[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
CAN TECHNOLOGY PROTECT AMERICANS
FROM INTERNATIONAL CYBERCRIMINALS?
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT &
SUBCOMMITTEE RESEARCH AND TECHNOLOGY
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
MARCH 6, 2014
__________
Serial No. 113-67
__________
Printed for the use of the Committee on Science, Space, and Technology
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Available via the World Wide Web: http://science.house.gov
__________
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR., DANIEL LIPINSKI, Illinois
Wisconsin DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas ERIC SWALWELL, California
PAUL C. BROUN, Georgia DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi ALAN GRAYSON, Florida
MO BROOKS, Alabama JOSEPH KENNEDY III, Massachusetts
RANDY HULTGREN, Illinois SCOTT PETERS, California
LARRY BUCSHON, Indiana DEREK KILMER, Washington
STEVE STOCKMAN, Texas AMI BERA, California
BILL POSEY, Florida ELIZABETH ESTY, Connecticut
CYNTHIA LUMMIS, Wyoming MARC VEASEY, Texas
DAVID SCHWEIKERT, Arizona JULIA BROWNLEY, California
THOMAS MASSIE, Kentucky MARK TAKANO, California
KEVIN CRAMER, North Dakota ROBIN KELLY, Illinois
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS COLLINS, New York
VACANCY
------
Subcommittee on Oversight
HON. PAUL C. BROUN, Georgia, Chair
F. JAMES SENSENBRENNER, JR., DAN MAFFEI, New York
Wisconsin ERIC SWALWELL, California
BILL POSEY, Florida SCOTT PETERS, California
KEVIN CRAMER, North Dakota EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas
------
Subcommittee on Research and Technology
HON. LARRY BUCSHON, Indiana, Chair
STEVEN M. PALAZZO, Mississippi DANIEL LIPINSKI, Illinois
MO BROOKS, Alabama FEDERICA WILSON, Florida
RANDY HULTGREN, Illinois ZOE LOFGREN, California
STEVE STOCKMAN, Texas SCOTT PETERS, California
CYNTHIA LUMMIS, Wyoming AMI BERA, California
DAVID SCHWEIKERT, Arizona DEREK KILMER, Washington
THOMAS MASSIE, Kentucky ELIZABETH ESTY, Connecticut
JIM BRIDENSTINE, Oklahoma ROBIN KELLY, Illinois
CHRIS COLLINS, New York EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas
C O N T E N T S
March 6, 2014
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Paul C. Broun, Chairman, Subcommittee
on Oversight, Committee on Science, Space, and Technology, U.S.
House of Representatives....................................... 9
Written Statement............................................ 9
Statement by Representative Dan Maffei, Ranking Minority Member,
Subcommittee on Oversight, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 10
Written Statement............................................ 10
Statement by Representative Larry Bucshon, Chairman, Subcommittee
on Research and Technology, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 11
Written Statement............................................ 11
Statement by Representative Daniel Lipinski, Ranking Minority
Member, Subcommittee on Research and Technology, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 12
Written Statement............................................ 12
Written statement by Representative Eddie Bernice Johnson,
Ranking Member, Committee on Science, Space, and Technology,
U.S. House of Representatives.................................. 13
Witnesses:
Dr. Charles H. Romine, Director, Information Technology
Laboratory, National Institute of Standards and Technology
Oral Statement............................................... 14
Written Statement............................................ 17
Mr. Bob Russo, General Manager, Payment Card Industry Security
Standards Council, LLC
Oral Statement............................................... 26
Written Statement............................................ 28
Mr. Randy Vanderhoof, Executive Director, Smart Card Alliance
Oral Statement............................................... 35
Written Statement............................................ 37
Mr. Justin Brookman, Director, Consumer Privacy, Center for
Democracy & Technology
Oral Statement............................................... 51
Written Statement............................................ 54
Mr. Steven Chabinsky, Senior Vice President of Legal Affairs,
CrowdStrike, Inc.; Former Deputy Assistant Director, Federal
Bureau of Investigation - Cyber Division
Oral Statement............................................... 65
Written Statement............................................ 67
Discussion....................................................... 75
Appendix I: Answers to Post-Hearing Questions
Dr. Charles H. Romine, Director, Information Technology
Laboratory, National Institute of Standards and Technology..... 86
Mr. Bob Russo, General Manager, Payment Card Industry Security
Standards Council, LLC......................................... 91
Mr. Randy Vanderhoof, Executive Director, Smart Card Alliance.... 97
Mr. Justin Brookman, Director, Consumer Privacy, Center for
Democracy & Technology......................................... 107
Mr. Steven Chabinsky, Senior Vice President of Legal Affairs,
CrowdStrike, Inc.; Former Deputy Assistant Director, Federal
Bureau of Investigation - Cyber Division....................... 112
CAN TECHNOLOGY PROTECT AMERICANS FROM INTERNATIONAL CYBERCRIMINALS?
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THURSDAY, MARCH 6, 2014
House of Representatives,
Subcommittees on Oversight &
Research and Technology
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittees met, pursuant to call, at 9:36 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Paul Broun
[Chairman of the Subcommittee on Oversight] presiding.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Broun. Good morning, everyone. This joint hearing
of the Subcommittee on Oversight and the Subcommittee on
Research and Technology will come to order.
Again, good morning and welcome to today's joint hearing.
In front of you are packets containing the written testimony,
biographies, and truth-in-testimony disclosures for today's
witnesses.
Before we get started, since this is a joint hearing
involving two Subcommittees, I want to explain how we will all
operate procedurally so all Members understand how the
question-and-answer period will be handled. We will recognize
those Members present at the gavel in order of seniority on the
full Committee, and those coming in after the gavel will be
recognized in order of arrival.
Now, for the sake of time, in lieu of giving my statement,
I will enter it into the record at this point.
[The prepared statement of Mr. Broun follows:]
Prepared Statement of Subcommittee on Oversight Chairman Paul Broun
Good morning. Let me begin by extending a warm welcome to our
witnesses and thank you all for appearing. I especially appreciate
everyone's patience and flexibility--witnesses and Members alike--in
making themselves available today given the weather interruption
earlier this week.
Today's hearing is titled ``Can Technology Protect Americans from
International Cybercriminals?'' I hope you can all help us more fully
answer that question and explore what specifically is being done to
secure U.S. IT infrastructure.
On the one hand, we are here this morning to review what appears to
be a rash of recent attacks and successful breaches of American IT
infrastructure and computer networks: Target; Neiman Marcus; Easton
Sports; Michaels Stores; the University of Maryland; Blue Cross Blue
Shield in New Jersey; and now maybe even Sears! A reported 823 million
exposed records made 2013 a record year for data breaches. The majority
of these data breaches hit businesses and health-care, followed by
government, academic, and financial institutions, in that order. In
fact, the Identity Theft Center, a non-profit organization that tracks
data theft, reported that health-care insurance providers and
organizations suffered 267 breaches, or 43 percent of all attacks in
2013. That's significantly higher than the business sector, comprised
of retailers, tech companies and others. It seems like an epidemic, and
the clear implications of people's privacy being violated concerns me
greatly.
On the other hand, fraud and breaches within the retail credit card
and debit card industry only amount to five-hundredths of 1% of sales,
or five cents on the dollar. And that loss has been declining. In other
words, more records are being exposed, but the financial damage may be
less. Is this a growing problem justifying more attention and effort,
or an example of the ongoing, successful efforts of the private sector,
with the help of the government's experience, knowledge, and
cooperation to counter these attacks? I take pride in noting that
financial technology companies in my home state of Georgia handle over
60 percent of all payment card transactions in America. These Georgia
companies are industry leaders in consumer protection and data
security, as documented in a February 23rd piece in the Peach Pundit by
the CEO of the Electronic Transactions Association.
Today, among other things, we will hear what the private sector is
doing in response to the market forces of risk, cost, liability, and
reward. I would suggest those free market incentives and disincentives
and the right of free association and cooperation are sufficient and
the most effective at addressing the evolving, quick-moving threat of
sophisticated hacking organizations and cybercriminals. The fact that
the payment industry and retailers have been actively working together
to make the necessary investments to tighten credit card and debit card
security next year by transitioning to ``smart or chip card''
technology is proof of that.
Nevertheless, the organized, international nature of the new IT
threat to intellectual property, trade secrets and other proprietary
data, personally identifiable information, medical and insurance
records, financial resources, and even top secret material, makes this
a critical danger to our economic and national security. We will hear
today that China and Russia are actively and aggressively waging
economic war on us with massive hacking espionage campaigns. This is
very disconcerting, and I look forward to the discussion about the role
of law enforcement and intelligence capabilities to deter, detect, and
punish global cybercrime syndicates, and whether they need more
technological tools and resources.
After all, before former FBI Director Robert Mueller stepped down,
he declared that ``in the not too-distant-future we anticipate that the
cyber threat will pose the greatest threat to our country.'' Well, it
will be interesting to hear what the former FBI Deputy Assistant
Director for Cyber, who served under Director Mueller, has to say in
his testimony.
