follows:]
Prepared Statement of Thomas Litchford
April 16, 2014
Chairman Meehan, Ranking Member Clarke, and Members of the
subcommittee, thank you for giving me this opportunity to provide you
with my thoughts on safeguarding consumer information from cyber
attacks. My name is Tom Litchford, and I am vice president of Retail
Technologies at the National Retail Federation (NRF). In my role at the
NRF, I manage the CIO Council, the IT Security Council, and the
Association for Retail Technology Standards.
NRF is the world's largest retail trade association, representing
discount and department stores, home goods and specialty stores, Main
Street merchants, grocers, wholesalers, chain restaurants and internet
retailers from the United States and more than 45 countries. Retail is
the Nation's largest private-sector employer, supporting 1 in 4 U.S.
jobs--42 million working Americans. Contributing $2.5 trillion to
annual GDP, retail is a daily barometer for the Nation's economy.
With respect to consumer data breaches I'd first like to comment on
an often forgotten fact--that these incidents have been perpetrated by
criminals--and often very sophisticated criminals--that are breaking
the law. The targeted retailers are victims in these situations--
victims that care very deeply about maintaining the confidentiality of
their customer information because if they lose that data, they lose
their customers' trust, and they lose business.
Accordingly, retailers make significant investments every year in
order to protect this data. Collectively, retailers spend billions of
dollars annually to safeguard data and fight fraud, as well as hundreds
of millions annually on PCI compliance. And yet, breaches still occur.
And not just in the retail industry. You may be surprised to learn that
in 2013 more breaches happened at financial institutions than at retail
stores and websites. Manufacturing, transportation, and utility
companies, and even professional services firms were targeted. No
industry is immune.
In retail breaches, the bad actors are primarily after payment
data--i.e., credit or debit card numbers--and they particularly like to
target U.S. cards. Why? Because of the volume of credit and debit card
numbers, and the fact that merchants must accept from customers 50-
year-old payment card technology--a magnetic stripe and a signature are
all that is needed to ``authenticate'' the customer and receive payment
authorization. The bottom line is that signature and mag-stripe based
cards are inherently fraud-prone products. Unfortunately, retailers and
our customers are largely at the mercy of the dominant credit card
companies when it comes to reducing card fraud.
So, how can we move forward? What types of solutions would reduce
or eliminate the crimes of data theft and fraud?
the way forward to protect the retail industry
One solution would be to replace signature authentication with an
encrypted Personal Identification Number (PIN). This would greatly
reduce the utility of counterfeited cards and go a long way toward
reducing fraud.
Another solution that is currently receiving some attention would
be to add a computer chip to the PIN and transition to the more secure
``Chip and PIN'' payment card technology. This technology employs a
small computer chip to validate the card to the bank (i.e., confirm
that it is not a counterfeit) at the Point-of-Sale (POS) terminal, in
addition to requiring the cardholder to enter a PIN to prove he is the
person authorized to use the bank-issued card. Chip and PIN technology
dramatically reduces the value of any stolen ``breached'' data for in-
store purchases because the payment card data is essentially rendered
worthless to criminals. In addition, the PIN helps ensure that a
customer and a merchant won't be defrauded even if someone steals the
customer's card. This combination serves as a deterrent to breaches.
The failure of U.S. card networks and banks to adopt such a system in
the United States is one reason why cyber attacks on brick-and-mortar
retailers have increased domestically even as they have dropped
overseas where the majority of the countries have adopted Chip and PIN
payment cards.
Despite the technology's potential benefits, the Chip and PIN
technology that is currently widely deployed in Europe and other
developed countries, sometimes called ``EMV technology,'' would not
provide the same level of protection in the United States because, as
mandated by the card brands for the U.S. market, it does not require
the use of a PIN. EMV--an acronym for Europay, Mastercard and Visa--is
a proprietary technology controlled by the major card brands. Further,
EMV, while not necessarily violating the Durbin Amendment, currently
violates the spirit of that amendment by potentially stifling the
competition in the debit routing market.
No technology (and especially not EMV), is a panacea, and there is
no ``silver bullet'' to preventing cyber crime. EMV, in particular,
would take years to realize the benefit in fraud reduction. As a
result, our members are exploring other means of securing data, such as
encryption and tokenization. Equally important, in addition to
technological changes, our members are developing measures, such as
establishing information-sharing mechanisms, to address the advanced
threats of the evolving cybercrime landscape.
the value of information sharing
One critical aspect of next generation information security is the
ability to share and receive actionable threat intelligence in a timely
manner. Information sharing allows companies to better detect and
defend against sophisticated cyber attacks and data security breaches.
By working together and with Government to disseminate and receive
cyber threat information, companies can learn where to look for signs
of an attack and how to alter their security systems to ``plug holes''
and block attempted intrusions carried out using techniques that were
effective in earlier attacks.
Importantly, third parties often possess information that can help
us mitigate the risks of an attack. As the United States Secret Service
(USSS) recently acknowledged in testimony before the Senate, ``one of
the most poorly understood facts regarding data breaches is that it is
rarely the victim company that first discovers the criminal's
unauthorized access to their network; rather it is law enforcement,
financial institutions, or other third parties that identify and notify
the likely victim company of the data breach by identifying the common
point of origin of the sensitive data being trafficked in cybercrime
marketplaces.''\1\ Victims of cyber crime can then begin to extricate
fraudsters from their system and prevent further data loss when they
know that an attack has taken place. Creating structures where
information regarding critical threats--and certainly actual breaches--
is shared swiftly can be critical in preventing and minimizing losses
from data breaches.
---------------------------------------------------------------------------
\1\ Testimony of Criminal Investigative Division Deputy Special
Agent in Charge William Noonan, available at: https://www.dhs.gov/news/
2014/02/04/written-testimony-us-secret-service-senate-
committeejudiciary-hearing-titled.
---------------------------------------------------------------------------
The retail industry is in a particularly good position to both
benefit from and bring value to information sharing with outside
organizations and entities. Indeed, the history of data breaches
affecting the retail industry indicates a pattern of increasingly
sophisticated cyber attacks using similar tactics, techniques, and
protocols (TTPs). During the recent spate of data breaches targeting
the retail industry, the sector learned the value of such information
sharing by receiving various reports and alerts from the USSS and FBI,
as well as other Federal agencies (e.g., US-CERT and NCCIC) that
highlighted cutting-edge TTPs. The retail industry also received
valuable information from security research companies; for example, the
iSightPartners report, which was disseminated through the National
Cybersecurity and Communications Integration Center (NCCIC) in the wake
of the Target breach, was of such particular value that NRF
subsequently held a webinar for its membership where an iSightPartners'
representative presented on the report's findings. In addition, in
January 2014, the FBI shared a confidential report with the retail
industry titled ``Recent Cyber Intrusion Events Directed Toward Retail
Firms'' that was designed to warn the industry regarding ``memory-
parsing'' malware that can infect POS systems. While the warnings in
the report--and the findings of the iSightReport--were useful to the
retail sector, NRF realized that its members would have derived
significant additional benefits had they been shared sooner. It would
have been more helpful had an established, trusted entity representing
the retail sector existed, at the time, to receive such information in
real time and disseminate it to credentialed retail business security
officers.
