The California Department of Financial Protection closed Silicon Valley Bank (SVB) on Fri 03/10/23 and the FDIC took control of and seized its deposits in the largest U.S. banking failure since the 2008 to 2012 mortgage financial crisis, and the second largest ever. Although SVB was well known in San Francisco and Boston where they had all of their 17 branches; they were little to known to the wider public. SVB specialized in financing start-ups and had become the 16th largest U.S. bank by assets. Their numbers at the end of 2022 were impressive with $209 billion in assets and approximately $175.4 billion in deposits.
As a precursor to their failure, SVB recorded six straight quarterly losses as economic conditions turned unfavorable. Then on Mon 02/27/23 their CEO Greg Becker sold $3.6 million of stock in a pre-arraigned 10b5-1 plan designed to reduce conflict of interest, yet it’s still potentially questionable due to the gain he got and the odd timing weeks before their collapse. Yet other executives that sold in recent weeks may not have the protection of the 10b5-1 and that would be a worse example of conflict of interest.
Some degree of support is needed for SVB because most there are not to blame; but so too is criticism so that the financial system can get better and innovate in the free market. You cannot just blindly support people (mostly sr. mgmt.) and organizations (crypto tie in) who are largely responsible for startup failures, frozen loans and payrolls, huge job loss, loss of deposited money over 250k, and great economic downturn – all the while the SVB mgmt. team gets very rich.
Obviously, the competencies and character of some of the SVB mgmt. team was not as good as other community banks and credit unions who aggressively avoided and overcame such failings. They likely put in more work with a deeper concern for the community, clients, and regulatory compliance – generally speaking. These many small community banks and credit unions are often 90 or 100 plus years old and did not grow at as fast a pace as SVB – super fast growth equals fast failure. Conversely, SVB is only 40 years young and most of its growth happened in the later part of that period. This coming from a guy who has consulted/worked at more than 10 financial institutions among other things including bank launch, tech risk, product, and compliance.
The company’s downward spiral blew up by late Weds 03/08/23, when it surprised investors with news that it needed to raise $2.25 billion to strengthen its balance sheet. This was influenced significantly by the Fed rate increases which forced the bank to raise lending rates, and that in turn made it hard for startups and medium-sized businesses to find approved funding. SVB also locked too much of their capital away in low-interest bonds. To strengthen their balance sheet in a slightly silly and desperate move, SVB sold $21 billion in securities at a large $1.8 billion loss. The details, timing, and governance of this make little sense, since the bank knew regulators were already watching closely. As a result, their stock fell 60% Thurs to $106.04 following the restructuring news.
As would be expected this fueled a higher level of deposit outflows from SVB; a $25 billion decline in deposits in the final three quarters of 2022. This spooked a lot of people, including CFOs, founders, VCs, and some unnamed tech celebrities — most of who started talking about the need to withdraw their money from SVB. SVB had almost 90% of its deposits uninsured by the FDIC which is far out of line with what traditional banks have. This is because the FDIC only covers deposits up to $250k. In contrast, Bank of America has about 32% of its deposits not insured by the FDIC – an enormous difference of 58%.
Crypto firm Circle revealed in a tweet late Fri 03/10/23 that it held $3.3 billion with the bank. Roblox corp. held 5% of its $3 billion in cash ($150 million) at the bank. Video streamer Roku held an estimated $487 million at SVB, representing approximately 26% of the company’s cash and cash equivalents as of Fri. Crypto exchange platform BlockFi — who filed for bankruptcy in November — listed $227 million in uninsured holdings at the bank. Some other SVB customers included Ziprecruiter, Pinterest, Shopify, and CrowdStrike. VCs like Y. Combinator regularly referred startups to them.
Yet after these initial outflows people start talking negatively, the perception became greater than reality. It did not matter whether the bank had a liquidity crisis or not. Heard psychology created a snowball effect in that no one wanted to be the last depositor at a bank — observing the lessons learned from prior banking mortgage crisis from 2008 to 2012 where Washington Mutual failed.
In sum, customers withdrew a massive $42 billion of deposits by the end of Thurs 03/09/23, according to a California regulatory filing. As a result, SIVB stock continued to plummet down another 65% before premarket trading was halted early Fri by regulators.
“All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.
Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds.”
That’s largely a bank run, and it is really bad news for SVB and many startups and medium businesses. SVB has been a foundational piece of the tech startup ecosystem. It was also known to industry commentators and tech risk researchers that SVB struggled with tech risk compliance, overall governance, and even had no chief risk officer in the eight months prior.
With reasoning and no direct evidence, only circumstantial evidence — as I had a couple of interviews with them and was less than impressed with their competency and trajectory — I speculate that crypto ties were a significant negative factor here because many of the companies and tech sub-domains SVB served are entangled with crypto and crypto-related entitles. Examples of this include their dealings with Circle — it manages part of the USDC stablecoin reserve of the American Circle, which confirmed to have a little more than $3 billion dollars of reserve blocked with SVB.
A Fri 03/10/23 Tweet from reporter Lauren Hirsch described BlockFi’s risky crypto entanglements with SVB this way: “Per new bankruptcy filing, BlockFi has $227m in Silicon Valley Bank. The bankruptcy trustee warned them on Mon that bc those funds are in a money market mutual fund, they’re not FDIC secured — which could be a prblm w/ keeping in compliance of bankruptcy law”.
Crypto compliance and insight for a big bank is very complex, undefined, and risk prone. The biggest tech venture bank has to be involved with a few crypto related failings and controversies, and the above are just a few examples but I am sure there are more. I just don’t have the data to back that up now, but I am sure it’s being investigated and/or litigated.
Note * This is a complex, evolving, and new development — some info may be incomplete and/or out of date at the time you view this.
About the Author:
Jeremy Swenson is a disruptive-thinking security entrepreneur, futurist/researcher, and senior management tech risk consultant. Over 17 years he has held progressive roles at many banks, insurance companies, retailers, healthcare orgs, and even governments including being a member of the Federal Reserve Secure Payment Task Force. Organizations relish in his ability to bridge gaps and flesh out hidden risk management solutions while at the same time improving processes. He is a frequent speaker, published writer, podcaster, and even does some pro bono consulting in these areas. As a futurist, his writings on digital currency, the Target data breach, and Google combing Google + video chat with Google Hangouts video chat have been validated by many. He holds an MBA from St. Mary’s University of MN, an MSST (Master of Science in Security Technologies) degree from the University of Minnesota, and a BA in political science from the University of Wisconsin Eau Claire.
1) Educate Employees About Cyber Threats and Hold Them Accountable:
Educate your employees about online threats and how to protect your business’s data, including safe use of social networking sites. Depending on the nature of your business, employees might be introducing competitors to sensitive details about your firm’s internal business. Employees should be informed about how to post online in a way that does not reveal any trade secrets to the public or competing businesses. Use games with training and hold everyone accountable to security policies and procedures. This needs to be embedded in the culture of your company. Register for free DHS cyber training here and/or use the free DHS SMB cyber resource toolkit. Most importantly, sign up for DHS CISA e-mail alerts specific to your company and industry needs and review the alerts – Sign up here. Use the free DHS developed CSET (Cybersecurity Evaluation Tool) to assess your security posture – High, Med, or Low. CSET is downloadable here.
2) Protect Against Viruses, Spyware, and Other Malicious Code:
Make sure each of your business’s computers are equipped with antivirus software and antispyware and updated regularly. Such software is readily available online from a variety of vendors. All software vendors regularly provide patches and updates to their products to correct security problems and improve functionality. Configure all software to install updates automatically. Especially watch out for freeware that contains malvertising. Make sure submission forms can block spam and can block code execution (cross-side scripting attacks).
3) Secure Your Networks:
Safeguard your Internet connection by using a firewall and encrypting information. If you have a Wi-Fi network, make sure it is secure and hidden – not publicly broadcasted. To hide your Wi-Fi network, set up your wireless access point or router so it does not broadcast the network name, known as the Service Set Identifier (SSID). Also, have a secure strong password to protect access to the router. (xbeithyg18695843%&*&RELxu75IGO) — example. Lastly, use a VPN (virtual private network) to encrypt data in transit, especially when working from home.
4) Control Physical Access to Computers and Network Components:
Prevent access or use of business computers by unauthorized individuals. Laptops can be particularly easy targets for theft or can be lost, so lock them up when unattended. Make sure a separate user account is created for each employee and require strong passwords. Administrative privileges should only be given to trusted IT staff and key personnel — with approval records.
5) Create A Mobile Device Protection Plan:
Require users to password-protect their devices, encrypt their data, and install security apps to prevent criminals from stealing information while the phone is on public networks. Use a containerization application to separate personal data from company data. Be sure to set reporting procedures for lost or stolen equipment.
6) Establish Security Practices and Policies to Protect Sensitive Information:
Establish policies on how employees should handle and protect personally identifiable information and other sensitive data. Clearly outline the consequences of violating your business’s cybersecurity policies and who is accountable. Base your security strategy significantly on the NIST Cybersecurity Framework 1.1: Identify, Detect Defend, Respond, and Recover — a respected standard that easy to understand (Fig. 1).The NIST Cybersecurity Framework Small Business Resources are linked here.
Fig. 2. NIST CSF Domains and Sub Areas, NIST, 2022.
7) Employ Best Practices on Payment Cards:
Work with your banks or card processors to ensure the most trusted and validated tools and anti-fraud services are being used. You may also have additional security obligations related to agreements with your bank or processor. Isolate payment systems from other, less secure programs and do not use the same computer to process payments and surf the internet. Outsource some or all of it and know where your risk responsibility ends.
8) Make Backup Copies of Important Business Data and Use Encryption When Possible:
Regularly backup the data on all computers. Critical data includes word processing documents, electronic spreadsheets, databases, financial files, human resources files, and accounts receivable/payable files. Back up data automatically if possible, or at least weekly, and store the copies either offsite or on the cloud. Having all key files backed up via the 3-2-1 rule — three copies of files in two different media forms with one offsite — thus reducing ransomware attack damage.
9) Use A Password Management Tool and Strong Passwords:
Another way to stay safe is by setting passwords that are longer, complex, and thus hard to guess. Additionally, they can be stored and encrypted for safekeeping using a well-regarded password vault and management tool. This tool can also help you to set strong passwords and can auto-fill them with each login — if you select that option. Yet using just the password vaulting tool is all that is recommended. Doing these two things makes it difficult for hackers to steal passwords or access your accounts.
10) Use Only Whitelisted Sites Not Blacklisted Ones or Ones Found Via the Dark Web:
Use only approved whitelisted platforms and sites that do not expose you to data leakages or intrusion on your privacy. Whitelisting is the practice of explicitly allowing some identified websites access to a particular privilege, service, or access. Backlisting is blocking certain sites or privileges. If a site does not assure your privacy, do not even sign up let alone participate.
About the Author:
Jeremy Swenson is a disruptive-thinking security entrepreneur, futurist/researcher, and senior management tech risk consultant. Over 17 years he has held progressive roles at many banks, insurance companies, retailers, healthcare orgs, and even governments including being a member of the Federal Reserve Secure Payment Task Force. Organizations relish in his ability to bridge gaps and flesh out hidden risk management solutions while at the same time improving processes. He is a frequent speaker, published writer, podcaster, and even does some pro bono consulting in these areas. As a futurist, his writings on digital currency, the Target data breach, and Google combing Google + video chat with Google Hangouts video chat have been validated by many. He holds an MBA from St. Mary’s University of MN, an MSST (Master of Science in Security Technologies) degree from the University of Minnesota, and a BA in political science from the University of Wisconsin Eau Claire.