Chairman Broun. And now, I will recognize my good friend,
Mr. Maffei, for his statement.
Mr. Maffei. Thank you, Mr. Chairman. And I will follow your
lead and also ask unanimous consent to put my opening statement
into the record. You have to say so ordered.
Chairman Broun. Okay. Without objection.
[The prepared statement of Mr. Maffei follows:]
Prepared Statement of Subcommittee on Oversight
Ranking Minority Member Dan Maffei
Cybercrime occurs on a daily basis. Widespread breaches, like the
recent data breach at Target, affected up to 110 million people by
exposing their personal data and credit card information. Smaller
breaches can still have serious economic consequences. Last year,
hackers with reported links to Al Qaeda engaged in hacking the phone
systems of small businesses in New York, including in my district in
Syracuse, New York. One of the companies hacked, an Albany-based dry
cleaner, halted plans to expand in Syracuse because they were
struggling to pay the $150,000 phone charges they incurred as a result
of this attack. This particular breach resulted in more than 75,000
minutes of overseas calls to Zimbabwe, Bosnia, the Congo, Libya and the
Maldives.
Last year alone half a billion records of personally identifiable
information, including names, emails, credit card numbers and passwords
were leaked through data breaches according to an IBM cyber-threat
report. But many breaches go unreported. Others go undetected. The full
scale and consequence of cybersecurity threats cannot be accurately
assessed.
When cybercriminals obtain credit card information on tens of
millions of consumers from a retail establishment we all end up paying.
Retailers have to pass along the costs for these security incidents
through increased prices as a result of fraud, enhanced security
upgrades, and potential litigation costs. When foreign governments
infiltrate our government agencies, it jeopardizes our national and
economic security. When an individual employee at a university,hospital
or insurance company steals the digital data of students, patients or
clients to engage in identity theft, there are real consequences for
Americans.
I do not believe there is a silver bullet to preventing cyber-
threats or eliminating the inadvertent disclosure of personal privacy-
related data. Technology alone cannot protect us. This is a
multifaceted threat and requires a multi-pronged response. A
combination of corporate awareness, federal policies, the proper
implementation of security standards, employee and consumer training,
and due diligence along the chain of information play a critical role
in confronting thisgrowing cyber menace.
There are some technical solutions that can certainly help in
countering this threat. The migration of so called E-M-V chip cards in
the U.S. and the use of ``chip and PIN'' transactions can play a role.
While this will help counter fraudulent person-to-person transactions,
they will not stop all fraudulent transactions, like online sales where
a card is not present. Online retail sales in the U.S. alone are
expected to grow from $231 billion in 2012 to $370 billion by 2017,
making online financial transactions an even more appealing avenue for
cybercriminals.
Standards are another technical solution that can play a key role
in helping secure IT systems against a wide-range of cyber-threats. The
National Institute of Standards and Technology recently released its
``Framework for Improving Critical Infrastructure Cybersecurity.'' This
guide can help federal agencies and private industry alike implement
reliable and robust IT networks that are as safe and secure as
possible.
I am concerned however, that industry is not doing enough to
protect itself and to protect our data from these various cyber
threats. The Payment Card Industry (or PCI) has its own Security
Standards Council and we have a witness from the council testifying
here today. His testimony clearly says--quote: ``the PCI Standards are
the best line of defense against the criminals seeking to steal payment
card data.'' While the efforts of the industry to police itself are
laudable, a recent 2014 report by Verizon called the ``PCI Compliance
Report'' found that only 11.1 percent of the payment card industry
companies that it surveyed in 2013 were ``fully'' compliant with the
PCI ``Data Security Standard.'' This was a decline of nearly 50 percent
from the 2010 Verizon ``PCI Compliance Report'' that showed 22 percent
of companies in the Payment Card Industry surveyed in 2009 were
``fully'' compliant with this standard.
It is unclear why the application of these industry endorsed
standards has declined but it is a troubling trend. This is
particularly troubling since even the PCI Security Standards Council
has said that they have seen a correlation between successful cyber-
attacks and the lack of compliance with its standards. We need to
figure out a way to either incentivize industry to act or to mandate a
requirement that they must act.
It is important that we explore these issues to help understand
what the private sector is doing to protect consumer data and how we
can be effective partners. But I think it is equally important to
understand what the commercial market is doing with consumer data.
We are all sharing more data with more sources all the time. As we
share more personal data the opportunities for that data to be stolen,
sold or lost escalates. We provide detailed financial data to our
banks. Our local grocery store knows the food we eat, the beverages we
drink and the toothpaste we use. Facebook knows who we associate with,
our favorite movies, books and vacation spots. Google Maps knows where
we've been and where we're going. How private industry maintains this
data, for how long and how securely is important to every consumer,
including me. I hope that Mr. Brookman, a consumer privacy expert from
the Center for Democracy & Technology, and one of our witnesses here
today, can offer some suggested guidance on how Congress should be
thinking about these issues that affect the privacy and security of all
of us.
I look forward to hearing from our witnesses and I appreciate the
Chairman calling this hearing today. I yield back.
Mr. Maffei. And the only thing I will say is I want to
thank you, Mr. Chairman, and also Chairman Bucshon and Ranking
Member Lipinski for having this hearing. I see the Chairman of
the full Committee is here and I want to thank him and my good
friend Elizabeth Esty is also here, too.
So this is a very important and substantive issue and I
really appreciate you doing this and I think it is a very good
issue for our Committee to be looking at.
I yield back.
Chairman Broun. Thank you, Mr. Maffei. I now recognize Dr.
Bucshon for his statement.
Mr. Bucshon. Chairman, I also ask unanimous consent to
submit my statement for the record.
Chairman Broun. Without objection, so ordered.
[The prepared statement of Mr. Bucshon follows:]
Prepared Statement of Subcommittee on Research and Technology
Chairman Larry Bucshon
I would like to welcome everyone to today's hearing on the role of
technology in protecting Americans from cybercriminals.
As Dr. Broun stated, many Americans have experienced security
breaches in the past few years. Universities, small grocery stores and
retailers in Indiana have all experienced security breaches recently.
Along with the national retailer security breaches, we have heard about
recently in the news, these smaller instances show how all individuals
and consumers are threatened by this growing problem.
According to a poll conducted by Defense News, leaders in national
security policy, the military, congressional staff, and the defense
industry believe cybersecurity is the top threat to our national
security.
While there is no question the federal government plays a role in
preventing these security breaches, we must ensure we are using our
resources as efficiently and effectively as possible.
The Science, Space and Technology Committee was responsible for two
pieces of relevant legislation that passed the House last year.
H.R. 756, the Cybersecurity Enhancement Act, strengthens
coordination and provides for strategic planning of cybersecurity
research and development between government agencies. While the federal
effort to prevent cyber attacks from happening is commendable, we must
ensure that these well-intentioned programs are not duplicative or
inefficient.
Another piece of legislation that the House passed last year is
H.R. 967, the Advancing America's Networking and Information Technology
Research and Development Act, which also provides for coordination of
the federal investment in research and development of unclassified
networking, computing and cybersecurity technology.
These two Science Committee bills both passed the House
overwhelmingly with bipartisan support but have been stalled in the
Senate, which has not yet indicated if they will act on these vital
bills or not. It is my hope that we will see the Senate move these
bills forward soon with the active help and support of the
cybersecurity community and its stakeholders.
I want to thank the witnesses for participating in today's hearing
and look forward to their testimony on private sector initiatives and
how we can help leverage these efforts.
Chairman Broun. Mr. Lipinski, you are recognized for your
statement.
Mr. Lipinski. You mean I don't get everyone's five minutes
for 20 minutes total?
No, thank you, Mr. Chairman. Thank you for holding this
hearing. It is very important issue as we keep seeing
unfortunately more cyber attacks and hacking, other ways of
stealing people's personal information, so I thank you for
holding this hearing.
I ask unanimous consent to submit my opening statement for
the record.
Chairman Broun. Without objection, so ordered.
[The prepared statement of Mr. Lipinski follows:]
Prepared Statement of Subcommittee on Research & Technology
Ranking Minority Member Dan Lipinski
Thank you Mr. Chairman. And thank you to our witnesses for being
here today after some rescheduling earlier in the week.
I've spoken in this Committee many times about the threats posed by
cybercrime, and each time there have been recent and potentially more
serious attacks to illustrate the point. This time, data breaches at
Target and Neiman Marcus collectively resulted in over 100 million
records being stolen in the form of personal and credit card
information. In total, payment card fraud was responsible for over 11
billion dollars in losses in 2012, with around half of that amount
coming from the US. And this figure doesn't account for many other
losses associated with identity theft.
Simply put, cybercrime threatens businesses of all sizes and every
single American. As such, reducing our risk and improving the security
of cyberspace will take the collective effort of both the Federal
Government and the private sector, as well as scientists, engineers,
and the general public.