One effective mechanism for sharing information, with a proven
track record, is sector-specific Information Sharing and Analysis
Centers (ISACs). In 2006, the Department of Homeland Security
recommended that the Nation's critical infrastructure sectors develop
ISACs to more effectively share threat intelligence. Today, the
National Council of ISACs has 15 member ISACs, including 13
representing or related to critical infrastructure sectors. While the
retail industry is not critical infrastructure, NRF believes that the
sector could benefit from taking a similar approach to information
sharing. ISACs provide a trusted source and repository for critical
threat information, whether provided by outside organizations or
internal members.
The Financial Services Information Sharing and Analysis Center (FS-
ISAC) has been a leading example of a model that has assisted one
sector in preparing for and defending against cybercrime. The FS-ISAC
established various forums and tools to encourage and support
information sharing among its members. Those include e-mail alerts that
provide timely and actionable cyber threat intelligence, bi-weekly
threat information sharing calls with security or risk management
experts, as well as emergency conference calls to share particularly
urgent threat intelligence. The FS-ISAC also conducts on-line webinar
presentations for its members so they can share threat information and
best practices. Using those tools, the financial services industry as a
whole can remain aware of the most up-to-date attack prevention
measures. As outlined in the next sections, NRF has already taken steps
to create, or is in the planning stages of developing, similar
mechanisms to encourage information sharing within the retail industry.
The ultimate goal of these endeavors is to establish a robust ISAC
equivalent for the retail industry. (Retail ISAC)
steps nrf has taken to create a trusted information-sharing platform
NRF already brings together senior business, technology, and loss-
prevention leaders through its Chief Information Officer (CIO) Council.
One subcommittee within this Council, the IT Security Council, connects
information security professionals and focuses on, among other goals,
promoting information sharing within the retail sector. NRF is
currently using its authenticated IT Security Council email
distribution list (and expanding it to also include business leaders
from the CIO Council) to push out actionable threat intelligence to the
retail industry. While this list currently includes only NRF members,
the intention is to broaden the list, and forthcoming Retail ISAC
membership, to non-NRF members as well (meaning all retailers).
Another step NRF has taken on the road to creating a Retail ISAC is
to collaborate with, and learn from, the FS-ISAC. NRF has held several
meetings with the FS-ISAC regarding its structure, communication
methods, and policies. These meetings have allowed NRF to gain insight
into how to operate an effective ISAC and avoid some of the growing
pains that come with the creation of any new entity. As a result of
these initial discussions, the FS-ISAC and NRF have taken steps to
establish a mechanism to push out relevant critical threat information
from the FS-ISAC to NRF for further distribution to its authenticated
IT Security Council members. The practical experience of receiving
information through an ISAC will allow NRF to better understand how
information is shared in an ISAC, and what filtering is necessary to
ensure that useful information is reaching the right parties.
NRF is also establishing relationships with key Government
agencies. The Government collects valuable information regarding
security incidents through its cyber crime investigations and broad
information sharing activities. NRF has held meetings with the United
States Secret Service to discuss the methods the agency currently uses
to distribute critical threat information, and how the Retail ISAC
could become a valued partner. Establishing a Retail ISAC will offer a
quicker avenue for the USSS (and other law enforcement agencies) to
share valuable information with the retail industry.
NRF has also met recently with the National Cybersecurity and
Communications Integration Center to discuss how the Retail ISAC could
receive actionable intelligence for its members as quickly as possible.
The NCCIC is a central communications point for critical infrastructure
entities, various Government agencies and international investigators
where cybersecurity information is sent, analyzed, and shared with
relevant parties in real time. NCCIC consists of four branches,
including the U.S. Computer Emergency Readiness Team (US-CERT). These
connections with the USSS and NCCIC are helping to establish an
information-sharing bridge to the retail industry even as the Retail
ISAC is under development.
Working with trusted advisors, NRF is currently in the planning
stages with respect to a final step in the development of the Retail
ISAC: The establishment of the technological and operational
infrastructure to support a secure portal through which members can
share information. NRF's goal is to allow credentialed members to share
information of varying levels of sensitivity anonymously, thus allowing
the Retail ISAC to act as a repository of critical threat,
vulnerability, and incident information that is sourced from various
members and outside organizations, and to facilitate peer-to-peer
collaboration with the sharing of risk mitigation best practices and
cybersecurity research papers. As this final step is resource-intensive
and requires the active participation of its membership, NRF
anticipates that it may take several months before the Retail ISAC is
fully operational. In the mean time, NRF has, and will continue to,
provide mechanisms and tools for information sharing among the retail
industry, as outlined above.
As a final note on information sharing, NRF and its membership
recognize that full, robust information sharing is sometimes hampered
by legal restrictions. Accordingly, NRF supports the passage by
Congress of the bipartisan ``Cyber Intelligence Sharing and Protection
Act'' (H.R. 624) so that the commercial sector can lawfully share
information about cyber threats in real time, thereby enabling
companies to defend their own networks as quickly as possible from
cyber attacks that are detected by other businesses.
conclusion
In closing, there are three important policies that NRF supports.
First, the members of NRF support replacing today's fraud-prone
mag-stripe and signature cards with cards using PINs or open-standard
``Chip and PIN'' technology. NRF also supports efforts to develop and
deploy end-to-end encryption or tokenization, but is opposed to the
adoption of ``EMV'' technology as mandated for the U.S. market, as it
presently would not require PIN-authentication of card-holders and rely
instead on simply a signature to authenticate the consumer.
Second, NRF supports information sharing within its membership and
the retail industry about cyber threats and has already taken several
steps to create a Retail ISAC, and continues to actively engage in
making that goal a reality. A retail-focused ISAC will allow the
industry as a whole to benefit from the information sharing that is so
critical to effectively combat today's evolving cyber threat.
Third, we support passage by Congress of the bipartisan ``Cyber
Intelligence Sharing and Protection Act'' (H.R. 624) legislation that
will facilitate the sharing of cyber threat information in real time,
thereby enabling companies to better defend their own networks based on
critical information about attacks on other businesses.
Thank you for your time today. I'd welcome your questions.
Mr. Meehan. Thank you, Mr. Litchford.
The Chairman now recognizes Mr. Rhoades for his testimony.
