Bloomberg Law: Privacy & Data Security brings you single-source access to the expertise of Bloomberg Law’s privacy and data security editorial team, contributing practitioners,...
A recent federal court ruling illustrates that employees continue to pose cybersecurity risks for companies that have upgraded security in response to a data breach, cybersecurity professionals and attorneys told Bloomberg BNA ( USAA Fed. Sav. Bank v. PLS Fin. Servs., Inc. , N.D. Ill., No. 16-cv-7911, dismissal 5/30/17 ).
The present case arises from USAA Federal Saving Bank claims that PLS Financial Services, a payday lending group, negligently failed to protect USAA customers’ "financial information so as to allow third parties to create fraudulent checks.” But Judge Sara L. Ellis of the U.S. District Court for the Northern District of Illinois dismissed the claims.
The court found “no common law duty exists to safeguard personal information under Illinois law,” and no legal duty exists “beyond legislative requirements” to safeguard an individual’s personal information or protect it from disclosure. Also, USAA didn’t adequately allege under its state consumer protection statute claim that an internal data breach at the payday lender took place in Illinois or affected individuals there, it said.
Companies have increasingly employed more advanced cybersecurity defenses—often to stop hackers. But companies focused on external threats can ignore internal actors or employees that pose the biggest security risk. Despite the case being tossed, it serves to remind companies to pay attention to internal security, including employees, third-party vendors, and other groups they work with closely, cybersecurity pros said.
For the financial sector, one of the biggest cybersecurity issues is that third-party or technical-service providers often “are inadequately protected and over-reliant on perimeter defenses and encryption technologies,” Tom Kellerman, CEO of cybersecurity investment strategy company Strategic Cyber Ventures in Washington and a former member of the Commission on Cybersecurity under President Barack Obama, told Bloomberg BNA May 31. These companies need to employ “user behavioral analytics” to confirm the identity of who is using the account or making a transfer, he said.
To minimize security threats from the inside, it’s essential to monitor employees, Kellerman said. But even enacting all the most sophisticated cybersecurity protocols won’t completely prevent “rogue employees from abusing information on the system,” he said.
In October 2012, the Federal Trade Commission and PLS reached a no fault settlement under which the company paid $101,500 and agreed to make customer data security changes. It agreed to develop a “comprehensive information security program” and “to take reasonable measures to protect against unauthorized access to or use of such information.”
Timothy J. Toohey, partner at Greenberg Glusker Fields Claman & Machtinger LLP’s in Los Angeles and head of the firm’s cybersecurity practice, told Bloomberg BNA May 31 that often “human beings are at the root of all these cybersecurity problems.” Companies not only have to deal with “employee carelessness,” but also handle internal threats from more nefarious insiders.
For the careless employee, ample training and increased “institutional procedures” will help banks, financial institutions, and other consumer-facing companies that must deal with clearinghouse and third-party payment vendors, Toohey said. However, dealing with rogue employees or hackers, companies need to have “instituted procedures” that double check every purchase and balance transfer, he said. Also, companies need to have procedures in place that “adequately monitor employees with access to sensitive customer information--such as financial transaction data,” he said.
To contact the reporter on this story: Daniel R. Stoller in Washington at dStoller@bna.com
To contact the editor responsible for this story: Donald Aplin at email@example.com
Full text of the opinion is available at http://bloomberglaw.com/public/document/USAA_Fed_Sav_Bank_v_PLS_Fin_Servs_Inc_No_16_C_7911_2017_BL_181033.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)