Entries Tagged "incentives"

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Tax Breaks for Good Security

Congress is talking—it’s just talking, but at least it’s talking—about giving tax breaks to companies with good cybersecurity.

The devil is in the details, and this could be a meaningless handout, but the idea is sound. Rational companies are going to protect their assets only up to their value to that company. The problem is that many of the security risks to digital assets are not risks to the company who owns them. This is an externality. So if we all need a company to protect its digital assets to some higher level, then we need to pay for that extra protection. (At least we do in a capitalist society.) We can pay through regulation or liabilities, which translates to higher prices for whatever the company does. We can pay through directly funding that extra security, either by writing a check or reducing taxes. But we can’t expect a company to spend the extra money out of the goodness of its heart.

Posted on October 13, 2005 at 8:02 AM • View Comments

Musicians tell Fans How to Beat Copy Protection

In any security system, it’s important to understand who the attacker is and who the defender is. In digital-media copy protection (usually called Digital Rights Management), it can get complicated.

The music industry has been selling the technology to everyone—Congress, the public—by claiming that they’re defending the rights of musicians. But more and more musicians are realizing that their interests are better served by freely copyable music.

Now, in the most bizarre turn yet in the record industry’s piracy struggles, stars Dave Matthews Band, Foo Fighters and Switchfoot—and even Sony BMG, when the label gets complaints—are telling fans how they can beat the system.

Read the whole article.

Posted on October 10, 2005 at 12:18 PM • View Comments

RFID Car Keys

RFID car keys (subscription required) are becoming more popular. Since these devices broadcast a unique serial number, it’s only a matter of time before a significant percentage of the population can be tracked with them.

Lexus has made what it calls the “SmartAccess” keyless-entry system standard on its new IS sedans, designed to compete with German cars like the BMW 3 series or the Audi A4, as well as rivals such as the Infiniti G35 or the U.S.-made Cadillac CTS. BMW offers what it calls “keyless go” as an option on the new 3 series, and on its higher-priced 5, 6 and 7 series sedans.

Volkswagen AG’s Audi brand offers keyless-start systems on its A6 and A8 sedans, but not yet on U.S.-bound A4s. Cadillac’s new STS sedan, big brother to the CTS, also offers a pushbutton start.

Starter buttons have a racy flair—European sports cars and race cars used them in the past. The proliferation of starter buttons in luxury sedans has its roots in theft protection. An increasing number of cars now come with theft-deterrent systems that rely on a chip in the key fob that broadcasts a code to a receiver in the car. If the codes don’t match, the car won’t start.

Cryptography can be used to make these devices anonymous, but there’s no business reason for automobile manufacturers to field such a system. Once again, the economic barriers to security are far greater than the technical ones.

Posted on October 5, 2005 at 8:13 AM • View Comments

Airline Security, Trade-offs, and Agenda

All security decisions are trade-offs, and smart security trade-offs are ones where the security you get is worth what you have to give up. This sounds simple, but it isn’t. There are differences between perceived risk and actual risk, differences between perceived security and actual security, and differences between perceived cost and actual cost. And beyond that, there are legitimate differences in trade-off analysis. Any complicated security decision affects multiple players, and each player evaluates the trade-off from his or her own perspective.

I call this “agenda,” and it is one of the central themes of Beyond Fear. It is clearly illustrated in the current debate about rescinding the prohibition against small pointy things on airplanes. The flight attendants are against the change. Reading their comments, you can clearly see their subjective agenda:

“As the front-line personnel with little or no effective security training or means of self defense, such weapons could prove fatal to our members,” Patricia A. Friend, international president of the Association of Flight Attendants, said in a letter to Edmund S. “Kip” Hawley, the new leader of the Transportation Security Administration. “They may not assist in breaking through a flightdeck door, but they could definitely lead to the deaths of flight attendants and passengers”….

The flight attendants, whose union represents 46,000 members, said that easing the ban on some prohibited items could pose a safety risk on board the aircraft and lead to incidents that terrorize passengers even if they do not involve a hijacking.

“Even a plane that is attacked and results in only a few deaths would seriously jeopardize the progress we have all made in restoring confidence of the flying public,” Friend said in her letter. “We urge you to reconsider allowing such dangerous items—which have no place in the cabin of an aircraft in the first place—to be introduced into our workplace.”

The flight attendants are not evaluating the security countermeasure from a global perspective. They’re not trying to figure out what the optimal level of risk is, what sort of trade-offs are acceptable, and what security countermeasures most efficiently achieve that trade-off. They’re looking at the trade-off from their perspective: they get more benefit from the countermeasure than the average flier because it’s their workplace, and the cost of the countermeasure is borne largely by the passengers.