STATEMENT OF MATTHEW RHOADES, DIRECTOR, CYBERSPACE AND SECURITY
PROGRAM, TRUMAN NATIONAL SECURITY PROJECT AND CENTER FOR
NATIONAL POLICY
Mr. Rhoades. Chairman Meehan, Ranking Member Clarke,
Congressman Fitzpatrick, thank you for having me here today.
Information networks provide hope to millions of people around
the world by creating the conditions for innovation and human
prosperity to flourish, while enabling America's mutually-
supportive ideals of human rights, freedom, and opportunity.
Unfortunately, they are also exploited by a variety of actors
to further nefarious national, criminal, and ideological
objectives.
Frequently these groups, hacktivists, terrorists,
criminals, and nation-states also overlap, working together
towards complimentary interests, while utilizing the inherent
anonymity of cyberspace. In short, today's technologies provide
an unprecedented opportunity for humans to reach their full
potential, while simultaneously increasing individual and
collective security risks. These are facts that the Members of
this committee know well, but they are worth mentioning here
today because in cyber space, the difference between espionage,
crime, and attacks can be as simple as intent, or just a few
keystrokes.
Gaining and maintaining access to a network are the most
difficult phases of a cyber incident, but once you are in a
network, whether you spy, steal, or destroy is often a matter
of choice. Criminals are developing new tools that are more
sophisticated and more intuitive than previous generations, and
then selling them in on-line marketplaces. This is lowering the
barrier to entry, and giving more actors the capability to
threaten critical systems. Cyber crime, in this way, is
connected to both National security, and the protection of
private information, and no single entity, whether Government
or business, can secure a domain that extends beyond
traditional geographic boundaries. Cybersecurity is a shared
responsibility.
To ensure our Nation is safe, the Government must
coordinate the protection of our country's most critical
assets, while law enforcement agencies impose the criminal laws
of the United States. Governments must also find ways to
cooperate with one another on investigations. Cyber crimes are
often intentionally routed through multiple countries,
particularly those who provide sanctuaries against
international investigations. More must be done in the
international arena to build the capacity of sanctuary states,
and to discourage others that are complicit in criminal
activities.
Private companies must do their part as well. But in
sectors where there is no choice in the consumer market, the
Government should play a larger role in ensuring the security
of critical networks. Many companies are collecting, storing,
and analyzing information on U.S. citizens. Securing those
networks, protecting our information, both require the private
sector to take better responsibility for their own security.
While information-sharing programs do not offer a
cybersecurity panacea, they can contribute to collective
security by creating a fuller picture of the threat
environment. That said, there is a right way to share
information, and a wrong way to share information. All
irrelevant personally identifiable information should be
removed before the information is given to the Federal
Government, or to other private actors. Information coming into
the Federal Government should have previously-defined
acceptable uses, and be given to a civilian agency, and those
who participate in information-sharing programs and exhibit
negligent behavior should be held responsible. Getting this
right matters. The way we build our domestic programs will have
privacy and civil liberties implications for Americans here at
home, but also for human rights activists and dissidents
abroad.
The unfortunate reality of cyber is that, given enough
time, resources, sophistication, and motivation, an attacker
will gain access to a network. As people become more dependent
upon technology, the opportunities for crime, espionage, and
physical disruption will increase. But by implementing
commonly-held best practices, we can protect the great majority
of our networks, secure our personal information, and allow our
security agencies to focus on preventing attacks to critical
systems.
Thank you for the opportunity to join you today, and I look
forward to your questions.
[The prepared statement of Mr. Rhoades follows:]
Prepared Statement of Matthew Rhoades
April 16, 2014
Chairman Meehan, Ranking Member Clarke, Members of the committee:
Thank you for inviting me to appear today to discuss how the public and
private sectors can work together to increase cybersecurity.
Currently, I serve as the director of the Cyberspace and Security
Program at the Truman National Security Project and Center for National
Policy. Together, these two organizations represent more than 1,300
members with an expertise in numerous security issues--including
cybersecurity--and a dedication to forging strong, smart, and
principled National security policy for America.
The rapid development of information networks over the past 30
years has allowed individuals and nations to grow and prosper. Today,
our small businesses are global enterprises--reaching markets and
customers on the other side of the world with the click of a mouse. The
internet invigorates economic progress and helps people rise out of a
cycle of poverty in the developing world.
These tools also enable the expansion of America's mutually
supportive ideals: Human rights, freedom, and opportunity. Using the
internet, democracy activists in nations ruled by oppressive regimes
can organize to petition for their fundamental rights; vulnerable
populations in conflict-ravaged areas can show the world the brutality
of their own governments; and individuals can seek out new ideas to
challenge their own beliefs.
New technologies are providing hope to millions by creating the
conditions for innovation and human prosperity to flourish.
Unfortunately, they are also being exploited by a variety of actors to
further nefarious national, criminal, and ideological objectives.
Hacktivists--or on-line demonstrators--use information networks to
target opponents and draw attention to a political cause. Terrorists
use information networks to spread their propaganda and recruit others
to help commit acts of violence. Criminal organizations use the
internet to steal from individuals and organizations all over the world
and turn another's loss into their financial gain. Finally, nation-
states leverage these capabilities to spy on, steal from, and
potentially attack their adversaries.
Frequently, these groups--hacktivists, terrorists, criminal
organizations, and nation-states--also overlap, working together
towards complimentary interests while utilizing the inherent anonymity
of cyber space to make attribution even more difficult.
With each new day, the number of actors with access to these tools
increases and, as a result, so does the number of potential victims.
Roughly 90% of the world's data has been generated in the last 2
years.\1\ As more information is generated, confidentiality and privacy
grow more vulnerable. Governments are losing once closely-held state
secrets; companies are finding their intellectual property suddenly in
the hands of competitors on the other side of the world; and
individuals are losing control over their private information.
---------------------------------------------------------------------------
\1\ Science Daily, ``Big Data, for better or worse: 90% of world's
data generated over last two years,'' 22 May 2013, http://
www.sciencedaily.com/releases/2013/05/130522085217.htm.
---------------------------------------------------------------------------
According to Symantec's ``Internet Security Threat Report 2014,''
the number of breaches increased by 62% in 2013 with a total of over
552 million identities compromised.\2\ Additionally, targeted attacks
grew by 91% and are increasingly aimed at small businesses.\3\
---------------------------------------------------------------------------
\2\ Symantec Corporation, Internet Security Threat Report 2014;
Volume 19, p. 5.
\3\ Ibid, p. 5 & p. 18.
---------------------------------------------------------------------------
And as we are all aware, the recent, highly-publicized breach at
Target--the second-largest retailer in the United States--compromised
personal information on 70 million customers by using software that may
have cost less than $2,500 at an on-line marketplace.\4\ Today, cyber
criminals can use relatively easy-to-find software to make outsized
gains.
---------------------------------------------------------------------------
\4\ Chris Smith, ``Expert who first revealed massive Target breach
tells us how it happened,'' 16 January 2004, http://bgr.com/2014/01/16/
how-was-target-hacked/.