Research efforts by the Federal Government and standards developed
in conjunction with the private sector will play a big part in
addressing cybercrime. The NSF and NIST have lead roles in these
respective tasks. I'm interested in hearing more from Dr. Romine about
NIST's recent efforts in these areas including the cybersecurity
framework for critical infrastructure released last month.
However, it's worth pointing out that it doesn't matter how good
our technology is or how current our standards are if people don't use
the technology correctly or adopt the standards. You can have the most
up-to-date server in the world, but if someone doesn't change the
default password or chooses an easily guessed password, no system will
be safe. Consider that a Verizon report found that last year only 11%
of companies surveyed were fully compliant with PCI standards. In many
ways, people are the weakest link in this process, and understanding
how people make decisions--and encouraging better decisions--through
social science research must be a part of our efforts to mitigate risk.
To help address some of our nation's cyber threats, Congressman
McCaul and I have introduced the Cybersecurity Enhancement Act during
the last three congresses. The bill would improve cybersecurity by
building strong public-private partnerships, improving the transfer of
cybersecurity technologies to the marketplace, training a cybersecurity
workforce for both the public and private sectors, and coordinating and
prioritizing federal cybersecurity R&D efforts. We passed the bill in
the House last year but are still awaiting action in the Senate.
Hopefully with increased focus on cybersecurity issues we can finally
break through the logjam and get the Senate to act on a bipartisan bill
that will address our most immediate research and workforce needs.
Once again, thank you Mr. Chairman for holding this hearing. I look
forward to hearing from our witnesses. And with that, I yield back.
Chairman Broun. Now, I recognize the Chairman of the full
Committee for his statement if he so desires. Mr. Smith.
Chairman Smith. Thank you, Mr. Chairman. I will ask my
opening statement be made a part of the record as well.
Chairman Broun. Without objection, so ordered.
Chairman Broun. Now, if there are any other Members who
wish to submit an opening statement, your statements will be
added to the record at this point.
[The prepared statement of Ms. Johnson follows:]
Prepared Statement of Full Committeee Ranking Member Eddie Bernice
Johnson
Thank you, Mr. Chairman. This morning we are examining how
technology can help protect Americans against cyber-attacks.
Unfortunately, we have seen a string of cyber-attacks recently.
Last year, Target suffered a massive data breach resulting in the loss
of millions of debit and credit card numbers. Neiman Marcus, a store
based in my home state of Texas, experienced a data breach that
involved over a million credit and debit cards last year as well. These
breaches exposed the financial and personal information of millions of
Americans.
Data breaches are devastating. They cause Americans to lose trust
in private and public institutions and result in significant economic
losses. Data breaches can also result in intellectual property losses,
which can include a company's research and development, leading to
millions and billions of dollars in lost profits. The Ponemon Institute
estimates that the cost of data breaches due to fines, loss of
intellectual property, customer trust and capital equal $136 per
lostrecord. This translates into $68 billion in losses globally last
year alone.
This morning we will hear about computer chip-based credit cards,
known as the ``chip-and-pin'' cards. Although it seems like these
``chip-and-pin'' cards would help reduce counterfeiting of stolen
credit cards, it is not clear that they would have prevented the recent
attacks on Target and Neiman Marcus. To help prevent further similar
cyber-attacks, we will need other technologies.
But new technologies alone will not prevent cyber-attacks. New
technologies will need to be paired with training and education
efforts. Email attachments carrying malware are the most common way
attackers get into a computer. To stop that from happening, we need
training and education about proper computer security for employees and
individuals.
There are a number of federal efforts in this area including at the
National Institute of Standards and Technology, which has played an
important role in cybersecurity efforts for decades. NIST is the agency
tasked with developing standards and guidelines for Federal information
systems.
Additionally, NIST is the lead agency for the National Initiative
for Cybersecurity Education; they developed the National Strategy for
Trusted Identities in Cyberspace; they run a National Cybersecurity
Center of Excellence; and they maintain a National Vulnerability
Database.
We are fortunate to have Dr. Romine here this morning who can tell
us more about these and additional cybersecurity efforts at NIST. Last
month, NIST released a Framework for Improving Critical Infrastructure
Cybersecurity, which provides a common language for understanding and
managing cybersecurity risks. In our discussion of new technologies, we
should be discussing how the federal government can incentivize the
public sector to adopt cybersecurity best practices and standards that
are included in the Framework.
To prevent cyber-attacks will take an all-hands-on-deck approach. I
look forward to working with my colleagues on both sides of the aisle
on how the federal government can help with the development and
adoption of new cybersecurity technologies.
I would like to thank the witnesses for being here today. Thank
you, Mr. Chairman. I yield back the balance of my time.
Chairman Broun. At this time I would like to introduce our
panel of witnesses. Our first witness is Dr. Charles Romine,
Director of the Information Technology Laboratory at the
National Institute of Standards and Technology, NIST. Our
second witness is Mr. Bob Russo, General Manager of the Payment
Card Industry Security Standards Council. Our third witness is
Mr. Randy Vanderhoof, Executive Director of the Smart Card
Alliance. And our fourth witness is Mr. Justin Brookman,
Director of Consumer Privacy at the Center for Democracy &
Technology. Gentlemen, welcome. We are glad to have all of you
here today.
Our final witness is Mr. Chabinsky, Senior Vice President
of Legal Affairs at CrowdStrike, Incorporated; Former Deputy
Assistant Director at the Federal Bureau of Investigation's
FBI's Cyber Division. I welcome you, too, sir. I apologize. I
was rushing along to get into this hearing because we are going
to have votes very shortly.
And so just for everybody's information, we are going to
try to get through all of our witnesses' statements as quickly
as possible. If you would, try to limit your testimony to five
minutes each. You will have a light in front of you. When it
turns red, please be through so we can try to hear everybody
before we have to run off to vote and then we will come back
for questions. We will get as far along as we can.
As the witnesses should know, spoken testimony is limited
to five minutes. Then, after that, Members will have five
minutes each to ask you all questions. Upon the hearing, we
will submit questions for the record, and please expeditiously
answer these questions and get them back to the Committee.
Now, it is the practice of this Subcommittee on Oversight
to receive testimony under oath. If you would all please stand
and raise your right hand unless you have an objection to
taking an oath. Does anybody have an objection to taking an
oath?
No. Okay. I see them all shake their head side to side
indicating no.
Okay. Do you solemnly swear and affirm to tell the whole
truth and nothing but the truth, so help you God?
Very good. Please be seated.
Let the record reflect that all the witnesses participating
have taken the oath.
Now, I recognize Dr. Romine for five minutes.
TESTIMONY OF DR. CHARLES H. ROMINE, DIRECTOR,
INFORMATION TECHNOLOGY LABORATORY,
NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY
Dr. Romine. Thank you. Chairmen Broun and Bucshon, Ranking
Members Maffei and Lipinski, and Members of the Subcommittees,
I am Dr. Charles Romine, the Director of the Information
Technology Lab at NIST. Thank you for the opportunity to
discuss NIST's role in cybersecurity and our perspective on
recent cyber thefts.
Cyber thefts can occur at a scale unlike physical crimes.
As we know, one breach can affect thousands if not millions of
citizens. Cyber thefts are often perpetrated at the speed of
electronic transactions, making interception difficult and
placing a strong reliance on preventative security controls.
In response to the hearing title ``Can Technology Protect
Americans from International Cyber Criminals?'' my response
would be that it takes a holistic approach that includes
technology, training and awareness, policy, legal, economic,
and international efforts to bring cyber theft and other cyber
threats under control.
I will discuss some of NIST's activities that accelerate
the development and deployment of security technologies and
assist our stakeholders and partners in protecting their
information and communications infrastructure against cyber
threats.
In the area of cybersecurity, NIST has worked with Federal
agencies, industry, and academia since 1972. Our role--to
research, develop, and deploy information security standards
and technology to protect information systems against threats
to the confidentiality, integrity, and availability of
information and services--was strengthened through the Computer
Security Act of 1987 and reaffirmed through the Federal
Information Security Management Act of 2002 known as FISMA.
NIST accomplishes its mission in cybersecurity through
collaborative partnerships. The resulting NIST special
publications and interagency reports provide operational and
technical security guidelines for Federal agencies and cover a
broad range of topics such as electronic authentication and
malware.
NIST maintains the National Vulnerability Database, or NVD,
a repository of standards-based vulnerability management
reference data which enables security automation capabilities
for all organizations. The payment card industry uses the NVD
vulnerability metrics to discern the IT vulnerability in point-
of-sale devices and determine acceptable risk.
NIST researchers develop and standardize cryptographic
mechanisms used worldwide to protect information. The NIST
algorithms and guidelines are developed in a transparent and
inclusive process leveraging cryptographic expertise around the
world. The results are in standard interoperable cryptographic
mechanisms that can be used by all.
The impact of NIST's activities under FISMA extended beyond
enabling protection of federal IT systems. They provide the
cybersecurity foundations for the public trust that is
essential to realizing the national and global economic
productivity and innovation potential of electronic business.