There is nothing wrong with flight attendants evaluating airline security from their own agenda. I’d be surprised if they didn’t. But understanding agenda is essential to understanding how security decisions are made.

Posted on August 19, 2005 at 12:48 PM • View Comments

Infants on the Terrorist Watch List

Imagine you’re in charge of airport security. You have a watch list of terrorist names, and you’re supposed to give anyone on that list extra scrutiny. One day someone shows up for a flight whose name is on that list. They’re an infant.

What do you do?

If you have even the slightest bit of sense, you realize that an infant can’t be a terrorist. So you let the infant through, knowing that it’s a false alarm. But if you have no flexibility in your job, if you have to follow the rules regardless of how stupid they are, if you have no authority to make your own decisions, then you detain the baby.

EDITED TO ADD: I know what the article says about the TSA rules:

The Transportation Security Administration, which administers the lists, instructs airlines not to deny boarding to children under 12—or select them for extra security checks—even if their names match those on a list.

Whether the rules are being followed or ignored is besides my point. The screener is detaining babies because he thinks that’s what the rules require. He’s not permitted to exercise his own common sense.

Security works best when well-trained people have the authority to make decisions, not when poorly-trained people are slaves to the rules (whether real or imaginary). Rules provide CYA security, but not security against terrorism.

Posted on August 19, 2005 at 8:03 AM • View Comments

How Banks Profit from ID Theft

Wells Fargo is profiting because its customers are afraid of identity theft:

The San Francisco bank, in conjunction with marketing behemoth Trilegiant, is offering a new service called Wells Fargo Select Identity Theft Protection. For $12.99 a month, this includes daily monitoring of one’s credit files and assistance in dealing with cases of fraud.

It’s reprehensible that Wells Fargo doesn’t offer this service for free.

Actually, that’s not true. It’s smart business for Wells Fargo to charge for this service. It’s reprehensible that the regulatory landscape is such that Wells Fargo does not feel it’s in its best interest to offer this service for free. Wells Fargo is a for-profit enterprise, and they react to the realities of the market. We need those realities to better serve the people.

Posted on July 27, 2005 at 7:42 AM • View Comments

Visa and Amex Drop CardSystems

Remember CardSystems Solutions, the company that exposed over 40 million identities to potential fraud? (The actual number of identities that will be the victims of fraud is almost certainly much, much lower.)

Both Visa and American Express are dropping them as a payment processor:

Within hours of the disclosure that Visa was seeking a replacement for CardSystems Solutions, American Express said Tuesday it would no longer do business with the company beginning in October.

The biggest problem with CardSystems’ actions wasn’t that it had bad computer security practices, but that it had bad business practices. It was holding exception files with personal information even though it was not supposed to. It was not for marketing, as I originally surmised, but to find out why transactions were not being authorized. It was disregrading the rules it agreed to follow.

Technical problems can be remediated. A dishonest corporate culture is much harder to fix. This is what I sense reading between the lines:

Visa had been weighing the decision for a few weeks but as recently as mid-June said that it was working with CardSystems to correct the problem. CardSystems hired an outside security assessor this month to review its policies and practices, and it promised to make any necessary upgrades by the end of August. CardSystems, in its statement yesterday, said the company’s executives had been “in almost daily contact” with Visa since the problems were discovered in May.

Visa, however, said that despite “some remediation efforts” since the incident was reported, the actions by CardSystems were not enough.

And this:

CardSystems Solutions Inc. “has not corrected, and cannot at this point correct, the failure to provide proper data security for Visa accounts,” said Rosetta Jones, a spokeswoman for Foster City, Calif.-based Visa….

Visa said that while CardSystems has taken some remediating actions since the breach was disclosed, those could not overcome the fact that it was inappropriately holding on to account information—purportedly for “research purposes”—when the breach occurred, in violation of Visa’s security rules.

At this point, it is unclear what MasterCard and Discover will do.

MasterCard International Inc. is taking a different tack with CardSystems. The credit card company expects CardSystems to develop a plan for improving its security by Aug. 31, “and as of today, we are not aware of any deficiencies in its systems that are incapable of being remediated,” spokeswoman Sharon Gamsin said.

“However, if CardSystems cannot demonstrate that they are in compliance by that date, their ability to provide services to MasterCard members will be at risk,” she said.

Jennifer Born, a spokeswoman for Discover Financial Services Inc., which also has a relationship with CardSystems, said the Riverwoods, Ill.-based company was “doing our due diligence and will make our decision once that process is completed.”

I think this is a positive development. I have long said that companies like CardSystems won’t clean up their acts unless there are consequences for not doing so. Credit card companies dropping CardSystems sends a strong message to the other payment processors: improve your security if you want to stay in business.