Fig. 1. 2022 Cyber Year in Review Mashup; Stock, 2023.
The pandemic continues to be a big part of the catalyst for digital transformation in tech automation, identity and access management (IAM), big data, collaboration tools, artificial intelligence (AI), and increasingly the supply chain. Disinformation efforts morphed and grew last year with stronger crypto tie ins challenging data and culture; Twitter hype pump and dumps for example. Additionally, cryptocurrency-based money laundering, fraud, and Ponzi schemes increased partly due to weaknesses in the fintech ecosystem around compliance, coin splitting/mixing fog, and IAM complexity. This requires better blacklisting by crypto exchanges and banks to stop these illicit transactions erroring on the side of compliance, and it requires us to pay more attention to knowing and monitoring our own social media baselines.
The Costa Rican Government was forced to declare a national emergency on 05/08/22 because the Conti Ransomware intrusion had extended to most of its governmental entities. This was a more advanced and persistent ransomware with Russian gang ties (Associated Press; NBC News, 06/17/22). This highlights the need for smaller countries to better partner with private infrastructure providers and to test for worst-case scenarios.
We no longer have the same office due to mass work from home (WFH) and the mass resignation/gig economy. This infers increased automated zero-trust policies and tools for IAM with less physical badge access required. The security perimeter is now more defined by data analytics than physical/digital boundaries. Education and awareness around the review and removal of non-essential mobile apps grows as a top priority as mobile apps multiply. All the while, data breaches, and ransomware reach an all-time high while costing more to mitigate. Lastly, all these things make the Google acquisition of Mandiant more relevant and plausibly one of the most powerful security analytics and digital investigation entities in the world rivaling nation-state intelligence agencies.
Intro:
Every year I like to research and commentate on the most impactful security technology and business happenings from the prior year. This year is unique since crypto money laundering via splitting/mixing, disinformation, the pandemic, and mass resignation/gig economy continue to be a large part of the catalyst for most of these trends. All these trends are likely to significantly impact small businesses, government, education, high-tech, and large enterprise in big and small ways.
1) The Main Purpose of Cryptocurrency Mixer and/or Splitter Services is Fraud and Money Laundering.
Cryptocurrency mixer and/or splitter services serve no valid “real-world” ethical business use case considering the relevant fintech and legal options open. Even in the very rare case when you are a refugee fleeing a financially abusive government regime or a terrorist organization is seeking to steal your assets while the national currency is failing, like in Venezuela, which I wrote about in my 2014 article, “Thought$ On The Future of Digital Curren¢y For A Better World” – that is about political revolution and your personal safety more than anything else. Although cases like this give a valid reason why you might want to mix and/or split your crypto assets, that is not fully the same use case we’re talking about here with the recent uptick of ill-intended crypto mixer and/or splitter service use. Therefore, it’s only fair that we discuss the most likely and common use case, which is trending up, and not the few rare edge cases. This use case would be fraud, Ponzi schemes, and money laundering.
The evidence does not support that a regular crypto exchange is the same thing as a mixer and/or splitter service. For definition’s sake, I am not defining mixing and/or splitting cryptocurrency as the same thing as selling, buying, or converting it – all of this can be done on one or more of the crypto exchanges which is why they are called exchanges. If they are the same or even considerably similar, then why are people and orgs using the mixer and/or splitter services at all? They use them because they offer a considerably different service. Using a mixer and/or splitter service assumes you have gotten some crypto beforehand, from a separate exchange – a step or more before in the daisy chain. This can be done via legal or illegal means. Moreover, why are people paying repeated and hugely excessive fees for these services? The fees are out of line with anything possibly comparable because there is higher compliance and legal risk for the operators of them in that they could get sanctioned like Blender-IO, FTX, Coinbase, Gemini, and others.
You can still have privacy if that is what you are seeking via a semblance of legal moves such as a trust tied to a separate legal entity, family office entity, converting to real estate, and marriage entity – if you have time to do the paperwork. Legally savvy people have anonymity over their assets often to avoid fraudsters, sales reps, and just privacy for privacy’s sake – but again still not the same use case. Even when people/orgs use these legal instruments for privacy, they still have compliance reporting and tax obligations – some disclosure. Keep in mind some disclosure serves to protect you, that you in fact own the assets you say you own. Using these legal instruments with the right technical security including an encrypted VPN and multifactor authentication serves to sustain privacy, and you will then not need a crypto mixer and/or splitter.
Yet if you had cryptocurrency and wanted strong privacy to protect your assets, why would you not at least use some of the aforementioned legal instruments or the like? Mostly because any attorney worth anything would be obligated to report this blatant suspected fraud, and would not want to tarnish their name on the filings, etc. Specifically, the attorney would have to see and know where and what entities the crypto was coming from and going to, under what contexts, and that could trigger them to report or refuse to work with them – a fraudster would want to avoid getting detected.
Specifically, the use of multiple legal entities in different countries in a daisy chain of crypto coin mixing and/or splitting tends to be the pattern for persistent fraud and money laundering. That was the case in the $4.5-billion-dollar crypto theft out of NY (Crocodile of Wall Street), the Blender mixing fraud, and many other cases.
“Blended.io (Blender) is a virtual currency mixer that operates on the Bitcoin blockchain and indiscriminately facilitates illicit transactions by obfuscating their origin, destination, and counterparties. Blender receives a variety of transactions and mixes them together before transmitting them to their ultimate destinations. While the purported purpose is to increase privacy, mixers like Blender are commonly used by illicit actors. Blender has helped transfer more than $500 million worth of Bitcoin since its creation in 2017. Blender was used in the laundering process for DPRK’s Axie Infinity heist, processing over $20.5 million in illicit proceeds.”
Fig 2. U.S. Treasury Dept; Blener.io Crypto Mixer Fraud, 2022.
The question we as a society should be thinking about is tech ethics. What design feature crosses the line to enable fraud too much such that it is not pursued? For example, Silk Road crossed the line, selling illegal drugs, extortion, and other crime. Hacker networks cross the line when they breach companies and steal their credit card data and put it for sale on the dark web. Facebook crossed the line when it enabled bias and undue favor to impact policy outcomes.
Crypto mixer and/or splitter services (not mere crypto exchanges) are about as close to “money laundering as a service” as it gets – relative to anything else technically available excluding the dark web where there are far worse things available technically. Obviously, the developers, product owners, and project managers behind the crypto mixer and/or splitter services like this are serving the fraud and money laundering use case more than anything else. Some semblance of the organized crime rings is very likely giving them money and direction to this end.
If you are for and use mixer and/or splitter services then you run the risk of having your digital assets mixed with dirty digital assets, you have extortion high fees, you have zero customer service, no regulatory protection, no decedent Terms of Service and/or Privacy Policy if any, and you have no guarantee that it will even work the way you think it will.
In fact, you have so much decentralized “so-called” privacy that it could work against you. For example, imagine you pay the high fees to mix and split your crypto multiple times, and then your crypto is stolen by one of the mixing and/or splitting services. This is likely because they know many of their customers are committing fraud and money laundering; yet even if they are not these platforms are associated with that. Therefore, if the platform operators steal their crypto in this process, the victims have little incentive to speak up. Moreover, the mixing and/or splitting service companies have a nice cover to steal it, privacy. They won’t admit that they stole it but will say something like “everything is private and so we can’t see or know but you are responsible for what private assets you have or don’t have”. They will say something like “stealing it is impossible” which of course is a complete lie.
In sum, what reason do you have to trust a crypto mixing and/or splitting service with your digital assets as outlined above as they are hardly incentivized to protect them or you and operate in the shadows of antiquated non-western fintech regulation. So what really do you get besides likely fraud? What is the business rationale behind using these services as outlined above considering no solid argument or evidence can support it is privacy alone, and what net benefit do you get besides business-enabling money laundering and fraud?
Now there are valid use cases for crypto and blockchain technology generally and here are five of them:
1. Innovative tech removing the central bank for peer-to-peer exchange that is faster and more global, especially helping the underbanked countries.
2. Smart contracts can be built on blockchain.
3. Blockchain can be used for crowdfunding.
4. Blockchain can be used for decentralized storage.
5. The traditional cash and coin supply chain is burdensomely wasteful, costly, dirty, and counterfeiting is a real issue. Why do you need to carry ten dollars in quarters or a wad of twenty-dollar bills or even have that be a nation’s economic backing in today’s tech world?
Here are six tips to identify crypto-related scams:
1. With most businesses, it should be easy to find out who the key operators are. If you can’t find out who is running a cryptocurrency or exchange via LinkedIn, Medium, Twitter, a website, or the like be very cautious.
2. Whether in cash or cryptocurrency, any business opportunity promising free money is likely to be fake. If it sounds too good to be true it likely is. Multi-level marketing is one old example of this scam.
3. Never mix online dating and investment/financial advice. If you meet someone on a dating site or social media app, and then they want to show you how to invest in crypto or they ask you to send them crypto. No matter what sob story and huge return they are claiming it’s a scam (FTC).
4. Watch out for scammers who pretend to be celebrities who can multiply any cryptocurrency you send them. If you click on an unexpected link they send or send cryptocurrency to a so-called celebrity’s QR code, that money will go straight to a scammer, and it’ll be gone. Celebrities don’t have time to contact random people on social media, but they are easily impersonated (FTC).
5. Celebrities are however used to pump crypto prices via social media, so they get a windfall, and everyone else takes a hit. Watch out for crypto like Dogecoin which is heavily tied to celebrity pumps with no real-world business value. If you are lucky enough to get ahead, get out then.
6. Watch out for scammers who make big claims without details, white papers, filings, or explanations at all. No matter what the investment, find out how it works and ask questions about where your money is going. Honest investment managers or advisors want to share that information and will back it up with details in many documents and filings (FTC).
2) Disinformation Efforts Are Further Exposed:
Disinformation has not slowed down any in 2022 due to sustained advancements in communications technologies, the growth of large social media networks, and the “appification” of everything thereby increasing the ease and capability of disinformation. Disinformation is defined as incorrect information intended to mislead or disrupt, especially propaganda issued by a government organization to a rival power or the media. For example, governments creating digital hate mobs to smear key activists or journalists, suppress dissent, undermine political opponents, spread lies, and control public opinion (Shelly Banjo; Bloomberg, 05/18/2019).
Today’s disinformation war is largely digital via platforms like Facebook, Twitter, Instagram, Reddit, WhatsApp, Yelp, Tik-tok, SMS text messages, and many other lesser-known apps. Yet even state-sponsored and private news organizations are increasingly the weapon of choice, creating a false sense of validity. Undeniably, the battlefield is wherever many followers reside.
Bots and botnets are often behind the spread of disinformation, complicating efforts to trace and stop it. Further complicating this phenomenon is the number of app-to-app permissions. For example, the CNN and Twitter apps having permission to post to Facebook and then Facebook having permission to post to WordPress and then WordPress posting to Reddit, or any combination like this. Not only does this make it hard to identify the chain of custody and original source, but it also weakens privacy and security due to the many authentication permissions involved. The copied data is duplicated at each of these layers, which is an additional consideration.
We all know that false news spreads faster than real news most of the time, largely because it is sensationalized. Since most disinformation draws in viewers which drives clicks and ad revenues; it is a money-making machine. If you can significantly control what’s trending in the news and/or social media, it impacts how many people will believe it. This in turn impacts how many people will act on that belief, good or bad. This is exacerbated when combined with human bias or irrational emotion.