Many organizations voluntarily follow NIST's standards and
guidelines reflecting their worldwide acceptance. NIST works
extensively in smart card standards and guidelines. NIST
developed the standard for the U.S. Government personal
identity verification card and actively works on global
cybersecurity standards for use in smart cards, smart card
cryptography, and others.
As you know, NIST spent the last year working to convene
the U.S. critical infrastructure sectors to build a
cybersecurity framework as part of Executive Order 13636. This
cybersecurity framework released last month was created through
collaboration between industry and government and consists of
standards, guidelines, and practices to promote the protection
of critical infrastructure. The framework is already being
implemented by industry, adopted by infrastructure sectors, and
is reducing cyber risks to our critical infrastructure,
including the finance industry.
The 2013 data breach investigations report noted that in
2012 76 percent of network intrusions exploited weak or stolen
credentials. Target has revealed that the compromised
credential of one of its business partners was the vector used
to access its network.
NIST houses the National Program Office at the National
Strategy for Trusted Identities in Cyberspace, or NSTIC, which
is addressing this most commonly exploited vector of cyber
attack, the inadequacy of passwords for authentication. NSTIC
is addressing this issue by collaborating with the private
sector, including funding 12 pilots, to catalyze a marketplace
of better identity and authentication solutions.
Another critical component of NIST's cybersecurity work is
the National Cybersecurity Center of Excellence, a partnership
between NIST, the State of Maryland, Montgomery County, and the
private sector, which is accelerating the adoption of applied,
standards-based solutions to cybersecurity challenges. NIST
recognizes our essential role in helping counter cyber theft
and cyber threats. We look forward to continuing our work along
with our federal government partners, private sector
collaborators, and international colleagues to improve upon the
comprehensive set of technical solutions, standards,
guidelines, and best practices necessary to realize this
vision.
Thank you for the opportunity to testify today on NIST's
work in cybersecurity and to share some of the specific work we
do to assist organizations to reduce risks due to cyber theft,
and I would be happy to answer any questions.
[The prepared statement of Dr. Romine follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Broun. Thanks, Dr. Romine.
Mr. Russo, you are recognized for five minutes.
TESTIMONY OF MR. BOB RUSSO,
GENERAL MANAGER, PAYMENT CARD INDUSTRY SECURITY
STANDARDS COUNCIL, LLC
Mr. Russo. Thank you. My name is Bob Russo and I am the
General Manager of the PCI Security Standards Council, a global
industry initiative and membership organization focused on
securing payment card data. Our approach to an effective
security program combines people, process, and technology as
key components of protecting payment card data. We believe that
development of standards to protect payment card data is
something the private sector and specifically PCI is uniquely
qualified to do. The global reach, expertise, and flexibility
of PCI have made it critical and vital.
Our community of over 1,000 of the world's leading
businesses is tackling data security challenges from simple
issues--for instance, the word ``password'' is still the most
commonly used password out there--to really complicated issues
like proper encryption. Consumers are understandably upset when
their payment card data is put at risk, and we know the harm
caused by data breaches.
The Council was created to proactively protect consumers'
payment card data. Our standards represent a solid foundation
for a multilayered security approach. We focus on removing card
data if it is no longer needed. Simply put, if you don't need
it, don't store it. If you do need it, then protect it. Reduce
the incentives for criminals to steal it. Let me tell you how
we do that.
The Data Security Standard is built on 12 principles that
cover everything from physical security to logical security and
much more. This standard is updated regularly through feedback
from our global community. In addition, we have developed other
standards that cover payment software, point-of-sale devices,
the secured manufacturing of cards, and much, much more.
We work on technologies like tokenization and point-to-
point encryption to help reduce the amount of card data kept in
systems and devalue that information. Tokenization and point-
to-point encryption work in concert with other PCI standards to
offer additional protections.
Another technology, EMV chip, is an extremely effective
method of reducing card fraud in a face-to-face environment.
That is why the Council supports its adoption in the United
States through organizations such as the EMV Migration Forum.
And our standards support EMV today in other worldwide markets.
However, EMV chip is only one piece of the puzzle.
Additional controls are needed to protect the integrity of
payments online and in other channels. These include
encryption, tamper-resistant devices, malware protection,
network monitoring, and more. These are all addressed within
the PCI standards. Used together, EMV chip and PCI can provide
strong protections for payment card data.
But effective security requires much more than just
standards. Standards without supporting programs are only tools
and not solutions. The Council's training and certification
programs have educated tens of thousands of individuals and
make it easy for businesses to choose products that have
already been lab-tested and certified as secure.
Finally, we conduct global campaigns to raise awareness of
payment card security.
We welcome the Committee's attention to this critical
issue. The recent compromises underscore the importance of a
multilayered approach to payment card security, and there are
clear ways in which the government can help, for example, by
leading stronger law enforcement efforts worldwide and by
encouraging stiffer penalties for these crimes. Promoting
information sharing between public and private sectors also
merits attention.
The Council is an active collaborator with government. We
work with NIST, with DHS, and many other government entities.
We are ready and willing to do much more. The recent breaches
underscore the complex nature of payment card security. A
multifaceted problem cannot be solved by a single technology,
standard, mandate, or regulation. It cannot be solved by a
single sector of society. We must work together to protect the
financial and privacy interests of consumers.
Today, as this Committee focuses on recent data breaches,
we know that the criminals are focusing on inventing the next
attacks. There is no time to waste. The PCI Standards Council
and business must continue to provide multilayered security
protections while Congress leads the efforts to combat global
cybercrimes that threaten us all.
We thank the Committee for taking a leadership role in
seeking solutions to one of the largest security concerns of
our time.
[The prepared statement of Mr. Russo follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Broun. Thank you, Mr. Russo.
The buzzer that you hear is for votes on the Floor of the
House and so we are going to have to go shortly. We have time
for Mr. Vanderhoof to give your testimony for five minutes.
And, for Members' information, we will recess right after Mr.
Vanderhoof finishes. We will go vote. It is going to be a long
series of votes, probably about an hour, maybe a little more.
We will come back for Mr. Brookman and Mr. Chabinsky's
statement.
And so, Mr. Vanderhoof, you are recognized for five
minutes. Please keep it within five minutes. Thank you.
TESTIMONY OF MR. RANDY VANDERHOOF,
EXECUTIVE DIRECTOR,
SMART CARD ALLIANCE
Mr. Vanderhoof. Chairman Broun and Chairman Bucshon and
Members of the Subcommittee, on behalf of the Smart Card
Alliance and its members, I thank you for the opportunity to
testify today.
The Smart Card Alliance is a nonprofit organization that
provides education about smart card chip technology and
applications. In 2012, the Alliance formed the EMV Migration
Forum to convene all payments industry stakeholders to advance
the migration to EMV in the United States. Collectively, the
two organizations have more than 370 member organizations,
including American Express, Discover, MasterCard, and Visa and
financial institutions, merchants, and other payments industry
participants.
My testimony will be about payment security and the
increasing threat of cybercrime to steal vulnerable payment
data, how EMV chip cards and terminals make payments more
secure, and the state of the U.S. migration towards EMV.
As this hearing recognizes, the increasing instances of
cybercrime in the United States highlight the need for EMV chip
cards. Cybercrime criminals are increasingly targeting retail
store chains. The FBI found at least 22 instances of this in
the past year. Attacks on retailers are particularly damaging
because a single attack can cause millions of dollars' worth of
credit card fraud and create the need to close and reissue tens
of millions of payment card accounts.
The increase in attempted data breaches on retail systems
is due in part to the fact that the U.S. magnetic stripe card
data is highly valued by hackers who can sell it on the black
market to criminals for large profits. For example, the black
market price for several million card accounts believed to be
stolen from the Target breach was between $27 and $45 each for
a period of time. Criminals pay such high prices for U.S.
magnetic stripe card data because it is easy to use it to
create counterfeit payment cards. This is why the United States
is the only region in the world where counterfeit card fraud
continues to grow.
It is our best interest to replace magnetic stripe cards
with secure EMV chip cards because it will devalue U.S.
payments data for criminals. This is mainly because, if stolen,
EMV data cannot be used to create usable counterfeit payment
cards. And countries that have implemented EMV have seen
counterfeit card fraud decline by as much as 67 percent. The
positive news is that the U.S. payment system is already more
than two years into a plan to four-year migration to EMV chip
technology.
Next, I want to tell you more about EMV chip cards and how
they address counterfeit card fraud. EMV is the name of the
global standard for chip payment cards and is based on widely
used and highly secure smart card technology. Today, 45 percent
of the total payment cards in circulation and 76 percent of the
POS terminals installed globally are this EMV-enabled device.
EMV prevents counterfeit card fraud in two ways. The first
way is the secure storage of the cardholder data inside the
chip rather than on the magnetic stripe. Even if the chip data
were to be copied, it cannot be used to create another chip
card using the same data. Also, EMV transaction data excludes
other data needed for magnetic stripe transactions, so it
cannot be used to make fraudulent transactions in an EMV or
magnetic stripe environment.