---------------------------------------------------------------------------
The Target example shows that even the largest companies with vast
resources are vulnerable. Frequently, they are unaware that a breach
has even occurred. One security provider recently announced that in
2013 the median number of days attackers were present in a network
prior to discovery was 229 days. That is actually 14 days less than the
2012 median.\5\
---------------------------------------------------------------------------
\5\ Mandiant, MTrends: Beyond the Breach, p.1.
---------------------------------------------------------------------------
In short, today's technologies provide an unprecedented opportunity
for humans to reach their full potential while simultaneously
increasing individual and collective security risks.
These are facts that the Members of this committee know well, and
they are broader than the scope of this hearing. But they are worth
mentioning in this context because in cyber space, the difference
between espionage, crime, and attack can be as simple as intent, or
just a few keystrokes.
Gaining and maintaining access to a network are the most difficult
phases of a cyber incident. Adversaries spend a great amount of time,
energy, and resources to seek out and secure vulnerabilities that
provide access. But once they are in the network, whether they spy,
steal, or destroy is a matter of choice.
Furthermore, criminals are developing new tools that are more
sophisticated and more intuitive than previous generations, and then
selling them in on-line marketplaces. This reality is lowering the
barriers to network entry and giving more malicious actors the
capability to threaten critical systems, in both the private and public
sectors.
Cyber crime, therefore, is linked to National security and the
protection of private information. All of the actors using cyber space
for illegitimate means need vulnerabilities to exploit, and no single
entity--whether Government or business--can secure a domain that
extends beyond traditional geographic boundaries. In cyber space, one
weak link can compromise the security of the entire system.
Cybersecurity is a shared responsibility.
To ensure our Nation is safe, the Government must coordinate the
protection of our country's most critical assets against sophisticated,
destructive attacks while law enforcement agencies impose the criminal
laws of the United States in the cyber domain. Through the development
of new tools and the continued maturation of the National Cybersecurity
and Communications Integration Center (NCCIC), the Department of
Homeland Security (DHS) is addressing this responsibility.
But more can be done. For example, the effectiveness of the NCCIC
is directly tied to the level of participation by other Federal
agencies. Yet, those agencies are not currently required to share
information with DHS. If we are going to task DHS with the
responsibility for leading the protection of Federal civilian agencies,
then we must give them the authorities required to be successful.
Governments must also find ways to cooperate with one another on
investigations. Cyber crimes are often intentionally routed through
multiple countries, particularly those who provide sanctuaries against
international investigations. When an investigation leads to a new
jurisdiction, the investigators are suddenly at the mercy of another
government. More must be done in the international arena to build the
capacity of nations that do not want to be criminal sanctuaries and to
discourage others that are complicit in criminal activities originating
in their territory.\6\
---------------------------------------------------------------------------
\6\ Richard A. Clarke, Securing Cyberspace Through International
Norms: Recommendations for Policymakers and the Private Sector, Good
Harbor Risk Management, LLC, p. 23.
---------------------------------------------------------------------------
Private companies must do their part as well. Most of this
country's critical infrastructure is privately-owned and operated, but
market forces alone have yet to incentivize broad-scale use of cyber
risk management strategies. Many companies are working to protect their
networks, but too many are not doing enough. And in sectors where there
is no choice in the consumer market--where a public good is being
provided by a private actor--the Government should play a larger role
in ensuring the security of critical networks.
Additionally, many companies are collecting, storing, and analyzing
information on U.S. citizens. This information deciphers everything
from our travel habits to our personal interests. Securing our most
important networks and protecting our personal information requires the
private sector to take better responsibility for their own security.
Finally, individuals have to take responsibility for our on-line
behavior as well. Although there are sophisticated hackers at work,
most compromises take advantage of existing vulnerabilities that have
not been patched but could have been. The more hardened a target
becomes, the more likely a hacker will look for a less secure,
peripheral target as a means to get in. This is likely the reason that
targeted attacks are increasingly focused on small businesses. We must
contribute to a culture of security that is respectful of the rights of
others, while contributing to the security of the whole system.
Universities across the country, including Drexel University here
in Philadelphia, are developing educational programs to ensure the next
generation is prepared to combat cybersecurity threats. These are
important initiatives that warrant support. However, it will take a
generation for them to fully bear fruit. More also needs to be done to
make today's users aware of the risks associated with their on-line
behavior.
Getting this model of collaborative security correct is dependent
upon trust. Governments and private entities must work together to
mitigate threats. Both, however, are collecting vast quantities of
information on individuals. The more information they store in their
databases, the more attractive those databases become to criminals.
What they share and how they share has serious privacy and civil
liberties consequences for individual consumers.
While information-sharing programs do not offer a cybersecurity
panacea, they can contribute to collective security by creating a
fuller picture of the threat landscape. That said, there is a right way
to share information and a wrong way to share information. All
irrelevant personally identifiable information should be removed before
the information is given to the Federal Government or another private
actor. Information coming into the Federal Government should have
previously-defined acceptable uses and be given to a civilian agency.
And those who participate in the program and exhibit negligent behavior
should be held responsible. Getting this right matters: The way we
build our domestic programs will have privacy and civil liberties
consequences for Americans and for human rights activists and
dissidents overseas.
The reality is that given enough time, resources, sophistication,
and motivation, an attacker will gain access to a network. And as
people become more dependent upon technology, the opportunities for
crime, espionage, and physical disruption will only increase. But with
collaboration built upon trust, I believe we can reduce our
vulnerabilities. By implementing commonly-held best practices, we can
protect the great majority of our networks, secure our personal
information, and allow our security agencies to focus on preventing
sophisticated attacks against our most critical networks. And, in the
end, we can more fully realize the potential of new technologies to
expand freedom and opportunity at home and abroad.
Thank you for the opportunity to join you today, I look forward to
answering any of your questions.
Mr. Meehan. I thank each of the panelists for your
testimony, and your full written statements will become part of
the record, so I now recognize myself for 5 minutes of
questioning.
Mr. Peters, thank you for taking the time to be here with
us today, representing not only your bank, but many smaller to
mid-sized institutions as well. I was struck by the figure that
you gave me, a million dollars that you are spending at a
relatively sophisticated bank in and of itself, but relatively,
you know, smaller, compared to the big New Yorks, or--that is a
million dollars off the bottom line. That is a lot of
investment. Can you tell me how you are using that kind of an
investment, and how you make the choices about where to, you
know, put those kinds of decisions about what you use, and what
you rely on to come from other places?
