Canada: Cybersecurity Lessons From The United States: A Guide For Directors And Officers

Last Updated: June 1 2017
Article by Ruth Promislow, Elie Freedman and Katherine F.M. Rusk

The recent global ransomware attack (WannaCry) was yet another reminder of the increased threat posed by cyber breaches. While cybersecurity attacks are inevitable, organizations (and their directors and officers) may still be liable to the extent they failed to take reasonable steps to prevent the attack, or failed to respond appropriately to the attack.

Understanding what is expected of an organization is therefore critical to minimizing exposure from cyberattacks. There is little case law in Canada that provides direction. But there is useful direction from the Federal Trade Commission (FTC) of the United States which has been seeking to enforce such matters for approximately 15 years. Generally, the FTC complaints described below resulted in a fine being paid by the target organization and/or an agreement by the organization to take specified steps to address its cybersecurity posture.

Here are four lessons learned:

1. Take Appropriate Steps to Identify Security Risks and Develop Plans to Address Potential Threats

It is critical to identify the risks posed to the personal information for which your organization is responsible (e.g., customer, employee, or corporate proprietary information). Without doing so, you do not have an idea of what it is you are trying to protect and what are the risks that you need to address.

The FTC has brought complaints against organizations that did not proactively identify and patch network risks. In several cases, the FTC claimed against the organizations on the basis that they did not make efforts to detect reasonably foreseeable vulnerabilities nor employ reasonable processes for discovering and remedying the risks posed by such vulnerabilities.  

The ability to receive, address, and monitor reports about security threats is as important as the ability to identify them. The FTC claimed against an organization on the basis that it "failed to implement a process for receiving and addressing security vulnerability reports from third-party researchers, academics or other members of the public, [and] thereby delay[ed] its opportunity to correct discovered vulnerabilities or respond to reported incidents".

2. Protect and Safeguard Your Critical Services and Limit the Impacts of Cybersecurity Events

A plethora of the FTC's cases deal with organizational failures in developing and implementing reasonable safeguards to protect consumer information. In Re Twitter, Inc., the company was the subject of a FTC investigation and claim for a cyber breach because it granted administrative control of its systems, including user accounts, to almost all of its employees. The FTC successfully asserted that Twitter was liable for a cyber breach that exploited this weakness because the company failed to: establish policies that made administrative passwords difficult to guess; suspend administrative accounts after a reasonable amount of unsuccessful login attempts; and restrict access to administrative controls according to the employee's job needs. Twitter entered into a 20-year agreement and consent order with the FTC, which includes mandatory annual and biennial security assessment reports by qualified third-party professionals.

3. Monitor Your Network Activity to Detect and Identify Potential Cyber Events

The FTC has claimed against companies for their failure to employ an intrusion detection system and to monitor network access logs for suspicious activity. Monitoring network activity is a basic and expected method of reducing risks posed by cyber intruders to consumer information.

4. Execute and Maintain Appropriate Cyber Breach Response Processes

The FTC enforcement actions have also focused on failure by organizations to detect breaches and take appropriate steps. Failure to detect a breach gives rise to obvious consequences—customers and clients do not know their information has been compromised, and there is the obvious risk that a further breach will occur.

In Re Wyndham Worldwide Corporation, the FTC alleged that the company had not followed proper cybersecurity response procedures when it failed to subsequently monitor its network for malware used in a prior attacks. In Re ASUSTeK Computer, Inc., the FTC brought suit against ASUSTeK Computer, Inc. for the organization's failure to disseminate known router vulnerabilities, and their corresponding fixes, to consumers. In the first instance, Wyndham's failure to respond to the original cyber event resulted in the theft of 619,000 payment card accounts and more than USD$10 million in fraudulent charges. In the second, ASUSTek's failure to provide notice and mitigation methods to consumers about certain of its router vulnerabilities resulted in breach of almost 13,000 connected devices.

Appropriate cyber event responses and processes are important elements in a comprehensive cybersecurity plan. 

Conclusion

Cyberattacks are inevitable, but liability for those attacks does not have to be. Further, while there is no magic bullet to prevent all attacks, it is possible to mitigate the risk.   

Organizations must identify their risks and vulnerabilities, and develop and implement a cybersecurity plan that incorporates both a mitigation and incident response plan. Failure to do so leaves the organization exposed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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