The second way is by a one-time unique code called a
cryptogram generated by the chip during each payment
transaction. The cryptogram proves that the card is authentic
and that the transaction data was unique to that card.
Therefore, any use of the same unique card data would be
detected and the transaction denied.
To put these security benefits into perspective, if EMV
chip card data had been present in the retailer systems that
were recently victimized, the impact of that data breach would
have been significantly lessened for the merchant, the card
issuers, and the consumers due to the greatly reduced risk of
counterfeiting and resulting card fraud.
The U.S. migration to EMV is complex, expensive, and
difficult to coordinate, especially for debit cards. The U.S.
payment market, which is larger than all of Europe combined, is
the largest individual market to convert to chip cards. This
migration has been driven by the payment brands in the form of
a fraud liability shift that align around targeted migration
dates starting in October 2015. After these dates, the
responsibility for fraud resulting from a payment transaction
will shift away from the party using the most secure
technology. This fraud liability shift is the most effective
approach to ensure each party in the payments transaction makes
the investment in chip technology.
To date, an estimated 15 to 20 million chip payment cards
have been issued to U.S. consumers and retailers have replaced
approximately 1 million of the estimated 10 million point-of-
sale terminals.
In summary, the predominant use of magnetic stripe payment
cards contribute greatly to the U.S. financial markets being
targets for cyber thefts and counterfeit card fraud. While a
move to EMV chip payments in the United States is a complex and
expensive undertaking, it is a critical one that will benefit
our entire payment system. I am encouraged by the payments
industry and merchants' recognition that we need to move to EMV
chip technology quickly and by the fact that chip cards are
being used now and retailers are moving to put in place the
chip-enabled terminals to begin accepting chip transactions by
the industry's target dates.
I thank you for your attention and I welcome any questions
from the Committee.
[The prepared statement of Mr. Vanderhoof follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Broun. Mr. Vanderhoof, thank you so much. I think
we have time for one more.
Mr. Brookman, if you would please limit it to five minutes
and then we will recess and come back right after votes. We
have eight more minutes before the clock runs out, and as
Members know, it will be held open for a while.
So, Mr. Brookman.
TESTIMONY OF MR. JUSTIN BROOKMAN,
DIRECTOR, CONSUMER PRIVACY,
CENTER FOR DEMOCRACY & TECHNOLOGY
Mr. Brookman. Absolutely. Thank you, Chairman Broun,
Chairman Bucshon, Ranking Members Maffei and Lipinski. Thank
you very much for the opportunity to testify here today.
I am here today on behalf of the Center for Democracy &
Technology. We are a digital rights advocacy group based here
in D.C. and I head up our work on commercial data privacy. Some
of us like me are lawyers but we also have technologists on
staff who focus on internet architecture, encryption, and
cybersecurity.
We have been concerned about the issue of data security for
some time. We have supported state efforts to require
notification to consumers in the event of data breach, and we
have encouraged the Federal Trade Commission to aggressively
pursue bad data security cases under its general commercial
protection authority.
Unfortunately, it appears that the current policy solutions
in place have been insufficient to staunch the proliferation of
personal data breach. Just last week, the FTC announced that
identity theft was the number one source of consumer complaints
for the 14th year in a row. Moreover, the problem seems to be
getting worse and not better. For one thing, there is more and
more attack surface for malicious actors to target. Even the
food trucks where I get my lunch every day accept credit card
payments through smart readers attached to their phones. And
people increasingly use credit cards for $1 and $2 purchases
due to improvements in technology and purchase flows.
The proliferation of financial account usage is of course
tied to the bigger issue of big data in general. It is now
easier for companies to collect and analyze all sorts of
information about us, not just based on how we use their
services but possibly supplemented by third-party data brokers
as well. And it is cheaper for them to maintain these files,
too. As storage technology advances, it is just simpler to keep
old data around forever.
And it is notable that Target was the subject of what was
possibly the largest data breach in history because Target had
been discussed in privacy circles recently for different
reasons. Last year, it was revealed that Target was developing
very sensitive predictive analytics technologies about the
people who shop there, analyzing what they bought to develop
profiles about what sort of people they were. And the most
famous story coming out of that was there was a father who
stormed into Target one afternoon complaining his daughter was
receiving pregnancy-related coupons from Target, for diapers or
prenatal vitamins, and he said how dare they; she is just a
teenager, and then comes back a couple days later and
apologizes that it turns out Target was right in this
particular case.
It is worth noting that this sort of sensitive information,
information about what we buy, what we read, where we go, who
we associate with, that is at risk, too, in the big data world.
Target didn't just lose information about 40 million financial
accounts; they also allegedly lost 70 million profiles from its
customer relationship management database. Did that include in
there assessments of all their shoppers possibly supplemented
with third-party data? We don't know.
We believe these issues should be addressed together.
First, the United States should have comprehensive data privacy
and security legislation. We are one of the few developed
nations in the world that doesn't have baseline protections for
all personal information. The FTC has tried to use its limited
general consumer protection mandate to better protect privacy
and data security, but that authority is currently being
challenged in court by Wyndham Hotels. In that case, the FTC
argued that Wyndham Hotels' use of objectively poor data
security to safeguard consumer data constituted an unfair
business practice under Section 5 of the FTC Act. Wyndham has
refused to accept responsibility for its poor security
management and is challenging the FTC's authority to go after
bad security practices.
We believe technology has a really important role to play
in limiting data breach incidents, but we do not believe that
Congress should enact specific technological data security
solutions. That would embed current practices in the law and
limit innovation in the future. Rather, policymakers should
enact laws that strongly incentivize companies to safeguard
personal data with significant consequences for companies that
fail to use reasonable security practices.
Now, for financial account information, there are some
actually pretty good incentives under the law right now.
Companies who undergo a financial data breach have to absorb
the cost of data breach notification to consumers,
investigation, credit monitoring, loss to consumer goodwill,
and then payment to the issuing bank for potential violation of
PCI standards.
Yesterday, it was reported that Target has already spent
over $60 million in the breach from last year, and in 2007, TJX
Corporation reported that they had spent over $250 million from
their data breach incident.
However, it is not clear that these potential costs are
sufficiently internalized today within corporate decision-
making. Organizations and people in general unfortunately have
a tendency to under-evaluate small percentage chances of very
bad things happening. And that appears to be what is happening
with data security. Companies are convincing themselves it
won't happen to them, and there are many cases failing to
adequately account for security risks.
We believe that strengthening the FTC's authority to go
after bad security practices along with the authority to obtain
civil penalties for bad security would help push companies in
the right direction. We also believe that legislation should
require companies to develop privacy and security plans and to
adhere to privacy and security-by-design principles. The
companies are encouraged to think proactively and
prophylactically about data privacy and security from the very
beginning of product and system development that will result in
better outcomes for all consumers.
Thank you very much for the opportunity to testify and I
look forward to your questions.
[The prepared statement of Mr. Brookman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Broun. Thank you, Mr. Brookman.
We are going to recess until after this vote series.
Members, be aware that we are going to resume 10 minutes after
the last vote begins, so please hurry back. My Democratic
colleagues have agreed to that, so we will recess and be back.
Gentlemen, thank you for your patience, appreciate it.
[Recess]
Chairman Broun. Okay. We will reconvene this hearing, and I
appreciate all the witnesses' patience with us and particularly
Mr. Chabinsky. I appreciate your patience. Maybe we saved the
best for last, but anyway, I have always been very concerned
about privacy issues and I know you are, too.
Mr. Chabinsky, you have five minutes.
TESTIMONY OF MR. STEVEN CHABINSKY,
SENIOR VICE PRESIDENT OF LEGAL AFFAIRS,
CROWDSTRIKE, INC.;
FORMER DEPUTY ASSISTANT DIRECTOR,
FEDERAL BUREAU OF INVESTIGATION-CYBER DIVISION
Mr. Chabinsky. Thank you. Good morning, Chairmen Broun and
Bucshon, Ranking Members Maffei and Lipinski, and distinguished
Members of the Subcommittees.
I am pleased to appear before you today to discuss the role
of technology in protecting Americans from international
cybercrime. I have spent over 15 years committed to reducing
the security risks associated with emerging technologies. And
the observations and conclusions I am sharing today in my
individual capacity are the culmination of a career spent in
government--mostly with the FBI--industry, and academia.
First, I would like to address the cyber threat landscape.
Over the past 10 years, industry has faced a well-orchestrated
hacking epidemic. Foreign intelligence services are siphoning
off our intellectual property and weakening American
competitiveness, while organized criminal groups steadily gain
access to corporate and consumer credentials that have been
used to defraud Americans out of billions of dollars.
On the nation-state side, China and Russia continue to
engage in massive cyber economic espionage campaigns that
impact thousands of corporate victims daily.
