May 2009

I don’t know, but I could probably find out. 

There is an increasing amount of discussion within the information security industry about whether the use of “security questions” to unlock forgotten passwords is a sound practice.  Many web sites ask users to answer personal questions upon registration, so that those questions and answers can be used in the future to authenticate users when they have forgotten their passwords.  The problem is twofold:

(1) The answers to many of these questions can be relatively easily guessed by an unauthorized individual to gain access to the account.

(2) In many cases, the authorized user forgets the answer to the question when it is needed later to access the account.

A recent study conducted by researchers at Microsoft and Carnegie Mellon University (“It’s no secret: Measuring the security and reliability of authentication via ‘secret’ questions”) found that 17% of users’ security answers were guessed correctly by mere acquaintances, and 20% of the study participants forgot their answers within six months. 

On May 12, 2009, the UK Information Commissioner’s Office (ICO) released a much anticipated report authored by the RAND Corporation assessing the strengths and weaknesses of the 1995 EU Data Protection Directive (95/46/EC) (the "Directive), the main source of privacy legislation in Europe. While the report highlighted a number of the Directive’s positive attributes, it nonetheless concluded that as society becomes more globally networked, "the Directive as it stands will not suffice in the long term."

As our readers know, many of the 44 state data breach notification laws allow for (and may even require) a brief delay in notifying affected individuals of the breach if that notification would interfere with or impede a law enforcement investigation. Last week, the governor of Maine amended that state’s data breach notification law. The amendment clarifies that notification may be delayed for no longer than 7 business days after a law enforcement agency determines that the notification will not compromise a criminal investigation.
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The Financial Industry Regulatory Authority (FINRA) announced on April 28, 2009 that it had fined Centaurus Financial, Inc., of Anaheim, California, $175,000 for Centaurus’s failure to protect confidential customer information. FINRA also required Centaurus to send notifications to affected customers and their brokers, provide one year of credit monitoring at no cost to the affected customers, and certify to FINRA that its procedures and systems are in compliance with privacy requirements. See FINRA News Release (April 28, 2009).

On April 30, 2009, Representative Bobby Rush (D-Ill) introduced H.R. 2221, the Data Accountability and Trust Act. The bill is nearly identical to H.R. 958, introduced by Rep. Rush in the 110th Congress, and is similar to the Data Accountability and Trust Act, introduced by Rep. Stearns (R-FL) in the 109th Congress. Of course, the newest “Data Accountability and Trust Act” is only the most recent of dozens of bills proposed over the last several years that would implement uniform federal breach notification requirements and preempt the 44 state laws requiring notification. Rep. Rush’s latest bill also includes data security provisions and would preempt the growing number of state laws imposing such requirements.
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Last month, we blogged about whether the Red Flag Rules apply to medical care providers.  According to the FTC, they may also apply to retailers.

The Federal Trade Commission’s recently released “how-to” guide says that the Red Flag Rules apply to “retailers that offer financing or help consumers get financing from others, say, by processing credit applications.” However, most retailers have been caught off guard by this interpretation, since they are not accustomed to being considered “creditors.” Fortunately for them, in the nick of time for the May 1st compliance deadline, the FTC extended the deadline to August 1, 2009, giving retailers time to put their policies in place in a thoughtful and reasoned manner.