Scott A. Carlson

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This blog post is co-authored by Seyfarth Shaw and The Chertoff Group and has been cross-posted with permission.

What Happened

On July 26, the U.S. Securities & Exchange Commission (SEC) adopted its Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure final rule on a 3-2 vote. The final rule is a modified version of the SEC’s earlier Notice of Proposed Rulemaking (NPRM) released in March 2022. The final rule formalizes and expands on existing interpretive guidance requiring disclosure of “material” cybersecurity incidents.Continue Reading SEC Publishes Public Company Cybersecurity Disclosure Final Rule

On March 15, 2023 the Securities and Exchange Commission (“SEC”) proposed three new sets of rules (the “Proposed Rules”) which, if adopted, would require a variety of companies to beef up their cybersecurity policies and data breach notification procedures. As characterized by SEC Chair Gary Gensler, the Proposed Rules aim to promote “cyber resiliency” in…

Introduction

On March 9, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed mandates for cybersecurity disclosures by public companies. If adopted, these mandates seek to provide investors a deeper look into public companies’ cybersecurity risk, governance, and incident reporting practices. SEC chair Gary Gensler noted in a statement regarding the proposed mandates that cybersecurity incidents continue to become a growing risk with “significant financial, operational, legal, and reputational impacts.”

“The interconnectedness of our networks, the use of predictive data analytics, and the insatiable desire for data are only accelerating, putting our financial accounts, investments, and private information at risk. Investors want to know more about how issuers are managing those growing risks.” – Gary Gensler, SEC ChairpersonContinue Reading SEC Proposes Mandatory Cybersecurity Disclosures by Public Companies

Introduction

On March 15, 2022, President Biden signed into law the Cyber Incident Reporting for Critical Infrastructure Act of 2022. The Act will require critical infrastructure organizations (defined below) to report cyber attacks to the Cybersecurity and Infrastructure Security Agency (CISA) within 72 hours. The Act also creates an obligation to report ransomware payments within 24 hours.

According to the Federal Bureau of Investigation’s 2021 Internet Crime Report, released on March 23, 2022, cyber incidents rose 7% from 2020, with potential losses topping $6.9 billion. Many of the most threatened organizations fall into the critical infrastructure sector, and in 2021 alone, cyber incidents caused oil and food shortages, as well as supply chain threats. With cyber incidents reaching all-time highs in 2021, the legislation purports to protect U.S. critical infrastructure entities and investigate cyber crimes moving forward. The Act suggests that reporting obligations are being implemented to ensure that the government can support in the response, mitigation, and protection of both private and public companies that are covered under the Act. Within 24 months, CISA’s director is required to issue a proposed rule, and must issue a final rule 18 months after making the proposal. The legislation also authorizes the Director of CISA to issue future regulations to amend or revise that rule.
Continue Reading President Biden Signs Bill Mandating Cyber Reporting for Critical Infrastructure Entities

Introduction

While previous cybersecurity legislation has largely been unable to pass through Congress, the Strengthening American Cybersecurity Act of 2022 was introduced by U.S. Senators Rob Portman (R-OH) and Gary Peters (D-MI), and has been viewed as a priority as threats of cyber incidents continue to rise. The Senate unanimously passed the Act, which, in its current form, would require federal agencies and critical infrastructure operators to report cyberattacks within 72 hours to the Cybersecurity and Infrastructure Security Agency (CISA). Should the legislative package make it through the House unchanged, it would also require critical infrastructure companies to report ransomware payments within 24 hours. The Act combines language from the three bills Senators Portman and Peters have authored in the past – the Cyber Incident Reporting Act, the Federal Information Security Modernization Act of 2021, and the Federal Secure Cloud Improvement and Jobs Act.
Continue Reading U.S. Senate Unanimously Passes Cybersecurity Bill on March 2, 2022

On September 21, 2021 the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issue an updated memo on the potential sanctions risk associated with facilitating ransomware payments and to once again note “proactive steps” companies can take to mitigate such risks. See “The OFAC memo”, available here.  The memo comes on the heels of increased  regulatory activity and public statements regarding ransomware by the Biden Administration, and further, on the heels of the OFAC’ s designation and sanction of SUEX OTC, S.R.O for its part in facilitating financial transactions for ransomware actors involving illicit proceeds from at least eight ransomware variants.