With respect to financially motivated cybercrime, a
disproportionate amount of it appears to be tied to Eastern
Europe. On the FBI's current cyber most wanted list, for
example, 7 of the 10 individuals have connections either to
Russia, Ukraine, or Latvia.
Next, I would like to discuss our failed cybersecurity
strategy. We keep spending more and more money and the problem
keeps getting worse. I propose this is because we are focusing
on the wrong part of the solution. Faced with the choice of
trying to make our systems impenetrable--also known as
vulnerability mitigation-- or trying instead or at least an
equal part to dissuade people from hacking into our systems in
the first place--which would be threat deterrence--we have
focused our resources almost entirely on the former,
vulnerability mitigation. Our failed strategy dramatically
raises the costs to the victims without substantially raising
the costs to the bad guys. In fact, our failed strategy has
potential victims fearing for the loss of their data more than
actual hackers are fearing for the loss of their freedom.
We spend without end on vulnerability mitigation, despite
it being well-understood that completely securing networks is a
daunting, impossible task even for the most experienced. There
simply is no chance that industry can consistently withstand
intrusion attempts from foreign intelligence services and
global organized crime groups. As a result, improving our
security posture requires that we reconsider rather than simply
redouble the nature of our efforts.
Fundamentally, we need to ensure that our cybersecurity
strategies, technologies, market incentives, and international
dialogue focus greater attention on the challenges of more
quickly detecting and mitigating harm while in parallel
locating and penalizing bad actors. Doing so also would align
our cybersecurity efforts with the security strategies we use
in the physical world.
In the physical world, vulnerability mitigation efforts
certainly have their place. We take reasonable precautions to
lock our doors and windows, but we do not spend an endless
amount of resources in hopes of becoming impervious to crime.
Instead, to counter determined thieves, we ultimately concede
that an adversary can gain unlawful entry, but through the use
of burglar alarms and video cameras, we shift our focus towards
instant detection, attribution, threat response, and recovery.
When the alarm monitoring company calls a business owner at
3:00 a.m., it does not say we just received an alarm that your
front door was broken into, but don't worry, we have called the
locksmith. Rather, it is only obvious, immediately necessary
and the reason people purchase alarm systems, that they call
the police to stop the felon.
It is surprising then and suggests a larger strategic
problem that in the world of cyber, when the intrusion
detection system goes off, the response has been to call the
chief information security officer and perhaps even the CEO to
explain what went wrong and to demand that they prevent it from
happening again.
In answer to the question of this hearing, technology can
play a vital role in protecting Americans from international
cybercrime, but to achieve that result, technology must be used
in greater part to achieve threat deterrence. In that way,
businesses and consumers will benefit from improved, sustained
cybersecurity and will enjoy those benefits at lower costs.
Thank you for the opportunity to testify today. I would be
happy to answer any questions you may have.
[The prepared statement of Mr. Chabinsky follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Broun. Thank you, Mr. Chabinsky.
I want to thank the witnesses for your testimony, now
reminding Members that Committee rules limit questioning to
five minutes. The Chair will open the first round of questions.
The Chair recognizes himself for five minutes.
I ask this of all five of you. What is the fastest and the
best way to get new innovations deployed to protect the safety,
privacy, and security of consumers' financial data? Government
mandates that pick technological winners and losers or allowing
maximum competition for customers in the market by companies
offering innovative security solutions and consumer protections
against new, evolving, and changing threats that go way beyond
the requirements of a static law?
Start with Mr. Romine.
Dr. Romine. Thank you, Mr. Chairman. I think it is clear
that in order to maintain the kind of innovation that is needed
on the defensive side for us to protect our assets and our
networks, we have to be just as agile as the innovation that is
taking place with our malefactors. And so, I think having
additional regulation is probably not the answer from our
perspective. We have a voluntary program associated, for
example, as I talked to earlier in my testimony about the
cybersecurity framework for critical infrastructures that NIST
worked on, and that is a purely voluntary program in part
because we believe that that enables the private sector to
maintain an innovative approach to the kind of defenses that
are needed.
Chairman Broun. Very good. Mr. Russo?
Mr. Russo. Thank you for the question. I think the PCI
Security Standards Council is uniquely qualified to do exactly
what you are looking for. We have a network of over 1,000
merchants, banks, vendors, associations worldwide that submit
feedback to us on a regular basis indicating what they are
seeing in their region and then their particular verticals, and
all of this is factored into creating the absolute best
defenses that we can to protect this data. Right now, I think
that the best defense against a breach are the PCI standards.
Chairman Broun. Very good. Mr. Vanderhoof?
Mr. Vanderhoof. Yes, thank you. There really needs to be
multiple layers of security around payments data, so certainly
we need to devalue the data that currently exists in this
system, and there are alternative technologies using chip
technology, as well as other techniques such as tokenization
that are being developed to try to accomplish that goal.
Also, we certainly need to continue to strengthen the
networks that are using this data and the efforts that have
been made by the PCI Council and by other cybersecurity best
practices are going a long way towards doing that. And I think
we need to also maintain and invoke strong enforcement of when
data breaches do occur in terms of trying to track down the
people responsible for that and preventing future breaches from
happening.
Chairman Broun. Mr. Brookman.
Mr. Brookman. Yes. So I certainly don't think that
legislatively prescribing technological solutions is a good
idea. However, I think it would be a good idea to maybe
strengthen the Federal Trade Commission's authority to go after
bad data security practices. Right now, that authority is
somewhat unclear, and even when they do bring those cases, they
don't have the ability to get penalties for bad practices.
So I think strengthening them, creating more incentives for
companies and for banks and for merchants to deploy better
technological solutions is probably the best approach.
Chairman Broun. Mr. Chabinsky?
Mr. Chabinsky. Thank you, Mr. Chairman.
I think fundamentally we need a bit more research and
development in the area of return on investment. It is very
difficult for us to understand whether the value of security
that is being proposed in the marketplace will have a
commensurate benefit as to the cost. We have heard a lot within
this hearing as well as prior ones about the costs of
implementing certain solutions, in certain cases mounting into
the billions of dollars. And it is very difficult for industry
to understand whether or not that is a benefit that outweighs
the cost that we are seeing. So I would suggest that this
Committee is in a good position to explore government research
that would spend more time looking at the metrics of success
and the return on investment.
Chairman Broun. Okay. Thank you, Mr. Chabinsky.
Mr. Chabinsky. Thank you.
Chairman Broun. I have a question for all of you. As a
physician, I am very concerned particularly with the question
about protection of privacy and security in the healthcare
industry and the insurance industry. I have half a minute left.
Does anybody want to take on what we can do to protect privacy
in patient records and that sort of thing?
Mr. Vanderhoof.
Mr. Vanderhoof. Yes, thank you, Chairman.
I think the problem we have with the imposed changes that
are happening in the healthcare system around the use of
electronic data for health records is that we have failed to be
able to authenticate who are the actual individuals that have
authorized access to that data and be able to positively
identify the individual that owns that data so that when health
information is being digitized and being used and shared across
different professional entities, there needs to be a way to
protect the access to that information and so that that
information can't be then stolen and be used for other
purposes. And having this ability to strengthen the health IT
system in similar ways is really another way forward to making
sure that consumer health information stays protected.
Chairman Broun. Thank you, Mr. Vanderhoof.
My time is expired, but I would like for all five of you to
answer that question for the record in written form.
And, as a physician, I am very concerned about a central
repository of all health records. I think there should be a
better way so that patients control their own electronic
medical records and not the Federal Government and not an
insurance agent or the insurance industry. And so I would
appreciate any input from all of you.
My time is expired. Mr. Maffei, you are recognized for five
minutes.
Mr. Maffei. Thank you, Mr. Chairman.
I guess I will start with Dr. Romine. Where are these
threats and incursions coming from generally? I mean where are
the criminals, if you will, coming from?
Dr. Romine. So I think there are a number of places, and I
think Mr. Chabinsky is absolutely right. Some of them are
intelligence services from other governments seeking our
intellectual property for their competitive advantage. Some of
them are organized crime, highly organized and capable, and
those are international as well. So I think, Mr. Chabinsky is
accurate on that score.
Mr. Maffei. Mr. Russo, you and I talked about this a little
bit. Do you have an idea of how many are external to the United
States? Is there any way to trace that or figure that out?
Mr. Russo. There probably isn't a good way to trace that.
Obviously, some of the major breaches that we are seeing now
are being perpetrated from outside the United States. As a
matter of fact, I picked up a USA Today this morning and there
was a big article about this malware coming from someplace
outside of the United States as well.
I would agree with Mr. Chabinsky. I think one of the areas
that we would like to see a little more help in is bringing
some of these people to justice, stiffer fines, and the ability
to stop this thing. We are basically in an arms race when it
comes to security, and while we are staying up with them and
staying ahead in some cases, you need to be vigilant all the
time. And unfortunately, many businesses are not vigilant 365,
24/7, and hackers need to be vigilant one day.
Mr. Maffei. Right. Exactly.
