Fall Cybersecurity Enforcement Update: State and Federal Regulators Increase Scrutiny on Victims of Cyberattacks

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We have written here previously about the dramatic increase in cyberattacks on companies of all types since the start of the COVID-19 pandemic. Indeed, by some estimates, ransomware attacks have increased over 90% during the first half of 2021 compared to the same period last year. As these and other types of cyberattacks have increased, various federal and state regulators have correspondingly stepped up efforts to investigate and bring enforcement actions – which often include large fines – against companies that are perceived to have been negligent in their cybersecurity efforts. Two of the most active agencies in cybersecurity enforcement have been the New York Department of Financial Services (NYDFS) and the United States Securities & Exchange Commission (SEC), both of which have made important announcements regarding cybersecurity compliance in the past few months.

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Senators Introduce Bipartisan Legislation To Require Federal Contractors and Operators of Critical Infrastructure to Disclose Cyber Intrusions

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A bipartisan group of 14 United States senators recently introduced proposed legislation that would require federal contractors and operators of critical infrastructure to disclose any cyber intrusion within 24 hours. A copy of the proposed legislation can be found here.

Currently, there is no federally mandated reporting requirement for cyberattacks on American infrastructure targets. The newly proposed legislation is designed to prevent these attacks from going unreported and uninvestigated.

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U.S. Department of Labor Issues Cybersecurity Guidance for ERISA-Covered Plans

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There have been a rash of high-profile cyberattacks in the United States recently. Some of the more visible public attacks include SolarWinds, the Microsoft Exchange attack, Accellion, the Florida Water Treatment Plant and, more recently, the devastating cyber-attacks against Colonial Pipeline. These attacks, while disruptive, also yielded high-dollar payments to the cyber-threat actors.

ERISA-covered plans hold just under $10 trillion in assets and these plans are particularly enticing for cyber-threat actors. Although the Colonial Pipeline cyberattacks was executed by a coordinated hacking group, cyberattacks on ERISA-covered plans have historically been less complex. A typical scenario involves a retired employee’s ERISA account being accessed by an imposter, who then steals the account balance.

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Cybersecurity Enforcement Trends: A Fraught New Reality for ‘Victims’ of Cyberattacks

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New York partners Pete Baldwin and Bob Mancuso authored an article for the New York Law Journal titled, “Cybersecurity Enforcement Trends: A Fraught New Reality for ‘Victims’ of Cyberattacks,” that discusses how regulators have shifted their focus from data breach notifications to overall cybersecurity preparedness.

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Department of Homeland Security Announces New Cybersecurity Requirements for Pipelines

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The Department of Homeland Security (DHS) recently announced a new Security Directive requiring companies in the pipeline sector “to better identify, protect against, and respond to” cyber threats. Among other things, the Security Directive requires pipeline operators to report cyberattacks against their pipelines to DHS. This new requirement replaces the voluntary reporting guidelines that had been in place since 2010.

The new Security Directive is a response to the May 2021 ransomware attack on Colonial Pipeline that shut down much of the oil and gas distribution to the East Coast of the United States for approximately six days. According to various media reports, Colonial Pipeline ultimately elected to pay a Russian ransomware gang that claimed responsibility for the attack over four million dollars to re-open the crippled pipeline.

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New Bill Proposes that Americans Should Be Able to Sue Foreign Hackers

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The Homeland and Cyber Threat Act (HACT) was introduced in the U.S. House on March 12, 2021. This bill would allow U.S. citizens to sue foreign governments, agents and officials and to collect monetary damages for personal injury, damage or loss of property resulting from a cyberattack with foreign origins.

This bipartisan bill was introduced because cybersecurity activity and cyber incidents continue to rise, leading to increasing concerns of data security. Rep. Bergman, R-MI, a key sponsor of both this bill and a similar bill introduced in 2019, describes HACT as a tool of accountability for foreign states. The other bill sponsors (Reps. Allred, D-TX; Fitzpatrick, R-PA; Herrera Beutler, R-WA; Neguse, D-CO; and Kim, D-NJ) echo this theme of accountability and point to HACT as a way for Americans to “fight back against foreign cyberattacks.”

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