Mr. Peters. Well, a lot of it, Mr. Meehan, is a risk-reward
type thing. We spend a million dollars. We could probably spend
two or three if we wanted to. It goes really basically for
software. I mentioned multi-level protection. That is the most
important thing, is you have three or four different layers,
and they all look at things differently, and that will kind-of
catch things. We use a lot of outside vendors who come in and
do intrusion tests on us. We have 19 people in our IT
department, whatever--and it sort of points up a point which
Mr. Fitzpatrick brought up a second ago, about--how about small
banks, or how about small businesses? That is really, you know,
we are fortunate we are large enough--we spend a million
dollars, and we can afford to spend it. But you get a bank that
is a $3- or $400 million bank, or you get a small business with
25 or 50 employees, they have a lot of trouble spending that
type of money for this, and I think that is really one of the
real challenges which we have going forward.
We do not see, by the way, that decreasing going forward.
If we are--we spent a million dollars last year. We probably
spent $800,000 the year before, and I think this year the
budget is a $1.2 million or $1.3 million. So we are going to
see this continue to escalate.
Mr. Meehan. Now, do you issue credit cards and other things
out of your institution?
Mr. Peters. We do not issue a credit card. Banks our size
usually don't. There are usually five or six large banks in the
country that issue them. However, we do issue debit cards, and,
of course, they get compromised. On the Target situation that
happened, we had to replace over 1,000 cards, and to, once
again, Mr. Fitzpatrick--accommodation cost us $5 or $6 to
replace that card. Everybody has to be personally called. They
have to come into the bank personally to replace it, and there
is a lot of inconvenience and time. We get no--absolutely no
compensation for that at all, and this happens many, many times
during the year.
But we see--very frequently we see compromised debit cards.
It could--Target is obviously the most visible one, but there
have been lots of other little ones around that we get reports
on once a month. You know, your--at least 50 cards have been
compromised.
Mr. Meehan. I think that is one of the points that is made,
is, notwithstanding that sometimes a lot of identities are
taken, that the--turning that into some sort of a compromised
situation still takes a few more steps. So a lot of names are
sold, but then we see phishing, and other kinds of things that
take place to try to get that identity to themselves do
something that allows them to be further compromised. Isn't
that right, Mr. Litchford?
Mr. Litchford. Right. Well, I--and I think the previous
panel addressed the fact that consumers need to be educated
too, and to protect their sensitive data. But, at the same
time, in terms of the retail breaches, the data that they are
getting alone is not enough for identity theft. It is primarily
the card numbers that they are after. What the bad actors do is
then, in turn, sell those numbers in bulk. As you know, with
the current technology of those cards, it is very easy to then
go make a counterfeit card. Because we are using signature as
the second form of authentication, it is very easy for them
then to go commit fraud with those numbers.
So the costs here are on the banks and the retailer side.
At most, the consumers are probably inconvenienced. I mean, I,
for one, was part of the Target breach, and Chase replaced my
card, and I had to go through and update my auto payments, and
things like that. So it was more of an inconvenience at the
consumer level, but the cost of that fraud is being borne by
the commercial businesses, such as banks and retailers.
Mr. Meehan. Now, you have also mentioned the idea of the
technology, 50-year-old technology. What is the solution with
respect to the cards? You mentioned what is happening in
Europe, but that isn't a preferred solution for you. What is
the----
Mr. Litchford. Right.
Mr. Meehan [continuing]. Solution?
Mr. Litchford. I think there are a couple things. I mean,
first, you know, just back to EMV, to understand, EMV was
created over 20 years ago to address a problem outside of the
United States that was not a particular issue in the United
States. When that technology was developed, it had no inkling
of this thing called the internet, or e-commerce, or now what
is called emerging mobile commerce, with mobile payments. So
that technology is designed to only stop counterfeit cards
predominantly. Or if I were to lose the card, and you were to
pick that card up and try to use it, it would stop that,
because it has a PIN on it, right?
So with that, if the cost to implement that type of
technology in the United States, which we anticipate on the
retailer side alone is over $30 billion----
Mr. Meehan. Why so much?
Mr. Litchford. Because of the cost of replacing the
equipment and software, and training at the stores. There is--
again, the cost is anticipated to be anywhere from, I think,
$500 to $1,500 per lane. So when you are in a retailer, they
are having to replace not just the hardware, but train their
people how to use it, replace the software that handle the
systems, and things like that.
So, again, we just believe that that money could be better
spent addressing the entire ecosystem, not just part--present
situations, such as in stores, but also to start looking at----
Mr. Meehan. Well, what is the entire situation? Because as
you are speaking, I am considering the idea. I am thinking----
Mr. Litchford. Yeah.
Mr. Meehan [continuing]. In the one sense, why wouldn't we
be moving forward into newer technology? But, at the same time,
if you are spending $30 billion to do this, the dynamic nature
of--are they going to find some other way to get into the
middle of that transaction, so it is not done at the counter,
but it is done some other----
Mr. Litchford. Right.
Mr. Meehan [continuing]. Part----
Mr. Litchford. So EMV, as a technology, the card number is
still in the clear, just so you know. The encrypted portion of
EMV is just to validate that the card is the real deal, this is
not a counterfeit card. So we could still potentially see
those--they are called PANs, or personal account numbers,
exposed, and then used to do transactions in other
environments, such as on-line or mobile. Which is where,
frankly, the industry or--and consumers are going.
So, you know, even where EMV has been deployed, you know,
we are quick to tout, yes, we have stopped all this fraud in
our stores, but we have moved the equal percentage to on-line
environments, so the fraudsters will go to where they can
easily monetize the data. So, from a retailer's perspective,
what we want to do is--we know this cyber war we are in is a
war that is going to be a continual war. The goal is not
necessarily to stop breaches, but to stop their ability to
monetize any data that they would get from that breach.
So retailers are already taking steps now to try to
eliminate any of that sensitive data within their systems. As
an example, I am already seeing many retailers start to invest
in significant cost into something called encryption and
tokenization. So once I swipe my card at the retailer's
terminals, it is immediately encrypted, so that that number is
no longer in the clear. Of course, we have to work with
financial institutions to handle things like that, as well as
tokenization.
So, again, you know, I think the money--another thing you
can do, by the way, is, on your current mag stripe card, is you
could simply put a PIN on that today, and that would have
probably stopped most of the fraud that is occurring in the
United States. So, again, our position is we would like to see
the entire payment ecosystem addressed, not just focus on a
particular piece of that. Even then the focus is on--at least
what the cards are pushing down on retailers is not even to
have PINs. They want to just put a chipped card out there, and
still allow you to use your signature for that. So we think
that is not a full solution.
Mr. Meehan. Well, I thank you. My time is expired, and I
will turn to the gentlelady from New York.
Ms. Clarke. I thank you, Mr. Chairman. I want to also thank
our expert panelists, and say--and respond to Mr. Peters, and
your earliest salutation to me, that hope springs eternal.
Mr. Peters. Right.