Mr. Chabinsky, do you have any--I--DD is--are there any
estimates about how many threats are from outside the United
States? And also if you have a related comment.
Mr. Chabinsky. I don't--I am not aware of any actual
estimates but I think it is only natural that hackers being
able to remotely gain access are less likely to hit
domestically where they are. Right? So you would see that other
nations are experiencing hacking that would include hacking
from the United States and that we are more likely to then have
hacking from abroad.
Certainly, there is no doubt that a lot of the financial
fraud that we are seeing tends to be led or have strong ties to
Eastern Europe. But equally true, those groups even that have
those ties to Eastern Europe are global in nature and we have
seen groups that are operating in dozens of countries
simultaneously, hitting hundreds of cities at once. We saw one
ring that was able to hit ATMs throughout the world in a 24-
hour period and steal in excess of $9 million within 24 hours
on the ground. This turned out to be a proof of concept. A
group later did it, stealing $45 million. So it is certainly
global.
I would say in that regard that law enforcement is well
aware of that and the FBI for its part has a legal attache
program that they are using in no small part to help protect
Americans against cyber threats. They have embedded agents not
only within the embassies there but there are a number of
nation-states that have invited our own law enforcement to sit
side-by-side with them in their national Federal law
enforcement agencies just to combat cyber. In that regard, the
FBI has cyber agents sitting side-by-side with cyber agents of
other countries in Estonia, Ukraine, the Netherlands, Romania,
and Latvia. Those are very helpful models to build on this
international aspect of cybercrime law enforcement.
Mr. Maffei. So most of the time other countries are
cooperative with our efforts and we are with theirs?
Mr. Chabinsky. That is absolutely correct.
Mr. Maffei. But are there some instances of state
sponsorship that we know of, anybody on the panel?
Mr. Chabinsky. There are. China and Russia are certainly
the most heavily invested in state-sponsored espionage. The
relationship between nation-state espionage and cybercrime is
uncertain in most areas. There certainly is a lot of
information indicating that there can be an unsteady alliance
at times between nation-states and criminal enterprises either
because at the lower level of law enforcement, not typically at
the Federal level, there could be corruption of state and local
aw enforcement protection, and at the higher levels, there may
be an uneasy alliance where criminals are actually helping the
intelligence service for nation-state aims while on the side
being able to get rich quick, if you will, on criminal
activities for which the nation-state might look the other way.
Mr. Maffei. Do we know where the data breach at Target
originated?
Mr. Chabinsky. I am not prepared today to discuss that
matter.
Mr. Maffei. Anybody else know or--Mr. Russo, do you have
any idea? Okay.
Well, I would submit to the Committee that this is an
important--I appreciate the Chairman--the two Chairmen for
holding this hearing but that this is also a severe national
security concern. And the fact that we don't even know how many
of these threats are coming from outside the United States I
just think, you know, makes it important to have additional
scrutiny. So I will also be bringing it up in my other
Committee, which is the Armed Services Committee, although that
may not be the right one either, maybe Homeland Security. I am
not sure.
But I really appreciate us a drawing attention to it in
this hearing.
Thank you, Mr. Chairman.
Chairman Broun. Thank you, Mr. Maffei.
And I am on Homeland Security and we have looked into these
issues and we will continue to do so.
Dr. Bucshon, you are recognized for five minutes.
Mr. Bucshon. Thank you, Mr. Chairman.
On April 16 of last year, the House overwhelmingly passed
two bipartisan Science Committee bills to assist the private
sector and other domestic organizations to secure their
information systems. Each bill got over 400 votes.
The first is H.R. 756, the Cybersecurity Enhancement Act,
which requires a government-wide IT security R&D plan,
authorizes the National Science Foundation basic research on
cybersecurity with scholarships and support for cybersecurity
education, human resource development, and directs NIST to
coordinate Federal activities on international cybersecurity
technical standards development.
The other bill is H.R. 967, the Networking and Information
Technology R&D, or NITRD Act. It updates the NITRD program on
cybersecurity and it focuses the NITRD program on R&D to
detect, prevent, resist, respond to, and recover from actions
that compromise or threaten to compromise the availability,
integrity, or confidentiality of computer and network-based
systems. Unfortunately, neither one of these bills have been
taken up in the Senate and so right now they are kind of in
limbo.
The question I have is to the entire panel. Would these
bills help protect Americans from international cyber
criminals? And maybe we should suggest that the Senate pass the
bills if that is the case.
So I will start with Dr. Romine.
Dr. Romine. Thank you. There are many provisions of these
bills that are very constructive in addressing the very complex
issue of cybersecurity, and NIST has had a very close working
relationship in collaboration or discussions with the entire
Committee and your Subcommittee and your staff and we look
forward to continuing to engage on that.
Mr. Russo. Thank you, Congressman. The Council does not
endorse or comment on any specific legislation, but these bills
certainly represent concepts that we support.
Mr. Vanderhoof. Yes, and likewise, the Smart Card Alliance
does not advocate on behalf of any specific legislation.
However, in principle, we certainly do believe that more
research can be done to help stimulate private industry in
terms of looking for creative solutions to try to fight
cybercrime.
Mr. Brookman. My office does take positions on legislation.
We have not taken positions on these two bills. I think there
are some really good things in there that are incredibly
important and would be productive. My only caveat would be I
would want to ensure that additional funding and research was
given to NIST to fulfill the requirements that they would do
under those bills and not take away from existing resources.
Mr. Chabinsky. Chairman Bucshon, I fully support the goals
of both bills. I believe that in order to protect our economic
and national security, including better protecting Americans
from international cybercrime, the Federal Government must
increase its investment in research and development, as well as
in cyber workforce development.
I would respectfully recommend only that this Committee
keep an eye on how government-supported R&D resources are
allocated, keeping in mind that the best long-term strategy for
protecting Americans from criminals, whether they are near or
far, is in my opinion not through enhanced defenses but rather
through better detection of, attribution of, and penalties
against the criminals themselves.
These bills can promote the goals of enhancing cyber threat
deterrence, and I am grateful for the attention of the
Committee in advancing them.
Mr. Bucshon. Thank you very much. I want to make one
comment. I think on this whole issue that the American public
is very acutely aware of the privacy issues related to
cybersecurity but not as aware of--in my opinion when I talk to
people--of what the threats and the risk to breaches in
cybersecurity are because of the attention brought by the
national media leaning more towards the privacy issue, which is
an extremely important issue of course.
But I think all of us could in some way be helpful by
exposing more of what the risk actually is other than just
losing your credit card data, which is very important of
course, but a bigger issue is, for example, if half of America
all of a sudden loses power suddenly or the entire country
loses power or our GPS system shuts down, what the risk of that
is.
Mr. Romine and Mr. Russo, is the private sector capable of
successfully developing and following security standard for
itself or does it need government assistance or oversight?
Dr. Romine. So in this case, the NIST position is clear
that in the development of the cybersecurity framework we
worked very closely and collaboratively with the private sector
and we believe that those voluntary approaches are in fact
going to be very effective.
I would say government assistance, however, in the sense
that NIST has been acting as a convener for those discussions,
is very helpful.
Mr. Bucshon. Mr. Russo, quickly, because my time is up.
Mr. Russo. I would agree. The standards are adaptable. They
are developed in collaboration with a huge amount of input
globally, so I think we are uniquely qualified to handle
specifically payment card data.
Mr. Bucshon. Thank you very much. I yield back, Mr.
Chairman.
Chairman Broun. Thank you, Dr. Bucshon.
My friend Dan Lipinski, you are recognized for five
minutes.
Mr. Lipinski. Thank you, Mr. Chairman. I want to thank
Chairman Bucshon for talking about those two bills. You saved
me a little bit of time. I want to especially mention the
Cybersecurity Enhancement Act, which is the bill that I have
done with Congressman McCaul. In past Congresses also, and as
often happens, we are waiting for the Senate to act. Hopefully,
they will move soon on that.
So that moves me into my next question, which is for Mr.
Brookman and Mr. Romine, but anyone else can jump in.
Technology plays an important role in countering cyber
threats, but we all know that there are important other factors
that can contribute to cyber attacks also. Human factors often
help facilitate successful cyber intrusions by individuals who
mistakenly or incorrectly give up passwords or open up emails
from strangers, for instance, or they make their password
``password,'' as was mentioned earlier.
From a cybersecurity and cyber policy perspective, how do
we begin to address those elements to help counter cyber
attacks? That is, what is the importance of social science
research especially to look at the problems of cybersecurity
that come from human factors, and what can be done to encourage
people to practice better cyber hygiene?
So let's start with Mr. Brookman.
Mr. Brookman. Sure. So I am not a researcher but I know
there is a lot of good social science research going on on
these issues. I know Carnegie Mellon University, for example,
Dr. Lorrie Cranor, also UC Berkeley has done some really good
work with Chris Hoofnagle, Stanford, Alicia McDonald, did a lot
of looking into these issues about what kind of nudges you can
give to folks to do the right thing. I don't know how much
their research has been implemented in the marketplace.