In 2022 there were many cases of fake crypto initial coin offerings (ICOs) and related scams including the Titanium Blockchain where investors lost at least $21 million (Dept of Justice; Press Release, 07/25/22). The Celsius’ crypto lending platform also came tumbling down largely because it was a social media-hyped Ponzi scheme (CNBC; Arjun Kharpal, 07/08/22). This negatively impacts culture by setting a misguided example of what is acceptable.
Elon Musk’s controversial purchase of Twitter for $44 billion in October 2022 resulted in a big management shakeup and strategy change (New York Times; Kate Conger and Lauren Hirsch, 10/27/22). The goal was to reduce bias and misinformation in the name of free and fair speech. To this end, the new Twitter under Musk’s direction produced “The Twitter Files” which are a set of internal Twitter, Inc documents made public beginning in December 2022. This was done with the help of independent journalists Matt Taibbi, Bari Weiss, Lee Fang, and authors Michael Shellenberger, David Zweig and Alex Berenson.
“Twitter granted great deference to government agencies and select outside organizations. While any Twitter user can report a tweet for removal, officials at the platform provided more direct and expedited channels for select organizations, raising obvious ethical questions about the government’s non-public efforts at censorship. It also captured the degree to which law enforcement requested information – from the physical location of users to foreign influence – from social platforms outside of formal court orders, raising important questions of due process and accountability.”
With the help of Twitter’s misinformation, huge swaths of confused voters and activists aligned more with speculation and emotion/hype than unbiased facts, and/or project themselves as fake commentators. This dirtied the data in terms of the election process and only begs the question – which parts of the election information process are broken? This normalizes petty policy fights, emotional reasoning, lack of unbiased intellectualism – negatively impacting western culture. All to the threat actor’s delight. Increased public-to-private partnerships, more educational rigor, and enhanced privacy protections for election and voter data are needed to combat this disinformation.
3) Identity and Access Management (IAM) Scrutiny Drives Zero Trust Orchestration:
The pandemic and mass resignation/gig economy has pushed most organizations to amass work from home (WFH) posture. Generally, this improves productivity making it likely to become the new norm. Albeit with new rules and controls. To support this, 51% of business leaders started speeding up the deployment of zero trust capabilities in 2020 (Andrew Conway; Microsoft, 08/19/20) and there is no evidence to suggest this is slowing down in 2022 but rather it is likely increasing to support zero trust orchestration.
Orchestration is enhanced automation between partner zero trust applications and data, while leaving next to no blind spots. This reduces risk and increases visibility and infrastructure control in an agile way. The quantified benefit of deploying mature zero trust capabilities including orchestration is on average $ 1.51 million dollars less in breach response costs when compared to an organization who has not rolled out zero trust capabilities (IBM Security; Cost of A Data Breach Report, 2022).
Fig. 4. Zero Trust Components to Orchestration; Microsoft, 09/17/21
Zero trust moves organizations to a need-to-know-only access mindset with inherent deny rules, all the while assuming you are compromised. This infers single sign-on at the personal device level and improved multifactor authentication. It also infers better role-based access controls (RBAC), firewalled networks, improved need-to-know policies, effective whitelisting and blacking listing of apps, group membership reviews, and state of the art privileged access management (PAM) tools for the next year. In the future more of this is likely to better automate and orchestrate (Fig. 4.) zero trust abilities so that one part does not hinder another part via complexity fog.
4) Security Perimeter is Now More Defined by Data Analytics than Physical/Digital Boundaries:
This increased WFH posture blurs the security perimeter physically and digitally. New IP addresses, internet volume, routing, geolocation, and virtual machines (VMs) exacerbate this blur. This raises the criticality of good data analytics and dashboarding to define the digital boundaries in real time. Therefore, prior audits, security controls, and policies may be ineffective. For instance, empty corporate offices are the physical byproduct of mass WFH, requiring organizations to set default disable for badge access. Extra security in or near server rooms is also required. The pandemic has also made vendor interactions more digital, so digital vendor connection points should be reduced and monitored in real time, and the related exception policies should be re-evaluated.
New data lakes and machine learning informed patterns can better define security perimeter baselines. One example of this includes knowing what percent of your remote workforce is on what internet providers and what type? For example, Google fiber, Comcast cable, CenturyLink DSL, ATT 5G, etc. There are only certain modems that can go with each of these networks and that leaves a data trail. Of course, it could be any type of router. What type of device do they connect with MAC, Apple, VM, or other, and if it is healthy – all can be determined in relation to security perimeter analytics.
5) Cyber Firm Mandiant Was Purchased by Google Spawning Private Sector Security Innovation.
Google completed its acquisition of security and incident response firm Mandiant for $5.4 billion dollars in Sept 2022 (Google Cloud; Thomas Kurian CEO – Google Cloud, 09/12/22). This acquisition positions the search and advertising leader with better cloud security infrastructure, better market appeal, and more diversification. With a more advanced and integrated security foundation, Google Cloud can compete better against market leader Amazon Web Services (AWS) and runner-up Microsoft Azure. They will do this on more than price because features will likely grow to leverage their differentiating machine learning and analytical abilities via clients throughout the industry.
Other benefits of integrating Mandiant include improved automated breach response logic. This is because security teams can now gather the required data and then share it across Google customers to help analyze ransomware threat variants. Many of Google’s security related products will also be enhanced by Mandiant’s threat intelligence and incident response capabilities. Some of these products include Google’s security orchestration, automation and response (SOAR) tool which is described this way, “Part of Chronicle Security Operations, Chronicle SOAR enables modern, fast and effective response to cyber threats by combining playbook automation, case management and integrated threat intelligence in one cloud-native, intuitive experience” (Google; Google Cloud, 01/16/23).
According to Dave Cundiff, CISO at Cyvatar, “if Google, as one of the leaders in data science, can progress and move forward the ability to prevent the unknown vectors of attack before they happen based upon the mountains of data available from previous breaches investigated by Mandiant, there could truly be a significant advancement in cybersecurity for its cloud customers” (SC Media; Steve Zurier, 04/15/22). This results in a strong focus on prevention vs. response, which is greatly needed. Lastly, since AWS and Microsoft will be unlikely to hire Mandiant directly because Google owns them, they will likely look to acquire another security services player soon.
6) Data Breaches Have Increased in Number and Cost but Are Generally Identified Faster.
The pandemic has continued to be a part of the catalyst for increased lawlessness including fraud, ransomware, data theft, and other types of profitable hacking. Cybercriminals are more aggressively taking advantage of geopolitical conflict and legal standing gaps. For example, almost all hacking operations are in countries that do not have friendly geopolitical relations with the United States or its allies – and all their many proxy hops would stay consistent with this. These proxy hops are how they hide their true location and identity.
Moreover, with local police departments extremely overworked and understaffed with their number one priority being responding to the huge uptick in violent crime in most major cities, white-collar cybercrimes remain a low priority. Additionally, local police departments have few cyber response capabilities depending on the size of their precinct. Often, they must sheepishly defer to the FBI, CISA, and the Secret Service, or their delegates for help. Yet not unsurprisingly, there is a backlog for that as well with preference going to large companies of national concern that fall clearly into one of the 16 critical infrastructures. That is if turf fights and bureaucratic roadblocks don’t make things worse. Thus, many mid and small-sized businesses are left in the cold to fend for themselves which often results in them paying ransomware, and then being a victim a second time all the while their insurance carrier denes their claims, raises their rate, and/or drops them.
Further complicating this is lack of clarity on data breach and business interruption insurance coverage and terms. Keep in mind most general business liability insurance policies and terms were drafted before hacking was invented so they are by default behind the technology. Most often general liability business insurance covers bodily injuries and property damage resulting from your products, services, or operations. Please see my related article “10 Things IT Executives Must Know About Cyber Insurance” to understand incident response and to reduce the risk of inadequate coverage and/or claims denials.
Data breaches are more expensive than ever. IBM’s 2022 Annual Cost of a Date Breach Report revealed increased costs associated with the average data breach at an estimated $4.35 million per organization. This is a $110,000 year-over-year increase at 2.6% and the highest in the reports history (Fig. 5). However, the average time to identify and contain a data breach decreased both decreased by 5 days (Fig 6). This is a total decrease of 10 days or 3.5%. Yet this is for general data breaches and not ransomware attacks.
Fig 5. Cost of A Data Breach Increases 2021 to 2022 (IBM Security, 2022).
Fig. 6. Average Time To Identify and Contain a Data Breaches Decreases 2021 to 2022, (IBM Security, 2022).
Lastly, this is a lot of money for an organization to spend on a breach. Yet this amount could be higher when you factor in other long-term consequence costs such as increased risk of a second breach, brand damage, and/or delayed regulatory penalties that were below the surface – all of which differs by industry. In sum, it is cheaper and more risk prudent to spend even $4.35 million or a relative percentage at your organization on preventative zero trust capabilities than to deal with the cluster of a data breach.
7) The Costa Rican Government was Heavily Hacked and Encrypted by the Conti Ransomware.
The Costa Rican Government was forced to declare a national emergency on 05/08/22 because the Conti Ransomware intrusion had extended to most of its governmental entities. Conti is an advanced and persistent ransomware as a service attack platform. The attackers are believed to the Russian cybercrime gang Wizard Spider (Associated Press; NBC News, 06/17/22). “The threat actor entry point was a system belonging to Costa Rica’s Ministry of Finance, to which a member of the group referred to as ‘MemberX’ gained access over a VPN connection using compromised credentials” (Bleeping Computer; Ionut Ilascu, 07/21/22). Phishing is a common way to get in to monitor for said credentials but in this case it was done “Using the Mimikatz post-exploitation tool for exfiltrating credentials, the adversary collected the logon passwords and NTDS hashes for the local users, thus getting “plaintext and bruteable local admin, domain and enterprise administrator hashes” (Bleeping Computer; Ionut Ilascu, 07/21/22).
Fig. 7. Costa Rica Conti Ransomware Attack Architecture; AdvIntel via (Bleeping Computer; Ionut Ilascu, 07/21/22).
This resulted in 672GB of data leaked and dumped or 97% of what was stolen (Bleeping Computer; Ionut Ilascu, 07/21/22). Some believe Costa Rica was targeted because they supported Ukraine against Russia. This highlights the need for smaller countries to better partner with private infrastructure providers and to test for worst-case scenarios.
Take-Aways:
The pandemic remains a catalyst for digital transformation in tech automation, IAM, big data, collaboration tools, and AI. We no longer have the same office and thus less badge access is needed. The growth and acceptability of mass WFH combined with the mass resignation/gig economy remind employers that great pay and culture alone are not enough to keep top talent. Signing bonuses and personalized treatment are likely needed. Single sign-on (SSO) will expand to personal devices and smartphones/watches. Geolocation-based authentication is here to stay with double biometrics likely. The security perimeter is now more defined by data analytics than physical/digital boundaries, and we should dashboard this with machine learning and AI tools.
Education and awareness around the review and removal of non-essential mobile apps is a top priority. Especially for mobile devices used separately or jointly for work purposes. This requires a better understanding of geolocation, QR code scanning, couponing, digital signage, in-text ads, micropayments, Bluetooth, geofencing, e-readers, HTML5, etc. A bring your own device (BYOD) policy needs to be written, followed, and updated often informed by need-to-know and role-based access (RBAC) principles. Organizations should consider forming a mobile ecosystem security committee to make sure this unique risk is not overlooked or overly merged with traditional web/IT risk. Mapping the mobile ecosystem components in detail is a must.