Ms. Clarke. The private sector's focus is on the
development and implementation of technology systems to protect
computer intrusions and malicious code, internet fraud, spam,
and if a crime does occur, to detect it, and gather admissible
evidence for an investigation. The private entities that focus
on these technological efforts include internet service
providers, security vendors, software developers, and computer
forensic vendors.
Internet service providers offer businesses and home users
various levels of access to the internet, and other internet-
related services, such as customer support, and spam and virus
protection. Providers also assist law enforcement by monitoring
and providing information on selected internet activities, and
provide technical expertise.
How does a company who employs the services of security
vendors decide when to report a cyber crime, and when to allow
or encourage its security vendors to cooperate with law
enforcement in the investigation and prosecution of a cyber
crime? Can you give a sense of, you know, how does it all come
together, and, you know, what is that moment where it sort of
says, eureka, let us move in this immediately, because it is me
now, it could be someone else in the next----
Mr. Peters. If I could start? Yeah, first of all, we report
everything. We are required, as a financial institution, to
file something called suspicious activity reports, SARs, with
the Federal Government anytime anything happens. It could be
somebody who is trying to launder cash through a teller, but in
many cases now, actually, it is computer fraud. There is
identity theft. I think last year we stopped 14 cases of
identity theft at our bank. Unfortunately, one did get through.
On the other hand, we get 30 attacks a night, 30 attacks in our
computer system a night. Most of them are from China.
So we actually report everything to the Federal Government.
We are required to do that, and we do that, and to local law
enforcement. If something has identity theft, we will go to the
local authorities, usually our township folks, and report that
to the police department.
Mr. Litchford. Yes. So, again, in retail, the predominant
data that these bad actors are going after is credit card
information, and many times it is not the retailer that knows
that the--that a crime is occurring. It is typically, for
example, our financial institution friends that have pretty
decent algorithms for what is going on with fraud, that they
are able to then, for example, call a retailer and say, we
suspect something is going on. Then at that time--I am--can't
speak for all retailers, but I assume that the law enforcement
is then engaged.
One of the problems that we have in retail is the myriad of
laws that they have to abide by, not only in the United States.
I believe it, and I hope I get the numbers right, I think it is
47 States, plus the District of Columbia, have different
uniform breach notification laws. So one of the--so you can
imagine now what a retailer is trying to go through to figure
out, you know, how do I respond to this State versus that
State. Then--so part of the thing--things our members, and NRF,
is for is a uniform breach notification law.
Ms. Clarke. That is interesting. I had no idea that it was
based on the States how you go about reporting. Very well.
Mr. Litchford. Right.
Ms. Clarke. Then, when you think about the fact that many
retailers are also international now, it adds another layer
of----
Mr. Litchford. Yes.
Ms. Clarke. Challenge.
Mr. Litchford. Yes.
Ms. Clarke. I wanted to just revisit with you a moment the
whole idea of chip and PIN.
Mr. Litchford. Um-hum.
Ms. Clarke. It is a global standard, and we seem to be the
outlier, as the United States. As you have spoken about your
thinking around it, you talked about the idea of the mobile and
the on-line----
Mr. Litchford. Um-hum.
Ms. Clarke [continuing]. Purchasing, particularly when it
comes to retail items. How does that impact on our industry,
the fact that we are outliers with the swipe and signature,
versus the chip and PIN?
Mr. Litchford. Right.
Ms. Clarke [continuing]. You give us a better sense of
that?
Mr. Litchford. Well, I think the obvious impact is the bad
actors have come to the United States to get that data now,
because it is a place that is green pastures for them, and then
they can breach systems, get the data, and then easily monetize
it. So, again, the challenge here is what can we do with the
current mag stripe technology to try to reduce some of the
fraud that does occur when the data is breached? So I could
simply put a PIN on a mag stripe today, and pretty much stop a
lot of the fraud that is going on, because even if they made a
counterfeit card, they would not necessarily have the PIN that
goes with that card.
The other issues, you know, with EMV, again, is they are
proposing in the United States not to--they are calling it chip
and signature, or chip and choice, which everywhere else in the
world is chip and PIN. So we are wondering what--why do you not
want a PIN? What is the problem here? We know PINs are the way
to safeguard things, whether it is on a mag stripe or a chip
card.
Then a further potential issue we have with EMV is it is a
proprietary standard, meaning it was developed by the cards
themselves. With that, today, retailers, there are two rails,
so to speak, that you go over for your authentication, or your
authorization. One would be--what--you might think is the
credit rail, and the other is the debit rail. What is really
going on behind the scenes is you have a signature
authorization, or a PIN authorization. When that transaction is
a PIN authorization, retailers today have choice of about 18
different providers that they can go to, based on the fees that
are going to be charged to them for that authorization. EMV
does away with that. The debit routing is determined by the
card itself, therefore, by the issuer, not the retailers.
Ms. Clarke. That is interesting. Is there an advantage to
being in a separate system all to ourselves, in terms of these
retail transactions? In other words, that is driven by the
card, versus, I don't know, the public, or the----
Mr. Litchford. Right.
Ms. Clarke [continuing]. Retailers, or--I mean, when you
think about the fact that everywhere else, you know, for the
most part, we are dealing with chip and PIN. Is there an
advantage to us maintaining our own uniqueness, if you----
Mr. Litchford. Right. Well, and keep in mind, at the time
of EMV, the United States was far along, and well ahead, in the
sophistication of our payment networks, versus the rest of the
world. Today, keep in mind, if you see an EMV card from
somewhere else in the world, or even many U.S. cardholders have
EMV cards because they travel internationally, if you look on
the back, it still has a mag stripe on it, right?
Going forward, even if we were to pursue that technology in
the United States for at least 5 years or so, those cards are
still going to have mag stripes on the back of them for
transitional purposes. So I am not going to see benefit from
Day 1 of deploying EMV technology. That is why I made the
comment that you could put PINs on credit--on mag stripe cards
today and pretty much immediately see an impact, not having to
wait for this transitional period, and then use those
investment dollars to address the entire payment ecosystem, not
just what we call a card present, or in-store transaction.
Ms. Clarke. Thank you. Mr. Chairman, I thank you for your
indulgence, and yield back.
Mr. Meehan. I thank the gentlelady. Turn to Mr.
Fitzpatrick, from Bucks County.
Mr. Fitzpatrick. Mr. Litchford, isn't one of the issues
with this chip and PIN, or chip and choice, the--in terms of
economies and scale, and smaller merchants, the cost of new
technology requirements and terminals?
Mr. Litchford. Um-hum.
Mr. Fitzpatrick. Can you elaborate on that?
Mr. Litchford. Well, again, we have estimated the cost to
be, you know, somewhere in the lines of $600 to $1,500 per
terminal on the retailer side to deploy the ability to accept
EMV cards. Is that the question? Again, that is just in
retailers, right? So keep in mind, if we deploy EMV technology,
there are many, many other types of businesses that take credit
cards that will also have to upgrade their infrastructures, as
well as the financial institutions themselves. They have all
the ATMs out there that they need to replace. So there are just
huge and significant costs involved.
