I resisted writing about the British Tax Authorities’ blunder disclosed last week when they lost two CDs full of sensitive information (bank accounts and social benefits information) of 25 million UK families.  The story received enough mainstream press attention and I was afraid that many of our readers are starting to suffer from "breach fatigue" - hearing all too often about security breaches and missing personal information.

The fundamental reason why the breach occurred are all too common these days - e-mails released by the U.K.’s National Audit Office have confirmed that officials at the Revenue and Customs, did not want to remove sensitive information from child benefit data sent to the auditors because doing so would cost extra (although some experts have said that the cost of "sanitizing" the data could have cost less than the equivalent of $10,000).

Anyway, I could not resist writing about the recent development from the UK for a different reason.  As a response to the initial breach, the Revenue & Customs decided that it owed an apology to the families affected by the breach.  So it decided to mail them a personalized apology letter.  The letter, however, was too personalized - it included name, address, national insurance and child benefit numbers.  The information contained in this letter is all that is needed by identity thieves to open bank accounts, claim benefits or even apply for passports on behalf of somebody else. 

The UK authorities urge people who received the letters to destroy them after they receive them and read them.  But there are a large number of families who will never receive their - either because they moved or because somebody ‘conveniently’ picked the letter out of their mailbox on their behalf. 

So what follows next? A second apology letter to apologize for the loss of the CDs and the first apology letter? No, instead the Revenue & Customs authorities are shifting the blame to the concerned citizens who did not receive the letter by saying that they should have updated their mailing address.

James Paulick, currently pursuing a Juris Doctor decree at Duquesne University in Pittsburgh, Pennsylvania, will be joining us in writing and contributing to this site.  James received his Bachelor of Science in Computer Science from Wheeling Jesuit University and his interests include digital evidence reliability in cybercrimes and property rights in virtual words. 

We are happy to welcome James onboard and we are looking forward to his contributions.

We wrote in May, under the title "Cost of Insecurity" about TJX Companies’ costs in connection with the security breach suffered in 2003/2004.  In a footnote in its November 13 earnings announcement (Edgar report), TXJ increased its estimate of pre-tax charges for the credit card breach to $216 million (compare with the August estimate of $168 million) for the 9-months ending on October 27, 2007.

This charge equals to $0.28 per share.  TJX’s earnings per share are $1.43 and the total divident for the past year was $0.34.  When the charge related to a security breach equals  one-fifth of the EPS and  four-fifths of the annual divident, it should raise a big red flag to other companies to make sure that their data is secure. 

Many of our readers know that the principal cybercrime statute in the United States is the Computer Fraud and Abuse Act, 18 U.S.C. 1030.  It has served well over the years since enaction but some prosecutors (and civil plaintiffs to which it also applies) have complained that it does not keep up with newer types of cybercrime. Possibly in response to these critics, Senators Hatch (UT), Biden (DE), and Cochran (MS) have introduced an amendment to Section 1030.

The new bill, "Cyber-Crime Act of 2007" (S. 2213) (Thomas tracker) would make three substantial amendments:

First, it would prohibit "conspiracy to commit an offense" as well as the offenses actually committed. Currently Section 1030 does not cover explicitly "conspiracy" to commit any of its prohibited offenses, although prosecution was possible under other "conspiracy" provisions of Title 18. This makes it explicit now.

Second, the bill seeks to expand the required damage to protected computers threshold from $5,000 in a one-year period to "damage affecting 10 or more protected computers during any one-year period."  Currently, in order to be able to prosecute a cybercriminal under some provisions of 1030, there must have been a minimum threshold of $5,000 in damages caused by the alleged cybercrime.  In many cases this was not an issue, for example where the cybercrime had a direct financial loss of $5,000. However, other cases may not be so clear-cut. For example, if a small company’s computer is breached and the company expends some time and effort to investigate and fix the problem, the question becomes whether the expenses that the company incurred meet the $5,000 threshold.  Should full-time employees’ time be calculated on a per-hour basis to determine damages? How should loss of good will be calculated if the breach becomes public? In some cases these questions have created difficult questions.

Other reasons to introduce the damages to 10 computers requiremens are a couple of relatively new types of crime - Distributed Denial of Service (DDoS) and botnets. Both are very closely interrelated in that the cybercriminal obtains control of a high number of computers (sometimes called ‘zombies’ and almost always substantially more than 10) which they use to disable Internet resources, send spam or phish emails, or use the substantial aggregate computing and network power of these botnets for other evil purposes.  Because by definition the owners of the zombie computers would not know that they are part of the botnet, they would not be able to assert damages and meet the $5,000 threshold.  Creating a 10 or more damaged computers provision would allow prosecution of botnet operators under Section 1030 without having to show monetary damages to a particular zombie machine. 

The reality is that botnet operators can possibly be targeted under Section 1030 for the damages they do as a result of using the botnet to commit a specific act (e.g. spam, phish, DDoS); however, the new proposed provision would allow prosecution before the cybercriminals strike, not after.  Kudos for giving tools for proactive legal measures against such acts.

The third of the proposed substantial amendments adds cyber-extortion and threats to reveal confidential information illegally obtained from computer to be computer damage and thus eligible for prosecution under 1030. This provision also aims to deal with a frequent type of cybercrime where there is no verifiable damage.  Cyber-extortion can take many forms, but most often the cybercriminals seek to obtain money or something of value in exchange of either i) not attacking or disabling a certain computer or network resource or ii) not releasing confidential information obtained in an illegal way.  The new provision covers these and similar situations.

The proposed amendments to Section 1030 are a good step towards catching up with cybercriminals. Senator Biden’s statement in connection with the proposed bill says that, the "[c]urrent law hasn’t kept up with the fast pace of new criminal technologies–right now there are holes in the law that cyber-criminals can readily exploit. The Cyber-Crime Act will fix this, update the law and put us one step ahead of the cyber-criminals, instead of one step behind."