Breach Notification

The Breach Reporting Dillema

By Rich

Over at Emergent Chaos, Adam raises the question of whether we are seeing more data breaches, or just more data breach reporting. His post is inspired by a release from the Identity Theft Resource Center stating that they've already matched the 2007 breach numbers this year.

Personally, I think it's a bit of both, and we're many years away from any accurate statistics for a few reasons:

1. Breaches are underreported. As shown in the TJX case, not every company performs a breach notification (TJX reported, other organizations did not). I know of a case where a payment processor was compromised, records lost for some financial services firms that ran through them, and only 1 of 3-4 of the companies involved performed their breach notification. Let's be clear, they absolutely knew they had a legal requirement to report and that their customer information was breached, and they didn't.
2. Breaches are underdetected. I picked on some of the other companies fleeced along with TJX that later failed to report, but it's reasonable that at least some of them never knew they were breached. I'd say less than 10% of companies with PII even have the means to detect a breach.
3. Breaches do not correlate with fraud. Something else we've discussed here before. In short, there isn't necessary any correlation between a "breach" notification and any actual fraud. Thus the value of breach notification statistics is limited. A lost backup tape may contain 10 million records, yet we don't have a singe case that I can find where a lost tape correlated with fraud. My gut is that hacking attacks result in more fraud, but even that is essentially impossible to prove with today's accounting.
4. There's no national standard for a breach, never mind an international standard. Every jurisdiction has their own definition. While many follow the California standard, many others do not.

Crime statistics are some of the most difficult to gather and normalize on the planet. Cybercrime statistics are even worse.

With all that said I need to go call Bank of America since we just got a breach notification letter from them, but it doesn't reveal which third party lost our information. This is our third letter in the past few years, and we haven't suffered any losses yet.

–Rich

Did They Violate Breach Disclosure Laws?

By Rich

There's been an extremely interesting, and somewhat surprising, development in the TJX case the past couple weeks. No, I'm not talking about one of the defendants pleading guilty (and winning the prisoners dilemma), but the scope of the breach.

Based on the news reports and court records, it seems TJX wasn't the only victim here. From ComputerWorld:

Toey was one of 11 alleged hackers arrested last month in connection with a series of data thefts and attempted data thefts at TJX and numerous other companies. Besides TJX and BJ's, the list of publicly identified victims of the hackers includes DSW, OfficeMax, Boston Market, Barnes and Noble, Sports Authority and Forever 21.

Huh. Wacky. I don't seem to recall seeing breach notifications from anyone other than TJX. Since I've been out for a few weeks, I decided to hunt a bit and learned the Wall Street Journal beat me to the punch on this story:

That's because only four of the chains clearly alerted their customers to breaches. Two others -- Boston Market Corp. and Forever 21 Inc. -- say they never told customers because they never confirmed data were stolen from them. The other retailers -- OfficeMax Inc., Barnes and Noble Inc., and Sports Authority Inc. -- wouldn't say whether they made consumer disclosures. Computer searches of their Securities and Exchange Commission filings, Web sites, press releases and news archives turned up no evidence of such disclosures. The other companies allegedly targeted by the ring charged last week were: TJX Cos., BJ's Wholesale Club Inc., shoe retailer DSW Inc., and restaurant chain Dave and Buster's Inc. They each disclosed to customers they were breached shortly after the intrusions were discovered.

The blanket excuse from these companies for not disclosing? "We couldn't find any definite information that we'd been breached".

Seems to me someone has a bit of legal exposure right now. I wonder if is greater or less than the cost of notification? And don't forget, thanks to TJX seeing absolutely no effect on their business after the breach, we can pretty effectively kill off the reputation damage argument.

–Rich