Mr. Fitzpatrick. So retailers just consider it cost of
doing business, part of the security costs going forward? But
should there be a recognition on the difference between a
large-scale retailer, like Target, versus a smaller mom-and-pop
operation?
Mr. Litchford. I am not sure what you are asking there. I
mean, the cost is the cost. I think when you look at the
retailers, the larger ones, like Walmart, for example, are
already ready for EMV, predominantly because they are a global
retailer, and they use standardized deployment of POS systems.
So whatever they deploy to the United Kingdom gets deployed to
the United States, so therefore they are already ready for EMV.
Mr. Fitzpatrick. Back to your previous testimony, I think
what you said is that we need to recognize that, in the future,
there will be cyber attacks, and some of those attacks will be
successful, but the real key is trying to determine the best
way to minimize the damage, and precluding any monetizing of
that information in the future.
Mr. Litchford. Right.
Mr. Fitzpatrick. It has now been 5 months since the
successful attacks on the Target operation. What have we
learned, and what have we changed, as a Nation, in those 5
months?
Mr. Litchford. Um-hum. Well, again, I think one of the
biggest things that, from the retail perspective, we are
calling for is the lack of information, and the lack of
critical information getting to us relatively speedy. As an
example, from the Target breach itself, the first data that we
had that we could disseminate to our members was January 16. In
the mean time, we know, through these ISACs, that data was
being exchanged. But my members were calling, you know, what
can I do? How do I know that I have not got the same malware
problem?
As soon as we got that data, NRF did a webinar with
Eyesight Partners, who was one of the publishers of the paper,
to our members, and walked them through. This was a very
technical call. These are the signatures you need to look for,
these are the DLLs you need to look for. But, again, that was a
month after Target was announced, right? So one of the things,
based on that learning, that we are moving forward with is this
establishment of a retail ISAC.
So even though retail is not identified as a critical
infrastructure, we are going to go ahead and develop this ISAC.
We are working with financial services ISAC, the Secret
Service, NCCICS, and U.S. CERC to make sure that we get this up
and running. In the mean time, we are establishing a listserv
to push data out one way. As soon as that is up, which we
expect to be in the next week or so, that will then be
immediately fed with TLP White and TLP Green alerts. Are you
familiar with the traffic light protocol? So green is
information that is shareable to the public--or white is to the
public, green is to the community. But the amber and red alerts
I am not able to push out yet. So as NCCICS is pushing out
these alerts in real time, I cannot share those until I get to
a full-blown ISAC.
But this whole concept of sharing and collaboration is just
huge, and getting as near-real-time as we can, because the goal
is we don't want to be reactive. We want to get proactive, so
we want to know everything we can coming from all the services
that provide this type of information, so that we can then take
a proactive stance to protect our systems.
Mr. Fitzpatrick. Special Agent Quinn from the FBI indicated
in his testimony that some institutions would be reluctant from
reporting. Now, Mr. Peters, you talked about, in your industry,
you are required to report.
Mr. Peters. Yes.
Mr. Fitzpatrick. The FBI--he indicated some might be
reluctant to support, I suspect because competitors would take
advantage of that lapse in security. Is that your
understanding?
Mr. Peters. I don't know that I can speak to the
reluctance. I mean, one of the things, from working with the
Secret Service, is these Electronic Crimes Task Force, and
getting that information out to the retailers so that they
establish a relationship with that organization, so that, when
they do get the call, it is not necessarily, you know, hello,
this is the Secret Service calling you. It is, hello, this is
Ari calling you, yeah, what is up? We have that ability, and
that relationship, so that we are comfortable now working with
law enforcement and moving forward.
Again, from the breach notification perspective, it is the
problem of all the different laws in the States that we have,
that we are trying to now figure out, what do I have to do?
Mr. Fitzpatrick. Thank you.
Mr. Meehan. I thank Mr. Fitzpatrick. Let me just ask a
follow-up question. Mr. Rhoades, you--your testimony speaks to
an issue which, as I alluded to in my first line of questioning
with the earlier panel, but it is still--again, it is very,
very disconcerting that the median time----
Mr. Rhoades. Um-hum.
Mr. Meehan [continuing]. That--days before someone
appreciates businesses or otherwise that there is, you know,
there is activity within--inside their networks is 229 days,
median, before it is recognized. In addition, we are seeing,
particularly from the Eastern European, that, once in the
system, they are using that window to create software that
mimics the actual operation of the entity----
Mr. Rhoades. Um-hum.
Mr. Meehan [continuing]. Which makes it even more
difficult. So are we walking into a period here where detection
is going to become increasingly more difficult, and longer, and
therefore a greater opportunity for compromise?
Mr. Rhoades. I don't know if detection will become longer.
The report that I cited in my written testimony, the 229 days,
while staggering and very long, was actually an improvement
over what that security provider had found in the previous year
by about 2 weeks. The adversaries are becoming more
sophisticated, though, so it may be more difficult to notice
them. This is especially true for--you mentioned earlier a non-
profit. There has been some conversation around small
businesses. One of the things--the previous panel was
enlightening. I thought one of the things that was missing was
the human power that is required to do these things.
So, technology is nice. Technology really, in this space,
only enables policies and processes for an individual,
business, or entity to protect itself. Cybersecurity, at its
core, eventually comes down to people. So, to have trained
people to understand when they receive information from others,
how they can actually incorporate that and protect their
networks, to have people that are trained to use the
technologies that they have so that they can detect anomalies
in their networks, I think that is the fundamental challenge,
especially with small businesses and non-profits. That is the
biggest challenge for these actors getting more sophisticated.
I think the technologies will advance to be able to pick up
some of these network anomalies, but do you have an individual
on the other side watching that that can sort of understand
what to do with that information?
Mr. Meehan. Let me take it from the other side, which is
the information that is collected. I mean, we are now dealing
collectively in Washington with an issue regarding personal
information, the recognition that the Government, in certain
capacities, may be tracking if you made a phone call.
Mr. Rhoades. Um-hum.
Mr. Meehan. Yet what strikes me is, while that is an
important privacy question that we have to deal with, the
wealth of information that is being collected about our
activities out there in the cyber world, consumer world, or
wherever, is overwhelming----
Mr. Rhoades. Um-hum.
Mr. Meehan [continuing]. So much so that people are looking
at tendencies, they are looking at the ability to know a great
deal more about us than ever before. So where is the boundary
with respect to what is appropriate to collect about
individuals without a corresponding obligation----
Mr. Rhoades. Right.