From a policy perspective, I think the most important thing
you can do is to put the incentives in place to make companies
make the right decision that if they have a liability, they are
the ones who have to push people to do harder passwords. I
think it is very hard to prescribe that at a Federal level, but
I think, you know, putting stronger incentives on companies
to--in the event that they let people do passwords, then
perhaps their liability I think is probably the best solution.
Mr. Lipinski. All right. Dr. Romine?
Dr. Romine. Thank you. I am pleased to be able to say that
my laboratory has an active research program in the usability
of security. We have staff of psychologists, human factors,
engineers, computer scientists that are working on this
problem.
And I would like to make a couple of points. One is, of
course, regulating behavior is often not going to be as
effective as making strides in usability. The goal is to make
it easy to do the right thing, make it hard to do the wrong
thing, and make it easy to recover when the wrong thing happens
anyway.
And the other thing I would say is this idea that there is
a tradeoff between usability and security is a false dichotomy.
The fact is that you can actually achieve better security, more
realized security if you improve the usability of the security
and particularly the identity management that you are
undertaking.
Mr. Lipinski. Does anyone else want to comment on that at
all?
Let me move on then to the notification of these cyber
breaches. There is currently no Federal data breach
notification regulation. For many cyber tests, consumers are
not notified for days or longer after a company realizes it has
been successfully attacked. And Mr. Chabinsky had talked about
what usually is the--what the response is. Can each of you give
us very briefly your thoughts on requiring a national data
breach notification requirement? Let's start with Mr. Chabinsky
and go across.
Mr. Chabinsky. I fully support the goals of a national data
breach law. Right now, industry is subjected to I think at last
count it is 46 different data breach statutes on the books
across our land. That is making it very difficult not only for
consumers to get any sort of consistent approach in data breach
notification but for industry to actually have the confidence
and ability to react in a quick way across so many different
jurisdictions.
Mr. Brookman. Yes. We are really ambivalent on the need for
a Federal data breach notification. As you said, there are 46
States, so it is by and large already required. Making it more
seamless, easier to have a data breach notification is arguably
somewhat counterproductive, right? If it is easier for you to
comply, well, then there is less incentive for you to get
security right in the first place. So we think in order to be
effective, you have to pair it with something else, some sort
of comprehensive privacy or security requirements to make that
effective for consumers.
Mr. Vanderhoof. Yes, I definitely support some uniform data
breach notification guidelines for industry rather than having
a state-by-state approach because it does provide industry with
a better framework by which they can set up their procedures to
be able to uniformly inform their customers when a breach
occurs.
I would only caution that notifying customers when a breach
occurs and then notifying them what their risks are and what
they are able to do to address those risks is still going to be
up to the individual organization that has been breached, and
therefore, there still needs to be control within the
individual organization in terms of how they manage the
relationship with their customers.
Mr. Russo. Congressman, as I indicated, the Council does
not speak on legislation, but generally, we support awareness
of these types of issues.
Mr. Lipinski. Thank you. Dr. Romine?
Dr. Romine. And I would agree that a further discussion
needs to take place on whether that is an advisable approach.
From my perspective as a NIST representative, it is outside the
technical scope of our activities.
Mr. Lipinski. All right. Thank you very much. I yield back.
Chairman Broun. Thank you, Dan.
Mr. Kilmer, you are recognized for five minutes.
Mr. Kilmer. Thank you, Mr. Chairman.
I was going to start with Mr. Chabinsky. I am a member of
the Armed Services Committee. In fact, I just came from there
so apologies for being late. I know the military doesn't defend
itself from cyber attacks by software alone. You know, they use
a system of personnel training and physical security and IT to
guard against would-be attackers. Does industry follow that
approach, and if not, what percentage of risk would be--would
investments in enhanced IT hardware and software cover?
Mr. Chabinsky. Thank you for the question, Congressman
Kilmer.
Industry does absolutely follow the same approach. That
approach is in fact developed by NIST and adopted under FISMA.
Basically, you are talking about three different controls that
are put into place under a risk framework. There are technical
controls and much of what the focus of this Committee is on the
technology, and then we have already heard about the
administrative controls, about trying to work with our
personnel to ensure effective enforcement of our policies, and
then physical controls, making sure people don't actually have
access to our servers.
Those are exactly the same types of controls that are
adopted in private sector standards that are international as
well and that have been rolled out again in an actually quite
elegant form in the cybersecurity framework.
I would, of course, note that the military systems
themselves have been breached on numerous occasions and have
not been able to withstand the onslaught of intelligence
services, nor have the private sector. So I think everybody is
working in a situation in which they are doing the best that
they can following similar standards, but again, we are talking
about an area where risk is controlled but there remains an
unfortunately large amount of residual risk in this area.
Mr. Kilmer. I am going to touch on something that there has
been some discussion around already. I was a few months back in
a meeting with a number of folks in the IT space and we were
talking about cybersecurity issues, and the conversation found
its way to how companies implement protection, invest in new
software, and adopt best practices on avoiding cyber attack.
And one of the folks in the room said, you know, governments--
it is not the government's role to force compliance or force
protection. And I asked the question, you know, can government
in some way incent good cyber hygiene and incent compliance? Do
you think government as it stands right now provides any
incentive to industry to take steps it should to protect
itself? And if so, how? And if not, what might that look like?
Dr. Romine. So speaking again from the perspective of the
development of the cybersecurity framework that was just
released last month, there have been discussions in place with
regard to DHS helping with the voluntary program and they have
rolled out something that they call now C3, which is their
approach to providing assistance in using the framework. But
there has always been, in addition to that, discussions about
incentives that could be provided from the government, and
those discussions would be productive going forward as well.
Mr. Kilmer. Anything specific? I mean, go ahead, Mr.
Vanderhoof.
Mr. Vanderhoof. Thank you, Mr. Kilmer. So you mentioned the
Department of Defense, which still today is pretty much the
gold standard in terms of protecting its networks and
cybersecurity effects. And what they did was they invested in
their identity credentials to make those authentication
technologies as strong as they possibly can so that they know
who is allowed to be within their network to help prevent those
people that are not allowed to be in the network from getting
in the network.
And the government has adopted this common standard across
the entire Federal enterprise using secure chip technology and
have actually extended that technology standard that was set by
NIST to the commercial entities that also do business with
government.
So what has proven to be very effective on the commercial
side has been government leading by example of protecting
itself first, extending that level of standard for protection
for commercial entities doing business with the government, and
then that in turn has stimulated investment in those
technologies that are then translated into the commercial
spaces well.
Mr. Brookman. I will say that for financial data I think
the law does provide some pretty strong incentives. Data breach
notification is incredibly painful and expensive. The PCI rules
I think put pretty strong incentives there. For other
categories of consumer data, though, I think they are actually
very poor, including a lot of health data, right? To the extent
health data is not governed by HIPAA and HITECH, to the extent
you give information to an app or to some online service, there
are very little protections at all security-wise.
The Federal Trade Commission has tried to be aggressive
with its consumer protection authority, but even when they win,
they can't get any money. They just say, okay, promise to use
better security in the future. So I think there should be
stronger protections for other categories of consumer data.
Mr. Chabinsky. On the incentive side, Department of
Homeland Security is doing good work right now with the
insurance industry to determine whether or not corporations
will be able to find a better market in insurance to be able to
transfer risk, and the insurance industry as a result is trying
to think of ways that improved security will result in a market
that will be both cost-effective and beneficial. So I think
that that is one area that the government is working right now
on the incentives side.
Of course in a national data breach notification law,
should one exist, there is the potential to have certain safe
harbors if certain encryption methodologies were in place or
otherwise. So, I think that there are a number of incentives.
Again, my only caution is using any comparison between the
private sector and the government with respect to data security
and network security to have a more realistic discussion about
the number of breaches that actually are actively being
incurred against government systems with a lot of resources
being put against them and mandates no less, not voluntary, and
yet there still obviously are a lot of issues there.
Thank you.
Mr. Kilmer. Thank you. Thank you, Mr. Chairman.
Chairman Broun. The gentleman's time is expired.
I want to thank the witnesses for you all's valuable
testimony. I am southern. Y'all is plural for you all. But I
want to thank you all for you all's valuable testimony, and I
really want to thank you for your flexibility and for your
patience. I know you have been just kind of jerked around a
little bit by the weather and changing schedules and vote
series and you all have been extremely patient and extremely
flexible with us. It has been a great hearing I think. All the
Members, I am sure, have garnered a tremendous amount of
information from you all and we appreciate you all considering
getting back to us.
I want to remind Members that you all have a short period
of time to get questions to them. In fact, in two weeks, we
will submit questions for you all to answer. We call them
questions for the record and they will be put in the record,
and we appreciate your help on that.
So I do remind Members that if you have any additional
comments or any additional questions to please get them in
expeditiously.
Thank you all. You all are excused. This hearing is now
adjourned.
[Whereupon, at 11:57 a.m., the Subcommittees were
adjourned.]
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