IT and security professionals need to realize that alleviating disinformation is about security before politics. We should not be afraid to talk about it because if we are then our organizations will stay weak and insecure and we will be plied by the same political bias that we fear confronting. As security professionals, we are patriots and defenders of wherever we live and work. We need to know what our social media baseline is across platforms. More social media training is needed as many security professionals still think it is mostly an external marketing thing. Public-to-private partnerships need to improve and app to app permissions need to be scrutinized. Enhanced privacy protections for election and voter data are needed. Everyone does not need to be a journalist, but everyone can have the common sense to identify malware-inspired fake news. We must report undue bias in big tech from an IT, compliance, media, and a security perspective.
Cloud infra will continue to grow fast creating perimeter and compliance complexity/fog. Organizations should preconfigure cloud-scale options and spend more on cloud-trained staff. They should also make sure that they are selecting more than two or three cloud providers, all separate from one another. This helps staff get cross-trained on different cloud platforms and add-ons. It also mitigates risk and makes vendors bid more competitively.
In regard to cryptocurrency, NFTs, ICOs, and related exchanges – watch out for scammers who make big claims without details, white papers, filings, or explanations at all. No matter what the investment, find out how it works and ask questions about where your money is going. Honest investment managers or advisors want to share that information and will back it up with details in many documents and filings (FTC).
Moreover, better blacklisting by crypto exchanges and banks is needed to stop these illicit transactions erroring on the side of compliance, and it requires us to pay more attention to knowing and monitoring our own social media baselines. If you are for and use crypto mixer and/or splitter services then you run the risk of having your digital assets mixed with dirty digital assets, you have extortion high fees, you have zero customer service, no regulatory protection, no decedent Terms of Service and/or Privacy Policy if any, and you have no guarantee that it will even work the way you think it will.
About the Author:
Jeremy Swenson is a disruptive-thinking security entrepreneur, futurist/researcher, and senior management tech risk consultant. Over 17 years he has held progressive roles at many banks, insurance companies, retailers, healthcare orgs, and even governments including being a member of the Federal Reserve Secure Payment Task Force. Organizations relish in his ability to bridge gaps and flesh out hidden risk management solutions while at the same time improving processes. He is a frequent speaker, published writer, podcaster, and even does some pro bono consulting in these areas. As a futurist, his writings on digital currency, the Target data breach, and Google combing Google + video chat with Google Hangouts video chat have been validated by many. He holds an MBA from St. Mary’s University of MN, an MSST (Master of Science in Security Technologies) degree from the University of Minnesota, and a BA in political science from the University of Wisconsin Eau Claire.
Use the free DHS developed CSET (Cybersecurity Evaluation Tool) to assess your security posture – High, Med, or Low. CSET is downloadable here.
Educate Employees About Cyber Threats and Hold Them Accountable:
Educate your employees about online threats and how to protect your business’s data, including safe use of social networking sites. Depending on the nature of your business, employees might be introducing competitors to sensitive details about your firm’s internal business.
Employees should be informed about how to post online in a way that does not reveal any trade secrets to the public or competing businesses.
Use games with training and hold everyone accountable to security policies and procedures.
This needs to be embedded in the culture of your company.
Protect Against Viruses, Spyware, and Other Malicious Code:
Make sure each of your business’s computers are equipped with antivirus software and antispyware and updated regularly. Such software is readily available online from a variety of vendors. All software vendors regularly provide patches and updates to their products to correct security problems and improve functionality. Configure all software to install updates automatically. Especially watch freeware which contains malvertising.
Secure Your Networks:
Safeguard your Internet connection by using a firewall and encrypting information. If you have a Wi-Fi network, make sure it is secure and hidden. To hide your Wi-Fi network, set up your wireless access point or router so it does not broadcast the network name, known as the Service Set Identifier (SSID).
Have a secure strong password to protect access to the router (xeeityyg18695845%&*&RELxu78IGO) — example.
Lastly, use a VPN (virtual private network).
Control Physical Access to Computers and Network Components:
Prevent access or use of business computers by unauthorized individuals. Laptops can be particularly easy targets for theft or can be lost, so lock them up when unattended. Make sure a separate user account is created for each employee and require strong passwords.
Administrative privileges should only be given to trusted IT staff and key personnel.
Create A Mobile Device Protection Plan:
Require users to password-protect their devices, encrypt their data, and install security apps to prevent criminals from stealing information while the phone is on public networks.
Use a containerization application to separate personal data from company data.
Be sure to set reporting procedures for lost or stolen equipment.
Protect All Pages on Your Public-Facing Webpages, Not Just the Checkout and Sign-Up Pages:
Make sure submission forms can block spam and can block code execution (cross-side scripting attacks).
Establish Security Practices and Policies to Protect Sensitive Information:
Establish policies on how employees should handle and protect personally identifiable information and other sensitive data. Clearly outline the consequences of violating your business’s cybersecurity policies and who is accountable.
Base Your Security Strategy Significantly on the NIST Cybersecurity Framework 1.1: Identify, Detect Defend, Respond, and Recover:
The NIST Cybersecurity Framework Small Business Resources are linked here.
Fig. 2. NIST Cyber Security Framework Sub Tasks, NIST, 2022:
Require Employees to Use Strong Passwords and to Change Them Often:
Consider implementing multifactor authentication that requires additional information beyond a password to gain entry. Check with your vendors that handle sensitive data, especially financial institutions, to see if they offer multifactor authentication for your account. Smart card plus passcode for example.
Employ Best Practices on Payment Cards:
Work with your banks or card processors to ensure the most trusted and validated tools and anti-fraud services are being used. You may also have additional security obligations related to agreements with your bank or processor. Isolate payment systems from other, less secure programs and do not use the same computer to process payments and surf the Internet.
Outsource some or all of it and know where your risk responsibility ends.
Make Backup Copies of Important Business Data and Use Encryption When Possible:
Regularly backup the data on all computers. Critical data includes word processing documents, electronic spreadsheets, databases, financial files, human resources files, and accounts receivable/payable files. Backup data automatically if possible, or at least weekly, and store the copies either offsite or on the cloud.
Having all key files backed up via the 3-2-1 rule — three copies of files in two different media forms with one offsite — thus reducing ransomware attack damage.
Make Sure Your Vendors Have the Required Security Compliance Attestations and Insurance:
SOC 2, PCI, and HIPAA for example.
Cyber/data breach insurance should be separate from general business liability, and you should know the exclusions and sub-limits.
Use A Password Management Tool and Strong Passwords:
Another way to stay safe is by setting passwords that are longer, complex, and thus hard to guess. Additionally, they can be stored and encrypted for safekeeping using a well-regarded password vault and management tool. This tool can also help you to set strong passwords and can auto-fill them with each login — if you select that option. Yet using just the password vaulting tool is all that is recommended. Doing these two things makes it difficult for hackers to steal passwords or access your accounts.
Use Only Whitelisted Sites Not Blacklisted Ones or Ones Found Via the Dark Web:
Use only approved whitelisted platforms and sites that do not expose you to data leakages or intrusion on your privacy. Whitelisting is the practice of explicitly allowing some identified websites access to a particular privilege, service, or access. Backlisting is blocking certain sites or privileges. If a site does not assure your privacy, do not even sign up let alone participate.
Mimic Your Likely Threats with a Threat Modeling Methodology that works for your Industry:
Every year I like to research and commentate on the most impactful security technology and business happenings from the prior year. This year is unique since the pandemic and mass resignation/gig economy continues to be a large part of the catalyst for most of these trends. All these trends are likely to significantly impact small businesses, government, education, high tech, and large enterprise in big and small ways.
The pandemic continues to be a big part of the catalyst for digital transformation in tech automation, identity and access management (IAM), big data, collaboration tools, artificial intelligence (AI), and increasingly the supply chain. Disinformation efforts morphed and grew last year challenging data and culture. This requires us to put more attention on knowing and monitoring our own social media baselines. We no longer have the same office due to mass work from home (WFH) and the mass resignation/gig economy. This infers increased automated zero-trust policies and tools for IAM with less physical badge access required. The security perimeter is now more defined by data analytics than physical/digital boundaries.
The importance of supply chain cyber security was elevated by the Biden Administration’s Executive Order 1407 in response to hacks including SolarWinds and Colonial Pipeline. Education and awareness around the review and removal of non-essential mobile apps grows as a top priority as mobile apps multiply. All the while, data breaches, and ransomware reach an all-time high while costing more to mitigate.
1) Disinformation Efforts Accelerate Challenging Data and Culture:
Disinformation has not slowed down any in 2021 due to sustained advancements in communications technologies, the growth of large social media networks, and the “appification” of everything thereby increasing the ease and capability of disinformation. Disinformation is defined as incorrect information intended to mislead or disrupt, especially propaganda issued by a government organization to a rival power or the media. For example, governments creating digital hate mobs to smear key activists or journalists, suppress dissent, undermine political opponents, spread lies, and control public opinion (Shelly Banjo; Bloomberg, 05/18/2019).
Today’s disinformation war is largely digital via platforms like Facebook, Twitter, Instagram, Reddit, WhatsApp, Yelp, Tik-tok, SMS text messages, and many other lesser-known apps. Yet even state-sponsored and private news organizations are increasingly the weapon of choice, creating a false sense of validity. Undeniably, the battlefield is wherever many followers reside.
Bots and botnets are often behind the spread of disinformation, complicating efforts to trace and stop it. Further complicating this phenomenon is the number of app-to-app permissions. For example, the CNN and Twitter apps having permission to post to Facebook and then Facebook having permission to post to WordPress and then WordPress posting to Reddit, or any combination like this. Not only does this make it hard to identify the chain of custody and original source, but it also weakens privacy and security due to the many authentication permissions involved. The copied data is duplicated at each of these layers which is an additional consideration.
We all know that false news spreads faster than real news most of the time, largely because it is sensationalized. Since most disinformation draws in viewers which drives clicks and ad revenues; it is a money-making machine. If you can significantly control what’s trending in the news and/or social media, it impacts how many people will believe it. This in turn impacts how many people will act on that belief, good or bad. This is exacerbated when combined with human bias or irrational emotion. For example, in late 2021 there were many cases of fake COVID-19 vaccines being offered in response to human fear (FDA; 09/28/2021). This negatively impacts culture by setting a misguided example of what is acceptable.
There were several widely reported cases of political disinformation in 2021 including misleading texts, e-mails, mailers, Facebook censorship, and robocalls designed to confuse American voters amid the already stressful pandemic. Like a narcissist’s triangulation trap, these disinformation bursts riled political opponents on both sides in all states creating miscommunication, ad hominin attacks, and even derailed careers with impacts into the future (PBS; The Hinkley Report, 11/24/20 and Daniel Funke; USA Today, 12/23/21).
Facebook is significantly involved in disinformation as one recent study stated, “Globally, Facebook made the wrong decision for 83 percent of those ads that had not been declared as political by their advertisers and that Facebook or the researchers deemed political. Facebook both overcounted and undercounted political ads in this group” (New York University; Cybersecurity For Democracy, 2021). Of course, Facebook disinformation whistleblower Frances Haugen who testified before Congress in 2021 is only more evidence of these and related Facebook failings. Specifically that “Facebook executives, including CEO Mark Zuckerberg, misstated and omitted key details about what was known about Facebook and Instagram’s ability to cause harm” (Bobby Allyn; NPR, 10/05/21).
Fig. 2. Facebook Gaps in Ad Transparency (IMEC-DistriNet KU Leuven and NYU Cyber Security for Democracy, 2021).
With the help of Facebook’s misinformation, huge swaths of confused voters and activists aligned more with speculation and emotion/hype than unbiased facts, and/or project themselves as fake commentators. This dirtied the data in terms of the election process and only begs the question – which parts of the election information process are broken? This normalizes petty policy fights, emotional reasoning, lack of unbiased intellectualism – negatively impacting western culture. All to the threat actor’s delight. Increased public to private partnerships, more educational rigor, and enhanced privacy protections for election and voter data are needed to combat this disinformation.