Mr. Meehan [continuing]. For security? Looking at the
University of Maryland situation, where, you know, they kept
legacy information for some 300,000 people, where is there some
cyber hygiene going where people are determining that, you
know, a certain amount of information is all that is needed,
and we are going to excise all the unnecessary information?
Seems we are going in opposite directions.
Mr. Rhoades. Yeah, I think certainly the individual is
losing control over our private information going forward. I
can remember the first time I was at a particular retailer, and
I purchased a bottle of wine, and they scanned my driver's
license. That was without asking. That was just part of their
policy. I wasn't given the opportunity to necessarily agree or
disagree with it, or to question what information was being
collected. I still, to this day, am not quite sure what they
store for how long, and how it is used. That is a--that is not
to pick on a particular retailer. I think that is now a common
case, that there are entities, some legitimate, some
illegitimate, that are taking this information and using it to
monetize.
So I think this is--there is a new emphasis, particularly
over the course of the past 12 months, in the American public
dialogue on privacy and civil liberties. I think, as these
technologies advance, we need a broader National conversation
about what we feel is appropriate, and we feel is maybe too
much, and to find a way for individuals to somehow gain a
little bit, or feel they have gained a little bit more control
over their private information.
Mr. Meehan. Who controls that? Who becomes the arbiter of
that, and how is that enforced?
Mr. Rhoades. Well, the overall arbiter, ideally, would be
the American people. Having this conversation, particularly
through you all, our representatives, and deciding what is
appropriate, and what is not. That often does not--is not the
way things work, I understand that, but I think that this is
where we, as average citizens, particularly look to you to
represent our best interests.
Mr. Meehan. Well, I thank you. Do any of my colleagues have
any follow-up questions? Chairman recognizes Ms. Clarke.
Ms. Clarke. Thank you, Mr. Chairman, and I want to agree
with you on the need to have this conversation. I wonder how
much of this debate is generational----
Mr. Rhoades. Um-hum.
Ms. Clarke [continuing]. Simply because younger people live
their lives through this medium----
Mr. Rhoades. Um-hum.
Ms. Clarke [continuing]. In a way that perhaps my parents,
and even me, to a certain degree, don't. You know, I am a
hybrid. My mom is all-in now, she is texting. But, you know,
there is a conversation that needs to be had, because things
that we believe are private, young people don't necessarily
believe the same thing. So when you transfer that into the
final arbiter, which in--oftentimes are the courts now, the
application of current day law to what they are actually doing,
there is a disconnect. You know, because--there is almost a
voluntary surrender of privacy through this medium in certain
parts of the internet, social networking, for instance, and so
that conversation needs to happen, because I am just concerned
that we establish a standard so that people can then gauge
themselves accordingly. I think at a certain point it is going
to become almost moot, because everyone's information is going
to be out there, so it is going to cancel out.
But, having said that, data breaches involve personally
identifiable information, as the Chairman has stated, and under
many circumstances, and for many reasons, they can be
inadvertent, such as from the loss of an electronic device, or
deliberate, such as from a theft of a device, or a cyber-based
attack by a malicious individual or group for a nation, a
terrorist, or the adversary. Incidents have been reported at a
wide range of public-private sector institutions, including
Federal, State, local government agencies, educational
institutions, hospitals, other medical facilities, financial
institutions, retailers, et cetera.
The loss or unauthorized disclosure or alteration of the
information residing in private and public systems, which
include this PII, can lead to serious consequences and
substantial harm to individuals in the Nation. It is critical
that not only Federal agencies, but privately-owned companies
also protect their systems, and the information on them, and to
respond to data breaches and cyber incidents when they occur.
The President asked, in his cybersecurity Executive Order, 136-
36, that there be a separate section on privacy, civil liberty
protections, and PII. It contains a new subsection, entitled,
``Methodology To Protect Privacy and Civil Liberties'', and is
Appendix B of the primary framework.
Could you give us an update----
Mr. Rhoades. Um-hum.
Ms. Clarke. You know, I threw out sort-of my thinking, and,
you know, I am left-handed. But, you know, what do you think
the update on the discussion is, and the collaboration among
public and private entities regarding privacy and civil liberty
concerns?
Mr. Rhoades. Sure. So, as you mentioned, in the Executive
Order the President asked, through the programs that are
implemented under that Order, for the senior privacy and civil
liberties officers at each of the agencies involved to look at
those programs and do a risk-based assessment, in terms of
privacy and civil liberties, and to offer some strategies going
forward to mitigate some of those risks.
I believe earlier this week, or it may have been last week,
the Department of Homeland Security released its first
assessment of that, which, to me, it--I think that is an
important point for two reasons. No. 1, it gives, for those of
you who do oversight over the administration, the opportunity
to sort of baseline these things, look at some of their
recommendations that are in-house, and then follow those as we
go forward to ensure they have been implemented.
But I also think that is an important document strictly
from an emphasis on privacy and civil liberties. The specific
recommendations didn't necessarily stand out to me as game
changers, but in terms of getting overall cybersecurity right,
this is a real challenge, in that it requires trust at every
level.
I think, through both panels of this hearing, we have heard
there are multiple levers of--level of users, from nation-
states, to big corporations, to small corporations, to non-
profits, to individual end-users. I agree with the Chairman
when he said that this is a shared responsibility, so all of
these levels must work together. Frankly, here we have seen
less trust from the average American citizen to the Federal
Government. So I think it is important domestically to start to
rebuild some of that trust, particularly in light of the
National conversation over the last year.
I also think it is really important internationally,
because, as I said, we are the first generation to sort of try
to develop the doctrines and the concepts around these new
technologies. The fact is the rest of the world is watching us
as we struggle to come up with those ideas. How we do things
here in the United States is going to greatly affect the next
Green Movement in Iran, the next Tahrir Square, so we need to
be very cognizant of those as well if we do still want to stand
for some of those fundamental American rights of individual
opportunity, of individual freedom, of free speech.
So I think, for those reasons, that emphasis in the E.O.,
and then the most recent report is important. But then I would
also encourage you all to look at some of the recommendations,
and to ensure that the Executive follows up on their own
assessments.
Ms. Clarke. Thank you, Mr. Chairman. I yield back.
Mr. Meehan. Well, I want to express my deep appreciation to
each of you, not just for your preparation for your testimony
today, and the work, and--you have put into those thoughtful
comments, but for your on-going work in this area in each of
your respective venues. It is a debate--not a debate, it is a
dialogue that we are going to have to be continuing well into
the future. I want to express my appreciation to our
colleagues, and particularly my--the Ranking Member for taking
the time to travel here from New York.
I want to close by thanking our hosts here at Drexel, and
for the tremendous work that they are doing in being on the
vanguard in both--not just education, but research and
development in this important area of cybersecurity. I am
grateful for their efforts.
So, on behalf of the committee, the subcommittee stands
adjourned.
[Whereupon, at 12:49 p.m., the subcommittee was adjourned.]