4 Legal Surprises You May Encounter After a Cybersecurity Incident
Numerous firms lack the necessary preparedness to effectively address the various constituencies that seek redress following a breach or ransomware outbreak.
Many experts in the field of security are familiar with the various issues that arise following an incident, such as the need to notify individuals affected by a data breach and the requirement for public firms to file materiality reports with the Securities and Exchange Commission.
Nevertheless, there are unforeseen issues that may catch incident responders off guard, and each of these concerns carries the potential to affect legal responsibility. As an attorney specializing in cyber event breaches and having dealt with numerous cases involving ransomware outbreaks, I would like to highlight four noteworthy post-incident factors.
1. Review of Pre-Incident Security Controls by Cyber Insurance
In the event that an individual possesses cyber insurance and proceeds to inform their insurance provider, it is plausible that at some point throughout the process of seeking compensation, the provider may pose specific inquiries regarding the pre-incident implementation of security measures. The carrier will also conduct an in-depth analysis of the failures and determine the underlying cause of the incident.
It is imperative to ensure veracity and precision in delineating the controls implemented within the insurance application and underwriting procedures. In recent times, insurance providers have endeavored to reject claims on the grounds of misrepresentations made during the application process. Hence, the act of providing false information during the application procedure can result in significant financial ramifications amounting to millions of dollars in the future. It is advisable to collaborate with the risk management team, insurance broker, and external legal advisors in advance, prior to the occurrence of any incident, in order to ensure the appropriate depiction and documentation of the company’s controls.
2. Auditor Investigations
CPA audits and reviews are conducted by a wide range of entities, including big enterprises, public agencies, and even small companies. The reviews pertaining to cybersecurity incidents persist after the occurrence of such incidents, hence prompting numerous auditors to raise inquiries regarding those incidents. It is advisable to seek the expertise of specialized legal counsel with knowledge of cyber incidents to provide guidance and support in addressing the aforementioned inquiries. It is improbable for any information disclosed to a Certified Public Accountant (CPA) to be regarded as confidential or protected by privilege, rendering any statement pertaining to an occurrence potentially admissible as evidence in a subsequent legal proceeding. Hence, it is imperative to ensure that all assertions align with the content communicated in the notification letters, as well as with the information conveyed to employees, customers, and the media.
3. Banks Suspending Ransomware Payments
Once an organization has made the difficult decision to proceed with a ransomware payment, a number of legal considerations may arise as they work against the threat actor’s deadline to prevent the release of sensitive information.
Numerous security specialists possess knowledge of the procedural aspects of the Office of Foreign Asset Control (OFAC) inside the US Treasury Department. This knowledge pertains to the clearance of ransom payments and the subsequent prevention of their acquisition by malicious entities. However, financial institutions are becoming more cautious when it comes to facilitating wire transfers to well-known firms involved in threat negotiation. The potential liability of firms involved in the ransom payment process arises from the possibility that they could be held accountable for making an inappropriate payment to an entity subject to sanctions by the Office of Foreign Assets Control (OFAC). It is imperative for organizations to possess the necessary readiness to effectively navigate the Office of Foreign Assets Control (OFAC) in order to fulfill their own requirements as well as those of their banking institutions. Ensure that you have a prepared report readily available in order to expeditiously communicate pertinent information to a financial institution, hence facilitating the expeditious clearance of the transaction.
4. Not Knowing Which Customers Need Urgent Notice
If an organization provides services to other businesses or acts as a subcontractor for governmental agencies, it is probable that they have agreed to certain incident-response notification obligations either through contractual agreements or mandated by legislation. To ensure prompt response and adherence to notification standards, it is advisable to establish a spreadsheet that meticulously records the timeline of each notice prior to any occurrence. This spreadsheet will facilitate efficient tracking and management of notifications. Alternatively, the fulfillment of notification requirements may necessitate the expeditious engagement of a group of legal professionals tasked with swiftly examining contractual agreements. Failure to fulfill a notification obligation may result in your business being deemed in violation of a contractual agreement, with certain contracts imposing substantial fines for non-compliance with the notification provision.
Preparation Is the Best Incident Response Plan
Even the most well-designed tabletop exercise and incident response plan may need to demonstrate adaptability in response to the dynamic nature of an occurrence. Being adequately prepared to address the diverse groups of individuals who seek information or assistance following an occurrence is an effective initial measure in effectively managing uncertain circumstances.
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About The Author:
Yogesh Naager is a content marketer who specializes in the cybersecurity and B2B space. Besides writing for the News4Hackers blog, he’s also written for brands including CollegeDunia, Utsav Fashion, and NASSCOM. Naager entered the field of content in an unusual way. He began his career as an insurance sales executive, where he developed an interest in simplifying difficult concepts. He also combines this interest with a love of narrative, which makes him a good writer in the cybersecurity field. In the bottom line, he frequently writes for Craw Security.
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