(Some interesting legal opinions on the larger issue of disclosure are here.)

Posted on July 21, 2005 at 11:49 AM • View Comments

Redefining Spyware

The problem with spyware is that it can be in the eye of the beholder. There are companies that decry the general problem, but have their own software report back to a central server.

This kind of thing can result in a conflict of interest: “Spyware is spyware only if I don’t have a corporate interest in it.” Here’s the most recent example:

Microsoft’s Windows AntiSpyware application is no longer flagging adware products from Claria Corp. as a threat to PC users.

Less than a week after published reports of acquisition talks between Microsoft Corp. and the Redwood City, Calif.-based distributor of the controversial Gator ad-serving software, security researchers have discovered that Microsoft has quietly downgraded its Claria detections.

If you’re a user of AntiSpyware, you can fix this. Claria’s spyware is now flagged as “Ignore” by default, but you can still change the action to “Quarantine” or “Remove.” I recommend “Remove.”

Edited to add: Actually, I recommend using a different anti-spyware program.

Posted on July 14, 2005 at 5:05 PM • View Comments

New York Times on Identity Theft

I got some really good quotes in this New York Times article on identity theft:

Which is why I wish William Proxmire were still on the case. What we need right now is someone in power who can put the burden for this problem right where it belongs: on the financial and other institutions who collect this data. Let’s face it: by the time even the most vigilant consumer discovers his information has been used fraudulently, it’s already too late. “When people ask me what can the average person do to stop identity theft, I say, ‘nothing,'” said Bruce Schneier, the chief technology officer of Counterpane Internet Security. “This data is held by third parties and they have no impetus to fix it.”

Mr. Schneier, though, has a solution that is positively Proxmirian in its elegance and simplicity. Most of the bills that have been filed in Congress to deal with identity fraud are filled with specific requirements for banks and other institutions: encrypt this; safeguard that; strengthen this firewall.

Mr. Schneier says forget about all that. Instead, do what Congress did in the 1970’s—just put the burden on the financial industry. “If we’re ever going to manage the risks and effects of electronic impersonation,” he wrote recently on CNET (and also in his blog), “we must concentrate on preventing and detecting fraudulent transactions.” And the only way to do that, he added, is by making the financial institutions liable for fraudulent transactions.

“I think business ingenuity is top notch,” Mr. Schneier said in an interview. “And I think if you make it their problem, they will solve it.”

Yes, he acknowledged, letting consumers off the hook might cause them to be less vigilant. But that is exactly what Senator Proxmire did and to great effect. Forcing the financial institutions to bear the entire burden will cause them to tighten up their procedures until the fraud is under control. Maybe they will invest in complex software. But maybe they’ll take simpler measures as well, like making it a little less easy than it is today to obtain a credit card. Best of all, once people see these measures take effect—and realize that someone else is responsible for fixing the problems—their fear will abate.

As Senator Proxmire understood a long time ago, fear is the great enemy of commerce. Maybe this time, the banks will finally understand that as well.

Posted on July 12, 2005 at 5:14 PM • View Comments

Public Disclosure of Personal Data Loss

Citigroup announced that it lost personal data on 3.9 million people. The data was on a set of backup tapes that were sent by UPS (a package delivery service) from point A and never arrived at point B.

This is a huge data loss, and even though it is unlikely that any bad guys got their hands on the data, it will have profound effects on the security of all our personal data.

It might seem that there has been an epidemic of personal-data losses recently, but that’s an illusion. What we’re seeing are the effects of a California law that requires companies to disclose losses of thefts of personal data. It’s always been happening, only now companies have to go public with it.

As a security expert, I like the California law for three reasons. One, data on actual intrusions is useful for research. Two, alerting individuals whose data is lost or stolen is a good idea. And three, increased public scrutiny leads companies to spend more effort protecting personal data.

Think of it as public shaming. Companies will spend money to avoid the PR cost of public shaming. Hence, security improves.

This works, but there’s an attenuation effect going on. As more of these events occur, the press is less likely to report them. When there’s less noise in the press, there’s less public shaming. And when there’s less public shaming, the amount of money companies are willing to spend to avoid it goes down.

This data loss has set a new bar for reporters. Data thefts affecting 50,000 individuals will no longer be news. They won’t be reported.

The notification of individuals also has an attenuation effect. I know people in California who have a dozen notices about the loss of their personal data. When no identity theft follows, people start believing that it isn’t really a problem. (In the large, they’re right. Most data losses don’t result in identity theft. But that doesn’t mean that it’s not a problem.)

Public disclosure is good. But it’s not enough.

Posted on June 8, 2005 at 4:45 PM • View Comments

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Sidebar photo of Bruce Schneier by Joe MacInnis.