2) Identity and Access Management (IAM) Scrutiny Drives Zero Trust Orchestration:
The pandemic and mass resignation/gig economy has pushed most organizations to amass work from home (WFH) posture. Generally, this improves productivity making it likely to become the new norm. Albeit with new rules and controls. To support this, 51% of business leaders started speeding up the deployment of zero trust capabilities in 2020 (Andrew Conway; Microsoft, 08/19/20) and there is no evidence to suggest this is slowing down in the next year but rather it is likely increasing to support zero trust orchestration. Orchestration is enhanced automation between partner zero trust applications and data, while leaving next to no blind spots. This reduces risk and increases visibility and infrastructure control in an agile way. The quantified benefit of deploying mature zero trust capabilities including orchestration is on average $ 1.76 million dollars less in breach response costs when compared to an organization who has not rolled out zero trust capabilities (IBM Security, Cost of A Data Breach Report, 2021).
Fig. 3. Zero Trust Components to Orchestration (Microsoft, 09/17/21).
Zero trust moves organizations to a need-to-know-only access mindset with inherent deny rules, all the while assuming you are compromised. This infers single sign-on at the personal device level and improved multifactor authentication. It also infers better role-based access controls (RBAC), firewalled networks, improved need-to-know policies, effective whitelisting and blacking listing of apps, group membership reviews, and state of the art PAM (privileged access management) tools for the next year. In the future more of this is likely to better automate and orchestrate (Fig. 3.) zero trust abilities so that one part does not hinder another part via complexity fog.
3) Security Perimeter is Now More Defined by Data Analytics than Physical/Digital Boundaries:
This increased WFH posture blurs the security perimeter physically and digitally. New IP addresses, internet volume, routing, geolocation, and virtual machines (VMs) exacerbate this blur. This raises the criticality of good data analytics and dashboarding to define the digital boundaries in real-time. Therefore, prior audits, security controls, and policies may be ineffective. For instance, empty corporate offices are the physical byproduct of mass WFH, requiring organizations to set default disable for badge access. Extra security in or near server rooms is also required. The pandemic has also made vendor interactions more digital, so digital vendor connection points should be reduced and monitored in real-time, and the related exception policies should be re-evaluated.
New data lakes and machine learning informed patterns can better define security perimeter baselines. One example of this includes knowing what percent of your remote workforce is on what internet providers and what type? For example, Google fiber, Comcast cable, CenturyLink DSL, ATT 5G, etc. There are only certain modems that can go with each of these networks and that leaves a data trail. Of course, it could be any type of router. What type of device do they connect with MAC, Apple, VM, or other, and if it is healthy can all be determined in relationship to security perimeter analytics.
4) Supply Chain Risk and Attacks Increase Prompting Government Action:
Every organization has a supply chain big or small. There are even subcomponents of the supply chain that can be hard to see like third/fourth-party vendors. A supply chain attack works by targeting a third/fourth party with access to an organization’s systems instead of hacking their networks directly.
In 2021 cybercriminals focused their surveillance on key components of the supply chain including hacking DNS servers, switches, routers, VPN concentrators and services, and other supply chain connected components at the vendor level. Of note was the massive Colonial Gas Pipeline hack that spiked fuel prices this last summer. This was caused by one compromised VPN account informed by a leaked password from the dark web (Turton, William; and Mehrotra, Kartikay; Bloomberg, 06/04/21). The SolarWinds hack was another supply chain-originated attack in that they got into SolarWinds IT management product Orien which in turn got them into the networks of most of the customers of that product (Lily Hay Newman; Wired, 12/19/21). The research consensus unsurprisingly ties this attack to Russian affiliated threat actors and there is no evidence contracting that.
In response to these and related attacks the U.S. Presidential Administration issued Executive Order 14017, the heart of which requires those who manufacture and distribute software a new awareness of their supply chain to include what is in their products, even open-source software (White House; 05/12/21). This in addition to more spending on CISA hiring and public relations efforts for vulnerabilities and NIST framework conformance. Time will tell what this order delivers as it is dependent on what private sector players do.
5) Data Breaches Have Greatly Increased in Number and Cost:
The pandemic has continued to be a part of the catalyst for increased lawlessness including fraud, ransomware, data theft, and other types of profitable hacking. Cybercriminals are more aggressively taking advantage of geopolitical conflict and legal standing gaps. For example, almost all hacking operations are in countries that do not have friendly geopolitical relations with the United States or its allies – and all their many proxy hops would stay consistent with this. These proxy hops are how they hide their true location and identity.
Moreover, with local police departments extremely overworked and understaffed with their number one priority being responding to the huge uptick in violent crime in most major cities, white-collar cybercrimes remain a low priority. Additionally, local police departments have few cyber response capabilities depending on the size of their precinct. Often, they must sheepishly defer to the FBI, CISA, and the Secret Service, or their delegates for help. Yet not unsurprisingly, there is a backlog for that as well with preference going to large companies of national concern that fall clearly into one of the 16 critical infrastructures. That is if turf fights and bureaucratic roadblocks don’t make things worse. Thus, many mid and small-sized businesses are left in the cold to fend for themselves which often results in them paying ransomware, and then being a victim a second time all the while their insurance carrier drops them.
Further complicating this is lack of clarity on data breach and business interruption insurance coverage and terms. Keep in mind most general business liability insurance policies and terms were drafted before hacking was invented so they are by default behind the technology. Most often general liability business insurance covers bodily injuries and property damage resulting from your products, services, or operations. Please see my related article 10 Things IT Executives Must Know About Cyber Insurance to understand incident response and to reduce the risk of inadequate coverage and/or claims denials.
According to the Identity Theft Resource Center (ITRC)’s 2021Q3 Data Breach Report, there was a 17% year-over increase as of 09/30/21. This means that by the time they finish their Q4 2021 report it’s likely to be above a 30% year-over-year increase. Breaches are also more costly for organizations suffering them according to the IBM Security Cost of Data Breach Report (Fig 5).
Fig 5. Cost of A Data Breach Increases 2020 to 2021 (IBM Security, 2021).
From 2020 to 2021 the average cost of a data breach in U.S. dollars rose to $4.24 million from $3.86 million. This is almost a 10% increase at 9.1%. In contrast, the preceding 4 years were relatively flat (Fig 5). The pandemic and policing conundrum is a considerable part of this uptick.
Lastly, this is a lot of money for an organization to spend on a breach. Yet this amount could be higher when you factor in other long-term consequence costs such as increased risk of a second breach, brand damage, and/or delayed regulatory penalties that were below the surface – all of which differs by industry. In sum, it is cheaper and more risk prudent to spend even $4.24 million or a relative percentage at your organization on preventative zero trust capabilities than to deal with the cluster of a data breach.
Take-Aways:
COVID-19 remains a catalyst for digital transformation in tech automation, IAM, big data, collaboration tools, and AI. We no longer have the same office and thus less badge access is needed. The growth and acceptability of mass WFH combined with the mass resignation/gig economy remind employers that great pay and culture alone are not enough to keep top talent. Signing bonuses and personalized treatment are likely needed. Single sign-on (SSO) will expand to personal devices and smartphones/watches. Geolocation-based authentication is here to stay with double biometrics likely. The security perimeter is now more defined by data analytics than physical/digital boundaries, and we should dashboard this with machine learning and AI tools.
Education and awareness around the review and removal of non-essential mobile apps is a top priority. Especially for mobile devices used separately or jointly for work purposes. This requires a better understanding of geolocation, QR code scanning, couponing, digital signage, in-text ads, micropayments, Bluetooth, geofencing, e-readers, HTML5, etc. A bring your own device (BYOD) policy needs to be written, followed, and updated often informed by need-to-know and role-based access (RBAC) principles. Organizations should consider forming a mobile ecosystem security committee to make sure this unique risk is not overlooked or overly merged with traditional web/IT risk. Mapping the mobile ecosystem components in detail is a must.
IT and security professionals need to realize that alleviating disinformation is about security before politics. We should not be afraid to talk about it because if we are then our organizations will stay weak and insecure and we will be plied by the same political bias that we fear confronting. As security professionals, we are patriots and defenders of wherever we live and work. We need to know what our social media baseline is across platforms. More social media training is needed as many security professionals still think it is mostly an external marketing thing. Public-to-private partnerships need to improve and app to app permissions need to be scrutinized. Enhanced privacy protections for election and voter data are needed. Everyone does not need to be a journalist, but everyone can have the common sense to identify malware-inspired fake news. We must report undue bias in big tech from an IT, compliance, media, and a security perspective.
Cloud infra will continue to grow fast creating perimeter and compliance complexity/fog.Organizations should preconfigure cloud-scale options and spend more on cloud-trained staff. They should also make sure that they are selecting more than two or three cloud providers, all separate from one another. This helps staff get cross-trained on different cloud platforms and add-ons. It also mitigates risk and makes vendors bid more competitively.
The increase in number and cost of data breaches was in part attributed to vulnerabilities in supply chains in a few national data breach incidents in 2021. Part of this was addressed in President Biden’s Executive Order 1407 on supply chain security. This reminds us to replace outdated routers, switches, repeaters, controllers, and to patch them immediately. It also reminds us to separate and limit network vendor access points to strictly what is needed and for a limited time window. Last but not least, we must have up-to-date thorough business interruption / cyber insurance with detailed knowledge of what it requires for incident response with breach vendors pre-selected.
About the Author:
Jeremy Swenson is a disruptive thinking security entrepreneur, futurist/researcher, and senior management tech risk consultant. Over 17 years he has held progressive roles at many banks, insurance companies, retailers, healthcare orgs, and even governments including being a member of the Federal Reserve Secure Payment Task Force. Organizations relish in his ability to bridge gaps and flesh out hidden risk management solutions while at the same time improving processes. He is a frequent speaker, published writer, podcaster, and even does some pro bono consulting in these areas. As a futurist, his writings on digital currency, the Target data breach, and Google combing Google + video chat with Google Hangouts video chat have been validated by many. He holds an MBA from St. Mary’s University of MN, a MSST (Master of Science in Security Technologies) degree from the University of Minnesota, and a BA in political science from the University of Wisconsin Eau Claire.
National author, speaker, consultant, and entrepreneur Evan Francen got into information security long before it was cool and buzzing in the media, and long before every so-called IT consultancy started chasing the money. In fact, he and I both dislike the money chasers. He and his growing consultancy, FRSecure are for-profit, but they don’t do it for the money.
Like a patriot who delays college to join the army amid dire national conflict, Francen offers a fact-based call to arms to fix the broken cybersecurity industry in his 2019 book “Unsecurity”. Having known him and his company for a few years, and having read the book and many on this subject, this content is worth sharing because too few people write or talk about how to actually make this industry better. Here are my three unbiased key points from his book.
1) We’re Not Speaking the Same Language:
Francen opens his book with a lengthy chapter on how poor communication between cybersecurity stakeholders exacerbates trouble and risk. You can’t see or measure what isn’t communicated well. It starts because there are five main stakeholder groups who don’t share the same vocabulary amid conflicting priorities.
IT: Speaks in data tables and code jargon.
Cyber: Speaks in risk metrics and security controls.
Business: Speaks in voice of the customer and profits.
Compliance:Speaks in evidence collection and legal regulatory frameworks.
Vendor: Speaks in sales and marketing terms.
Ideally, all these stakeholders need to work together but are only as strong as the weakest link. To attain better communication and collaboration between these stakeholders, all must agree on the same general security framework best for the company and industry, maybe NIST CSF with its inferred definitions or maybe ISACA Cobit. However, once you pick the framework you need to start training, communicating, and measuring against it and only it –going with its inferred definitions.
