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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Faegre Drinker on Law and Technology Podcast: An Interview With Cybersecurity Regulators

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The regulation of cybersecurity remains a new and rapidly evolving space — and regulatory activity and priorities can be somewhat opaque to outside observers. In this special episode of the Faegre Drinker on Law and Technology Podcast, host Jason G. Weiss shares a discussion led by Faegre Drinker’s Peter Baldwin, who sat down with Brent Wilner, senior advisor to the Securities and Exchange Commission’s (SEC) Cyber Unit, and Justin Herring, leader of the New York Department of Financial Services’ (NYDFS) Cybersecurity Division. The two guests share their insights on each agency’s priorities in cybersecurity, data protection and enforcement.

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Kaseya: The Latest High-Profile Ransomware Attack

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On July 2, 2021, Kaseya Ltd., a Florida-based firm that provides software tools to thousands of primarily small and mid-sized businesses, became the latest victim of a high-profile ransomware attack. The attack is believed to have affected as many as 1,500 of Kaseya’s customers throughout the world, including at least 200 businesses in the United States. The attackers, who have claimed association with the Russia-linked REvil ransomware gang, have demanded an astronomical $70 million ransom to restore services for affected businesses.

The Kaseya attack was particularly devastating and effective because it was a supply chain attack, meaning it targeted a type of software that many other companies use to manage and distribute software updates. Thus, the attack not only affected Kaseya, but also potentially all of its customers.

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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 York Department of Financial Services and National Securities Corporation Agree to $3 Million Settlement in Cybersecurity Enforcement Action

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Earlier this month, the New York State Department of Financial Services (NYDFS) announced a settlement and consent order with National Securities Corporation (National Securities) for $3 million in connection with National Securities’ violations of NYDFS’s Cybersecurity Regulation, 23 NYCRR Part 500 (Part 500).

National Securities sells life insurance, accident and health insurance, and variable life/variable annuities insurance. As part of its day-to-day operations, National Securities collects personal data from its customers.

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Multiple Federal Agencies Jointly Warn of Increased and Imminent Cybercrime Threat to U.S. Hospitals and Healthcare Providers

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On October 28, 2020, the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA), the Federal Bureau of Investigation (FBI) and the Department of Health and Human Services (HHS) issued a Joint Cybersecurity Advisory warning of “an increased and imminent cybercrime threat to U.S. hospitals and healthcare providers.” The agencies collectively warned that “malicious cyber actors are targeting the Healthcare and Public Health (HPH) Sector with Trickbot malware, often leading to ransomware attacks, data theft, and the disruption of healthcare services.”

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