The revised memo stresses OFAC’s concern with many different types of companies that have a role in ransomware cases and subsequent payment.  The memo notes:

Companies that facilitate ransomware payments to cyber actors on behalf of victims, including financial institutions, cyber insurance firms, and companies involved in digital forensics and incident response, not only encourage future ransomware payment demands but also may risk violating OFAC regulations. The U.S. government strongly discourages all private companies and citizens from paying ransom or extortion demands and recommends focusing on strengthening defensive and resilience measures to prevent and protect against ransomware attacks.(emphasis supplied).

The OFAC memo next notes that the growth and facilitation of ransomware payments threatens the national security and foreign policy of the country:

Facilitating a ransomware payment that is demanded as a result of malicious cyber activities may enable criminals and adversaries with a sanctions nexus to profit and advance their illicit aims. For example, ransomware payments made to sanctioned persons or to comprehensively sanctioned jurisdictions could be used to fund activities adverse to the national security and foreign policy objectives of the United States. Such payments not only encourage and enrich malicious actors, but also perpetuate and incentivize additional attacks. Moreover, there is no guarantee that companies will regain access to their data or be free from further attacks themselves. For these reasons, the U.S. government strongly discourages the payment of cyber ransom or extortion demands. [emphasis supplied].
Continue Reading OFAC Issues a New Advisory Memo on Potential Sanctions Risk for Facilitating Ransomware Payments

A nationwide fraudulent unemployment benefits cyber scam has been making headlines for many months now and still continues to threaten employers and countless individuals throughout the United States.   Threat actors continue to exploit overwhelmed governmental agencies and are filing claims for benefits using the personal information of people who have not lost their jobs.  The false claims have been estimated in the hundreds of millions of dollars of fraudulent unemployment claims being paid to threat actors.  This fraud is a sharp reminder that sensitive personal information in the wrong hands can result in tremendous harm.  Employers should remain vigilant and alert their workforce, promptly challenge fraudulent claims, and check cyber-security practices and policies to help protect against this and other cyber threats.

It is estimated that nearly 53 million unemployment claims were filed during the few months of the coronavirus pandemic and the threat has continued into 2021.  Many state agencies, already understaffed and functioning with older technology and fraud detention protocols, were not prepared for the onslaught and have become tremendously overwhelmed.  The resulting delays and chaos in processing so many unemployment claims in such a short time has set the perfect stage for threat actors to take advantage.

Under normal circumstances, when the unemployment claim is filed, the agency will send  timely notice to the employer to provide the opportunity to protest the claim.  Typically the employer has ten days to protest.  However, during the pandemic, unemployment offices across the country have struggled to get the notices out to employers – taking months rather than days.  Consequently, employers are receiving the protest notices after the time has expired to protest the claim.  Most people learn they are affected when they get a notice from the state unemployment benefits office about their supposed application for benefits.  By then, however, the benefits usually have been paid to an account the criminals control.  Further, it is not clear given the magnitude of claims and impact on individuals whether in some instances agencies are paying even before they send the protest notice.
Continue Reading COVID-19 Unemployment Benefits Scams Continue Well Into the Pandemic

Business executives face the challenge of improving their company’s cybersecurity posture while balancing costs. The consequences of a cyberattack – including lost revenue, customers, diminished reputation and credibility, or even total shut down – force executives to prioritize cybersecurity within their budgets and strategize how to best allocate their limited resources. How should business executives…

From court closures and the way judges conduct appearances and trials to the expected wave of lawsuits across a multitude of areas and industries, the COVID-19 outbreak is having a notable impact in the litigation space—and is expected to for quite some time.

To help navigate the litigation landscape, we are kicking off a webinar…

On May 11, President Trump signed Executive Order (EO) on Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure. This is a significant development for U.S. cybersecurity as it represents a concrete call to action for the government to modernize its information technology, beef up its cybersecurity capabilities, protect our country’s critical infrastructure from…