Changing frameworks in the middle of the process is like changing keys in the middle of a classical song at a concert – don’t do it. That’s not to say that once communication and risk management gets better, that you can’t have some hybrid framework variation – like at a jazz concert. You can but you need proof of the basic items first.
Later, in the chapter Francen describes the communication issue of too many translations. That’s too many people passing the communication onto other people and giving it their spin. Thus, what was merely a minor IT problem ticket turns into a full-blown data breach? Or people get tied up arguing over NIST, ISSA, ISACA, and OWASP jargon – all the while nothing gets fixed and people just get mad at each other yet fail to understand one another. Knowing one or two buzz words from an ISACA conference or paper yet failing to understand how they apply to NIST or the like does not help. You should be having a framework mapping sheet for this.
The bigger solution is more training and vetting who is authorized to communicate on key projects. The issue of good communication and project management is separate from cybersecurity though it’s a critical dependency. Organizations should pre-draft communication plans with roles and scope listed out, and then they should do tabletops to solidify them. Having an on-site Toastmasters group is also a good idea. I don’t care if you’re a cyber or IT genius; if you can’t communicate well that’s a problem that needs to be fixed. I will take the person with much better communication skills because likely they can learn what they don’t know better than the other.
2) Overengineered Foundations:
In chapter two, Francen addresses “Bad Foundations”. He gives many analogies including building a house without a blueprint. However, I’m most interested in what he says on page 76:
“Problem #4 Overengineered Foundation – too much control is as bad as too little control, and in some cases, it’s even worse than no control at all.”
What he is saying here is that an organization can get so busy in non-real world spreadsheet assessments and redundant evidence gathering that their heads are in the sand for so long that they don’t see to connect the dots that other things are going array and thus they get compromised. Keep in mind IT and security staff are already overworked, they already have many conflicting dials and charts to read – amid false alarms. To bog them down in needless busywork must be weighed against other real-world security tasks, like patch management, change management, and updating IAM protocols to two-factor.
If you or your organization have an issue figuring this out, as Francen outlines, you need to simplify your risk management to a real-world foundational goal that even the company secretary can understand. It may be as simple as requiring long complex (multicharacter) passwords, badge entry time logs for everyone, encrypting data that is not public, or other basics. You must do these things and document that they have been done one at a time, engraining a culture of preventative security vs. reactive security.
3) Cultivate Transparency and Incentives:
In chapter five, “The Blame Game” Francen describes how IT and business stakeholders often fail to take responsibility for security failings. This is heavily influenced by undue bias, lack of diversity, and lack of fact-based intellectualism within the IT and business silos at many mid-sized and large organizations. I know this is a hard pill to swallow but its so true. The IT and business leaders approving the bills for the vendors doing the security assessments, tool implementations, and consulting should not be under pressure to give a favorable finding in an unrealistic timeframe. They should only be obligated to give timely truthful risk prudent advice. Yet that same advice if not couched with kid gloves can get a vendor booted from the client – fabricating a negative vendor event. Kinda reminds me of accounting fraud pre-Sarbanes Oxley.
The reason why is because risk assessors are creating evidence of security violations that the client does not agree with or like, and thus you are creating legal risk for them – albeit well justified and by their own doing. From Francen’s viewpoint, this comprehensive honest assessment also gives the client a way to defend and limit liability by disclosing and remediating the vulnerabilities in a timely manner and under the advisement of a neutral third party. Moreover, you’re going to have instructions on how to avoid them in the future thus saving you money and brand reputation.
Overall, transparency can save you. Customers, regulators, and risk assessors view you more positively because of it. That’s not to say there are not things that will remain private because there are many, trade secrets, confidential data, and the like. My take on Francen’s mention of the trade off’s between transparency and incentives in a chapter called “The Blame Game” is that it’s no longer acceptable to delay or cover up a real security event – not that it ever was. Even weak arguments deliberately miscategorizing security events as smaller than they are will catch up with you and kick your butt or get you sued. Now is the time to be proactive. Build your incident response team ahead of time. It should include competent risk business consultants, cyber consultants, IT consultants, a communication lead, and a privacy attorney.
Lastly, if we as an industry are going to get better we’re going to have to pick up books, computers, pens, and megaphones. And this book is a must-read! You can’t be passive and maintain your expert status – it expires the second you do nothing and get poisoned by your own bias and ego. Keep learning and sharing!
By Mamady Konneh, MSST, and Jeremy Swenson, MBA, MSST.
Minneapolis, MN — Every year we like to review and commentate on the most impactful security technology and business happenings from the prior year. Those likely to significantly impact the coming year in unique ways. Although incomplete, these are six trends worth addressing in order of importance.
1) The Media Disinformation War Continues Embracing Artificial Intelligence:
With the advancement of communications technologies, the growth of large social media networks, and with the “appification” of everything — users have morphed beyond merely consuming information to being distributors and sometimes contributors. This ripens the ease and capability of disinformation.
Disinformation is defined as incorrect information intended to mislead or disrupt, especially propaganda issued by a government organization to a rival power or the media. For example, governments creating digital hate mobs to smear key activists or journalists, suppress dissent, undermine political opponents, spread lies and control public opinion (Shelly Banjo, Bloomberg, 05/23/2019). Today’s disinformation war is largely digital via platforms like Facebook, Twitter, iTunes, WhatsApp, Yelp, and Instagram (Fig. 2). Yet even state-sponsored and private news organizations are increasingly the weapon of choice — creating a false sense of validity. Undeniably, the battlefield is wherever a large number of followers are.
We all know that false news spreads faster than real news most of the time, largely because its sensationalized. Since disinformation draws in viewers, which drives clicks and ad revenues, it’s a money-making machine. If you can control what’s trending in the news and/or social media, it impacts how many people will believe it, which in turn impacts how many people will act on that belief, good or bad. This is exacerbated when combined with human bias or irrational emotion.
Bots and botnets are often behind the spread of disinformation, complicating efforts to trace its source and to stop it. Further complicating this phenomenon is the amount of app (application) to app permissions. For example, the CNN and Twitter app having permission to post to Facebook and then Facebook having permission to post to WordPress and then WordPress posting on Reddit, or any combination like this. Not only does this make it hard to identify the chain of custody and source, but it also weakens privacy and security due to the many authentication permissions.
Fig 2. News, Social Media, and Puppet Master of Disinformation (Right, Chandrajit Banerjee, Left Marc Creighton, 2019).
Disinformation campaigns attempted to influence U.S. elections in 2016 — presidential, and 2018 — congressional (Fig. 2). The effects are not fully known to this day yet there is some undeniable impact, with debates on both sides. This taken in conjunction with outdated electoral policies and poor public-to-private partnerships support the conclusion that disinformation capabilities are on the rise leading up to the U.S. presidential election in 2020. In fact, according to one report, the number of countries engaged in disinformation increased from 48 to 70 or 150% from 2018 to 2019 (Samantha Bradshaw and Philip N. Howard, Oxford Internet Institute, 09/04/19). This is not about politics, this is about truth, appropriate technology, security improvements, and better public-private partnerships.
Moving on, large technology companies are increasingly under scrutiny to secure their platforms from disinformation campaigns. One recent example is as follows, “Twitter announced that it had removed more than 88,000 accounts that it said were engaged in “platform manipulation” originating in Saudi Arabia” (Aaron Holmes, Business Insider, 12/20/19). Since platforms like this have so much activity to monitor, many campaigns like this go on unaltered. Yet, let us not forget about the free speech rights of users and the many claims that certain tech companies are overreaching in their screening content to the level of undue bias. Resolving these two extremes is indeed a work in progress.
Another example which used AI (Artificial Intelligence) enabled disinformation is as follows: ‘“On December 20, 2019, Facebook took action against a network of over 900 pages, groups, and accounts on its own platform and on Instagram that were associated with “The Beauty of Life” (TheBL), reportedly an offshoot of the Epoch Media Group (EMG). These assets were removed for engaging in large-scale coordinated inauthentic behavior (CIB)”’ (Ben Nimmo, C. Shawn Eib, L. Tamora, et al; Graphika & the Atlantic Council’s Digital Forensics Research Lab, 12/2019). Many of these profiles were created with AI generated fake profile photos. The group amassed about 55 million followers, so their disinformation efforts largely worked.
Considering these disinformation events this past year, we think small and mid-size companies are likely the next target of disinformation campaigns. Such campaigns may aim to steal their customers, tarnish their reputation, or otherwise combine disinformation with advanced malware or other cyber fraud. They may be a direct target or a pass through medium. Small businesses are not immune from these risks even if never targeted before. While a large company could sustain several disinformation attacks, a small company could be easily run out of business by just one.
Imagine fraudulent Yelp reviews from a dental competitor who hires a non-U.S. based hacking group to have a bot army create 1,000 negative dental reviews on Yelp. Now the victim of this attack has a mess to clean up. Being a dental office, they are not tech experts, so they have to hire a tech consultancy. Yet even when hired, the full damage can never be undone. The stress and cost could drive them to shut down. Then there is the question of who pays for it? This begs the question of cyber insurance, do you have the correct coverage, is there any way your claims can be denied?
Overall, disinformation is a double-edged sword because if one country is using disinformation against another country, then that country is very tempted to use disinformation against them in response. Then when the public sees this state originated disinformation, they and their NGO (non-governmental organization) groups respond whether they believe the disinformation or not —of course with different responses. The same scenario could apply in a company to company context.
Disinformation is indeed a vicious cycle that encourages lies, ignorance, all the while damaging the value of what journalism means. In 2020 we as journalists, thought leaders, consultants and citizens must not be afraid to confront these fallacies and hidden distortions for future generations — a quality based truthful pen is a powerful sword!
2) Ransomware Doubles Attacking More Government Entities:
Ransomware heavily hit hospitals, businesses, and universities in 2019, but local governments were the top target. It attacked at least 103 local U.S. government agencies, mostly at the city and county levels (Emsisoft Malware Lab, 12/12/19). Further validating this conclusion is Barracuda Networks who found more broadly that two-thirds of all known 2019 ransomware attacks in the U.S. targeted U.S.governments (Alfred Ng, C-NET, 12/05/19). Specifically, these ransomware attacks originate mostly from phishing emails. Then the attackers implant malicious code in the targeted entities’ network, after which they encrypt their files making them inaccessible. These are for the most part not federal offices like the FBI, NSA, DOD, or the FAA — these offices have bigger budgets and better defenses.
In August 2019 twenty-three Texas cities were struck by a large coordinated ransomware attack. This overwhelmed them SO they were forced to seek advanced state assistance (Kate Fazzini, CNBC, 08/20/19). Also in 2019, seven Florida cities were struck in a similar attack: River City, Riviera Beach, Lake City, Key Biscayne, Stuart, Naples, and recently Pensacola (Rachael L Thomas, Naples Daily News, 08/20/19 & CISOMAG, 12/27/19). Moreover, the city of Baltimore, Maryland sustained two ransomware attacks in 14 months (Kate Fazzini, CNBC, 08/20/19). Fig. 4. shows the defaced City of New Orleans website which left citizens out of some services and information.
Fig. 4. City of New Orleans Website Down (NOLA.gov, City of New Orleans, 12/23/19).
