Untitled Document
The theft and loss of personal information is a serious and growing problem.
As the TJX incident and the other 1,150 reported data breaches since 2000 demonstrate,
data breaches inflict large direct and indirect costs on businesses and other
organizations. During this time, breaches of over 380,346,097 identities have
been reported. They also cause severe financial and other harm to individuals
whose credit card numbers, Social Security numbers and other critical personal
data are stolen and illegally used by unscrupulous outsiders or insiders. This
harm creates distrust of the electronic tools and processes that increasingly
undergird our economy's growth and productivity.
In response to this costly problem, organizations have employed a myriad of
technologies and engaged in various types of employee education. Increasingly,
legislators and regulators have jumped into the fray, viewing the problem as
a consumer protection issue. This legislative approach has become steadily more
security-oriented as the problem has intensified. It began with data breach
notification laws. More than 40 states now have these laws on the books. Because
they usually only require organizations to notify customers and others of a
data breach within a set period of time after the breach, these laws are generally
recognized as inadequate. They inform customers and others of the loss of critical
personal information, but have shown they minimally effect preventing these
losses from occurring.
So states are "moving up the ladder" and are now passing data handing
regulations. In Nevada this October, a was law passed that required all businesses
to encrypt personally identifiable customer data, including names and credit
card numbers that are transmitted electronically. Starting in January 2009,
Massachusetts will require businesses to encrypt sensitive data stored on laptop
computers and other portable devices. The states of Michigan and Washington
are considering similar regulations.
But are even these stricter state laws enough to protect critical personal electronic
data?
While helpful, they undoubtedly have serious limitations. First, they focus
on encryption. While a useful technology, it can also be expensive and cumbersome,
especially for small businesses. Second, encryption laws have the same limitations
as notification laws: while they mitigate the risk of a lost tape or mobile
device, they cannot prevent data breaches. An insider who has access to identity
information and retransmitting that critical information, either intentionally
or inadvertently, will not be stopped by encryption. Finally, these laws have
the same limitation all state laws do. They create a patchwork of requirements
and regulations that can be daunting for a large organization to navigate, next
to impossible for a small firm.
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