Foolish as it may sound local governments are more frequently opting to pay the ransomware rather than rebuild their systems. After seeing Atlanta spend $2.6 million in 2018 to restore its systems rather than pay the $52,000 ransom (Lily Hay Newman, Wired, 04/23/18) — many officials have decided that it’s cheaper to pay the hackers. One researcher confirmed this as follows; ‘“These government organizations are not always well-equipped on cybersecurity concerns, which makes them easy targets,” said Kevin Latimore, enterprise malware removal specialist for security software provider Malwarebytes. “Not only do they have the potential to pay, but they are a soft target”’ (Alfred Ng, C-NET, 12/05/19). More examples of this include Lake City, Florida who paid $426,000 to hackers via Bitcoin, and Riviera Beach Florida who paid hackers $600,000 via Bitcoin in 2019. Much of this will be covered by their cyber insurance but it complicates future payouts making denials and premium increases more likely (Scottie Andrew and Saeed Ahmed, CNN, 06/27/19).
For the coming year, this means that local governments need to harden their networks, better train their staff and hire private-sector talent. If they have paid ransom ware once they should expect and prepare for another attack soon, yet this does not rush onboarding of new vendor tools as vendors need to be risk assessed. Moreover, they outsource key IT tasks when they cannot meet the required service or security. Lastly, paying ransomware is not a long-term solution and it increases the likelihood of another attack, plus there is no guarantee they have not copied your data.
3) Insurance Companies Paying Ransoms Are Likely Encouraging More Attacks for Profits:
When organizations have cyber insurance, they are more likely to pay ransom demands. This results in ransomware being more profitable than it would otherwise be and thus incentivizes more well-funded attacks (Emsisoft Malware Lab, 12/12/19). Yet if insurance companies did better due diligence reviewing prospect customer cyber risk processes, tools, SOC reports and the like — there would likely be less grounds for claims denials and fewer simple claims like ransomware, etc. In some cases, the customer is incented to prove their cyber due diligence to justify a favorable risk rating and lower insurance premiums. However, the rigor of this due diligence is inconsistently applied in favor of sizeable companies where more dollars and complex risk exists. Yet can you imagine being a large insurance company asking a government entity for any documentation like this… it might be difficult. Even small county governments often have many unhelpful bureaucrats who are overconfident thus choking the needed risk management process. Private companies have the same issue, but they have less bureaucratic insulation. Overall, better public-private partnerships are needed.
This year we confirmed that cyber liability insurance risk assessment is still a contradictory mess. The carriers are profit-driven while they often confuse customers on what a policy means, especially small and medium-sized businesses that are not tech-focused. The risk assessment standards are immature, not organization specific, and they are outdated with current technology. If ransomware incentivizes cyber insurance, then what about the likely situation where an organization gets hit with ransomware, then the carrier pays it less the deductible, but then the ransomware demands a second payment. Carriers, adjusters, risk assessors, and even companies have not thought this through well enough. Most likely the carrier will deny the second payment demand and often in tandem with costly litigation.
Whatever the size or your organization, you should undergo strict security reviews in the insurance underwriting process. If the carrier does not ask anything or much about your technology or security, you might as well not pay for the coverage because it’s weak at best. Whatever risk diligence completed in underwriting the coverage, you should not publicly disclose that you have such coverage because cyber extortionists could then view you as a target. Cyber insurance should not be considered as an alternative to adequately funded and resourced security programs, rather it’s a failsafe. Our related article from this summer clarifies some of these complexities 10 Things IT Executives Must Know About Cyber Insurance!
Lastly, we observed that cyber insurance spending is not growing as fast as cybersecurity spending from 2018 to 2019 (Fig 5). While for 2019 to 2020 there is a $116 billion dollar estimated difference (Fig 5.). This trend is generally good because you cannot insure away what you have not built securely in the first place. In physical security terms, that would be like a bank having wide open doors and windows often yet wanting to get robbery insurance when they are incenting robbery. Of course, this is far more complicated in cyberspace and insurance companies and risk assessors are moderately speculative at best. We anticipate more partnerships with tech-savvy insurance brokers in 2020, more cyber insurance training, and perhaps new FinTech insurance startups can reduce risk and drive efficiencies while the legislators and large companies catch up.
4) Mobile Ecosystem Security Considerations Multiply:
Since the release of the first iPhone in 2007, the appification of everything is the new norm. Since computing power and memory on smartphones nearly doubles about every two years (Gordon Moore’s Law, 1958); the information security risk on these devices gets more complicated and multiplies with each new app installed.
There are 2.8 million apps available for download on the Google Play Store — More apps equals more risk exposure.
The Apple App Store has 2.2 million apps available for download.
Mobile apps are expected to generate $189 billion in revenue by 2020.
49% of people open an app 11+ times each day.
21% of Millennials open an app 50+ times per day.
57% of all digital media usage comes from mobile apps.
The average smartphone owner uses 30 apps each month — Touching many or all of the mobile ecosystem components in Fig. 6. — Thereby increasing complexity.
Fig 6. Mobile Ecosystem Components (Rohit Kumar, 2019).
The Apple App Store has a closed API (application programming interface) and thus less apps, unlike the Google Play App Store which has an open API and more apps. Thus, in prior years Apple’s App Store was regularly perceived as more secure than Google’s Play Store. However, in the fall of 2019, a reported 18 malicious apps were able to bypass Apple’s vetting system. Wired described it as follows, “it started small. Wandera’s security software flagged some unusual activity on a client’s iPhone. A lone speedometer app had made unexpected contact with a so-called command and control server, which had previously been identified as issuing orders to ad fraud malware in a separate Android campaign. In other words, the app had gone rogue” (Brian Barrett, Wired, 10/25/19).
Although the new iPhone 11 has no CPU power increase from the prior version, the new Samsung Galaxy S 11 includes a CPU that raises the bar in some ways for both phones. The new CPU is the Qualcomm Snapdragon 865 and will come with the new Galaxy S 11 in 2020. This CPU is 5G enabled while older chips are not. It also supports up to 8K HD video which has an ultra-high resolution that translates into very large files (Jessica Dolcourt, C-Net, 12/19/19). This enables better video chat, HD gaming, and professional level photo capabilities.
Additionally, the Snapdragon 865’s two-finger biometric unlocking feature has been improved for the Galaxy S 11 thereby challenging the new iPhone 11. The CPU’s 3D Sonic Max fingerprint reader is large enough to register two fingers as one commentator detailed: “This means it’s faster to unlock, and more secure when matching up more unique data points in the form of the ridges, valleys, and pores unique to your fingers. On phones, you might get the option to set up one or two-finger unlocking, or perhaps choose to use dual-finger authentication for mobile payments only, or select apps like your banking app” (Jessica Dolcourt, C-Net, 12/19/19).
Faster CPUs in the mobile ecosystem means that there is more room for malvertising, rootkits, viruses and other exploits to hide. Combine that with the increasing number of apps users download, the permissions they give them, etc. The complexity of this increases privacy and security risk. There is a very fine line between a hacked system and consented to app permissions, yet most users have few details on what this means or how many apps they have on their mobile devices.
For 2020, we see education and awareness around the review and removal of non-essential mobile apps as a top priority. Especially for mobile devices used separately or jointly for work purposes. This begs the questions: 1) what is the best BYOD (bring your own device) policy 2) and good containerization to separate company vs. personal use apps? This requires better understanding around geolocation, QR code scanning, in text ads, micropayments, Bluetooth, geofencing, readers, and HTML5. It thus goes without saying that we feel more holes will be exposed with BYOD tools and policy as they gain more adoption 2020.
5) Cloud Adoption Raises Privacy and Compliance Concerns:
Cloud computing grew in 2019 and is expected to grow in the coming years. Many industries are opting for cloud computing because it is less costly than on-premises and the service quality is generally better. This especially applies to small and medium businesses that often don’t have the technology resources to build their own infrastructures. According to one study, “83% of enterprise workloads will be in the cloud by 2020” (LogicMonitor, 2019). As a result, many industries are increasing their investment in cloud computing and the costs are likely to go down as cloud providers improve — the services are being democratized via niche cloud service tool startups. At present, “50% of enterprises spend on average of $1.2 million dollars on cloud services annually” (LogicMonitor, 2019).
Although cloud computing might seem cheaper than on-premises solutions, it has its downsides when it comes to security and privacy. Moving to the cloud is accepting the risk of having your data in someone else’s warehouse. Of course, the service level agreement and vendor risk assessment compliance documents will address most of this, but it’s not comprehensive. This is because cloud vendors are selective about what they disclose to customers in their annual or quarterly vendor risk review. This is because they are protecting their own privacy and the privacy of their many other clients where shared infrastructure is relevant. If you want complete privacy and control, build your own cloud but accept the higher cost.
Fig. 7. Public Cloud Challenges Influencers Survey (LogicMonitor, 2019).
The above survey by a vendor Logic Monitor confirmed that security, governance and compliance, and privacy were top challenges in 2019. We think these challenges will hold steady in 2020, while costs will likely decrease for basic use cases. If organizations continue to struggle with cloud trained employees, it will negatively impact vendor lock-in. This can be bad from a failover perspective. We think organizations should spend more on cloud trained staff. They should also make sure that they are selecting more than two or three cloud providers, all separate from one another. This helps staff get cross-trained on different cloud platforms and add ons, but it also mitigates risk and makes vendors bid more competitively.
6) Supply Chain Cyber Security Threats Increase:
All organizations depend on other entities for goods and services. Everything from manufacturers, distributors, marketers, attorneys, drivers, resellers, software providers, accountants, and more. The flow of this from start to finish is called the supply chain, and vendor management is the biggest part of it. As a result, it becomes challenging for organizations to identify and assess the security of every vendor they do business with. In fact “at least 59% of organizations have suffered from cyberattacks through third-party companies” (Olivia Scott, Supply Chain Brain, 10/09/19). Depending on the vendor and the connection point there may be more or less steps. More steps increases complexity and often decreases transparency, which in turn often increases risk.
Every aspect of supply chain has an internet-connected component from UPS Package scanners, to invoice creation, inventory management, quality control, and more. Vendors who say or suggest they are not internet-connected are usually wrong because they forgot one thing like utility applications, HVAC applications, coffee machine apps, navigation apps, payment processing apps, and their own 3rd parties that have access to customer data via the vendor, etc.
People often need clarification on what is a 4th party vendor. They are the vendors that your 3rd party vendor contracts with to meet your needs. With a 4th party vendor, you will have less insight into their infrastructure and process, if at all. Most likely any risk documentation you get from them with come via your 3rd party vendor. A lot of misinformation and hidden risk is here. Vendors managers need good communication skills and business tact to deal with this.
In the context of cybersecurity, supply chain is posing a growing threat because most of the parts of our computers and smartphones are made in other parts of the world, including the software used to run these machines. For example, iPhone chips are made by Taiwan Semiconductor Manufacturing Company (TSMC) who works with other vendors for even the smallest of components in a highly complex supply chain, acting as a manufacturer and assembler. If there is a security hole in one of the iPhone components, the customer Apple may not be the first to know because TSMC or their 3rd and 4th party vendors may not know about it or may not disclose it. This negatively impacts Apple and iPhone users.
Observing this paradox, security pioneer Bruce Schneier stated, “the computers and smartphones you use are not built in the United States. Their chips aren’t made in the United States. The engineers who design and program them come from over a hundred countries. Thousands of people have the opportunity, acting alone, to slip a backdoor into the final product” (Bruce Schneier, New York Times, 09/25/19). Thus the supply chain path needs to be scrutinized for security compliance regularly, especially in the context of large-scale hardware manufacturing for data-centric products like smartphones, cars, computers, and medical devices — few devices are not data-centric these days.
In sum, supply chain is here to stay because organizations will need to collaborate with one another in order to conduct their business efficiently. According to the Ponemon Institute, 3rd party misuse was the second-biggest security threat in 2019 (Olivia Scott, Supply Chain Brian, 10/09/19). Yet we need a reminder that supply chain is no longer merely transportation and inventory management, even if we are a goods and services company like a small construction company with no website. We need to rethink of supply chain as more digital and more data-centric than we did in prior years. It is a part of core business operations.
Thus, supply chain security should be a top priority for organizations in 2020 with a focus on 3rd party risk ranking and 4th party identification. Lastly, for big entities like government and corporate conglomerates who have many different internal organizations they interact with. They would be well advised to think of their own internal procurement process as “external supply chain” in an effort to better training and internal defenses — they are often their own worst enemy.
About the Authors: Mamady Konneh (left) is a senior information security professional, speaker and mentor with 10+ years of relevant experience in security, risk management, and project management in the healthcare, finance, and retail industries. He is a dynamic team player who leads by taking initiatives in developing efficient risk mitigation and situational awareness tactics. He is proficient at assessing the needs of the business and providing the tools to resolve challenges by enhancing the business process. He holds an MSST (Master of Science in Security Technologies) degree from the U of MN where he researched global I.D. card best practices for the country of Guinea.
Jeremy Swenson (right) is a senior IT consultant, writer, and speaker in business analysis, project management, cyber-security, process improvement, leadership, music, and abstract thinking. He has been employed by or consulted at many banks, insurance companies, retailers, healthcare orgs, governments, and so on over 14 years. He has an MBA from St Mary’s Univesity of MN and MSST (Master of Science in Security Technologies) degree from the U of MN.
A former software developer for Equifax, Sudhakar Reddy Bonthu, faces insider trading charges related to the company’s massive data breach last year, according to the SEC and federal prosecutors. Allegedly, in August 2017, Bonthu was asked to participate in Project Sparta, which Bonthu’s bosses described as a major project for one of the company’s clients who suffered a major breach that exposed details of over 100 million users.
Unknown to Bonthu at the time, that client was Equifax itself, which a month prior discovered that it was hacked and an intruder stole details for over 145.5 million US and international users. Bonthu was tasked with creating “an online user interface into which users could input information to determine whether they had been impacted by the breach.” According to court documents, he was told that “the project was a high priority for the unnamed company and had a short deadline because the client intended to ‘go live’ on September 6, 2017, with the breach remediation applications designed by Equifax.”
To create the website, which later turned out to be equifaxsecurity2017.com, Bonthu was given test data and was included in mailing lists exchanging information about the still-secret breach. SEC investigators say that Bonthu concluded on his own that the secret client in Project Sparta was in fact Equifax itself.
In an attempt to obstruct his trail he used his wife’s trading account, wherefrom he purchased eighty-six out-of-the-money put option contracts for shares of Equifax common stock with an expiration date of September 15, 2017, and a strike price of $130 per share. Bonthu made this purchase despite the fact that Equifax’s policies expressly prohibit any trading in derivative securities, including put and call options.
By purchasing out-of-the-money put options, Bonthu could make money only if the market price of Equifax stock were to drop below the put option strike price before the contract expired approximately two weeks later, on September 15. If the market price did not so drop, the put options would expire and his investment would be worthless.
On September 8, the price of Equifax common stock closed at $123.23, a drop of $19.49 (nearly 14%) per share from the prior day’s closing price of $142.72. […] As a result of the precipitous drop in Equifax’s share price, Bonthu turned his initial investment of $2,166.11 into $77,333.79 in only six days. In sum, Bonthu’s ill-gotten gains from his trading in Equifax options totaled $75,167.68, a return of more than 3,500% on his initial investment.
The SEC says Bonthu had never previously traded in Equifax options. Equifax fired Bonthu in March 2018 after he allegedly refused to cooperate on an internal investigation on charges that he violated the company’s insider trading policy. Bonthu has agreed today to a permanent injunction and to return ill-gotten gains plus interest. If the settlement is approved by a judge, this will terminate SEC civil charges.
The equifaxsecurity2017.com website, on which Bonthu worked, has been deemed one of the most poorly put together breach notification sites in recent years, with several issues affecting it.
He is the second Equifax employee charged with insider trading after Equifax’s breach last year. Earlier this March the SEC charged former CIO of Equifax U.S. Information Solutions Jun Ying. Equifax says it tipped off the Department of Justice and the SEC to Ying’s alleged insider trading.
Although Ying wasn’t directly told that Equifax had been breached, he was assigned to assist Equifax’s Global Consumer Solutions unit with what was billed as “a business opportunity for an unnamed client,” code-named Project Sparta, according to court documents. The project was designated as “urgent,” and everyone participating, including Ying and his team, were instructed to cancel their Friday evening plans and respond to all requests.
At 5:27 p.m. that day, Ying texted a co-worker that the breach they were working on “sounds bad” and noted: “We may be the one breached. . .. Starting to put 2 and 2 together,” according to the SEC complaint. Later that evening, Ying learned that Equifax’s CSO, chief legal officer and vice president of cybersecurity had all canceled their travel plans, it adds.
The following Monday, around 10 a.m., “Ying used a search engine to find information on the internet concerning the September 2015 cybersecurity breach of Experian, another one of the three major credit bureaus, and the impact that breach had on Experian’s stock price,” according to the complaint. “The search terms used by Ying were: (1) ‘Experian breach’; (2) ‘Experian stock price 9/15/2015’; and (3) ‘Experian breach 2015.’
“This defendant took advantage of his position as Equifax’s USIS chief information officer and allegedly sold over $950,000 worth of stock to profit before the company announced a data breach that impacted over 145 million Americans,” says U.S. Attorney Byung J. “BJay” Pak. “Our office takes the abuse of trust inherent in insider trading very seriously and will prosecute those who seek to profit in this manner. By selling when he did, Ying avoided losses in excess of $117,000.”
Earlier this month, Equifax revised its estimate of the breach’s impact to 147.9 million U.S. consumers. About 15 million U.K. consumers – of which about 860,000 are at risk of identity theft – and 8,000 Canadian consumers also saw their personal information get breached (see Equifax Breach Victims: UK Count Goes Up).
I identified Equifax’s control gaps and conflict of interest in a post shortly after the breach in 2017. I suspected then as I do now that more people will be charged related to conflict of interest with LifeLock identity theft protection.
Information sourced from Tara Siegel Bernard for the New York Times, Allison Prang for the Wall Street Journal, and the associated press. Curated and edited by Jeremy Swenson of Abstract Forward Consulting.
The 11th edition of the DBIR (Data Breach Investigation Report) was released this month. It analyzed more than 53,000 cybersecurity incidents and over 2,200 data breaches across the globe. Here is a summary of its key findings: Ransomware continues to be a top cybersecurity threat, according to the report. Ransomware is found in almost 39 % of malware attacks – double the amount in last year’s analysis. “Ransomware remains a significant threat for companies of all sizes,” says Bryan Sartin, executive director security professional services, Verizon. “It is now the most prevalent form of malware, and its use has increased significantly over recent years.” This comes as no surprise to many city and state officials that have battled with ransomware takeovers recently. Systems in the city of Atlanta were offline for several days last month following a ransomware attack. Government offices and municipal systems have also been targeted in Baltimore, North Carolina, San Francisco, and others yet to come forward – the government does not like to admit their errors.
The report also shows that attacks on public sector organizations continue to focus on espionage. 43 % of public sector attacks were motivated by espionage. Of those attacks, 61 % were carried out by state-affiliated actors. Privilege misuse and error by insiders account for a third of breaches. Small businesses represent 58 percent of data breach victims. Over 50% of the attacks on public sector organizations were accomplished using backdoors in software, which arguably makes the case for why putting backdoors in software is a bad idea even if a government plans to use it for its own purposes – the government is far behind the private sector in incubating innovation here. Using phishing techniques to get data from individuals remains the most popular method as individuals continue to be the weakest link when it comes to security.
Fig 1. Data Breach Causes, Verzion 2018 Using stolen credentials topped the list of causes for data breaches (See Fig 1. for the other top causes). A common saying is “it’s easier to ask the employee for their password than try to guess it”, so social engineering continues to be a very useful tactic for hackers. For most employees, the only security protection system is their password. If a cyber-criminal obtains it, they can easily bypass most of the company’s security controls.
Attribution is probably one of the most difficult tasks in cyber-crime which already has more challenges than most people realize, with misdirection and lack of digital footprints to help lead to the cyber-criminal. This is likely due to several virtual machines and botnets used to facilitate the attack across several nations – all of which are likely unfriendly to the United States. Specifically, 73% of cyber-attacks were caused by outsiders. Organized crime rings arevery likely using hackers as a service because50% of cyber-attacks were attributed to organized crime. 12% was attributed to nation-states – APT (advanced persistent threats) who have unlimited funds.
Specific to Healthcare: The healthcare industry is rife with error and misuse. In fact, it is the only industry that has more internal actors behind breaches than external. In addition to these problem areas, ransomware is endemic in the industry—it accounts for 85 % of all malware in healthcare.
In total, there were 750 incidents and 536 with confirmed data disclosed. The top three patterns include: miscellaneous errors, crimeware, privilege misuse – 63 % of all incidents within healthcare. Breach threat actors breakdown: 56 % internal, 43 % external, 4 % partner, 2 % multiple parties. Breach actor motives are: 75 % financial, 13 % fun, 5 % convenience, Data compromised: 79 % medical, 37 % personal, 4 % payment.
Abstract Forward Consulting can help you review the issues in this report to build stronger security and process controls. Contact us here to learn more.
National author, speaker, consultant, and entrepreneur Evan Francen got into information security long before it was cool and buzzing in the media, and long before every so-called IT consultancy started chasing the money. In fact, he and I both dislike the money chasers. He and his growing consultancy, FRSecure are for-profit, but they don’t do it for the money.
Francen opens his book with a lengthy chapter on how poor communication between cybersecurity stakeholders exacerbates trouble and risk. You can’t see or measure what isn’t communicated well. It starts because there are five main stakeholder groups who don’t share the same vocabulary amid conflicting priorities.
The above survey by a vendor Logic Monitor confirmed that security, governance and compliance, and privacy were top challenges in 2019. We think these challenges will hold steady in 2020, while costs will likely decrease for basic use cases. If organizations continue to struggle with cloud trained employees, it will negatively impact vendor lock-in. This can be bad from a failover perspective. We think organizations should spend more on cloud trained staff. They should also make sure that they are selecting more than two or three cloud providers, all separate from one another. This helps staff get cross-trained on different cloud platforms and add ons, but it also mitigates risk and makes vendors bid more competitively.
A former software developer for Equifax, Sudhakar Reddy Bonthu, faces insider trading charges related to the company’s massive data breach last year, according to the SEC and federal prosecutors. Allegedly, in August 2017, Bonthu was asked to participate in Project Sparta, which Bonthu’s bosses described as a major project for one of the company’s clients who suffered a major breach that exposed details of over 100 million users.
Ransomware continues to be a top cybersecurity threat, according to the report. Ransomware is found in almost 39 % of malware attacks – double the amount in last year’s analysis. “Ransomware remains a significant threat for companies of all sizes,” says Bryan Sartin, executive director security professional services, Verizon. “It is now the most prevalent form of malware, and its use has increased significantly over recent years.” This comes as no surprise to many city and state officials that have battled with ransomware takeovers recently. Systems in the city of Atlanta 
Using stolen credentials topped the list of causes for data breaches (See Fig 1. for the other top causes). A common saying is “it’s easier to ask the employee for their password than try to guess it”, so social engineering continues to be a very useful tactic for hackers. For most employees, the only security protection system is their password. If a cyber-criminal obtains it, they can easily bypass most of the company’s security controls.
Abstract Forward Consulting 
