Trust in the Cloud Legal and Regulatory Framework
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1 Trust in the Cloud Legal and Regulatory Framework Cloud Security Alliance San Francisco, CA February 26, 2014 Francoise Gilbert, JD, CIPP Managing Director IT Law Group 2014 IT Law Group All Rights Reserved
2 The House of Cards The cloud ecosystem is very fragile. It is a huge house of cards where layers sit on top of other layers. If one layer fails, the house of cards is likely to collapse
3 The cloud is based on dependencies. An organization depends on many others to operate. The glue that can help keep the Cloud House of Cards from collapsing is made of: - Transparency - Accountability - Trust
4 General Principles An organization Is responsible for data under its control, including data that have been transferred to third parties for processing Should implement policies and practices to protect data in its custody, including: Implementing procedures to protect the privacy and security of personal information Training staff on the organization s policies and practices Developing information to explain the organizations policies and procedures Should use contractual or other means to provide comparable levels of protection while the data are being processed by a third party
5 In practice: A Recipe for Trust? Comply with applicable laws Abide by the promises that they made in contracts Implement appropriate measures to protect the privacy and security of data in the company s custody Relevant to the type of data to be protected Take into account the state of technology, threats to the data Require the same from contractors, service providers Communicate clearly with constituents (customers, employees, business partners) Clear, detailed, understandable, disclosures Metrics, certification, attestation
6 Compliance with Applicable Laws
7 FTC Consent Decrees Recent FTC Actions for lax security practices GMR Transcription Services, Inc. (Jan 31, 2014) Provider of medical transcription service. Foru International Corporation (Jan 7, 2014) Manufacturer of notional supplements GeneLink (Jan 7, 2014) Manufacturer of nutritional supplements Accretive Health, Inc. (Dec. 31, 2013) Medical billing and revenue management service for hospitals TRENDnet, Inc. (Sep. 4, 2013) Telesurveillance service
8 FTC Consent Decree Requirements Designate employee(s) to coordinate and be accountable for the information security program Identify material internal and external risks to security, confidentiality, integrity of personal data that could result in unauthorized disclosure, misuse, loss, etc. Assess sufficiency of the safeguards in place to control these risks, especially: Information systems Employee training and management Prevention, detection, response to attacks Design, implement reasonable safeguards to control risk Regularly test and monitor effectiveness of the safeguards Develop and use reasonable steps to select and retain service providers capable of maintaining security practices consistent with the order; and require them by contract to establish and implement and maintain, appropriate safeguards Evaluate and adjust the program in light of the results of the testing and monitoring.
9 HIPAA - Privacy & Security Rules Security Rule 45 CFR et seq. 45 requirements, including Administrative Safeguards Physical Safeguards Technical Safeguards Security Breach Disclosure Rule 45 CFR et seq. (covered entities) and 16 CFR 318 (PRH and related entities) Notification of individuals Notification of the Secretary (covered entities) or the FTC (PHR) Notification of the Media Privacy Rule 45 CFR et seq.
10 HIPAA - Business Associates 45 CFR (b)(1) A covered entity may permit a business associate to create, receive, maintain or transmit ephi on the covered entity's behalf ONLY if the covered entity obtains satisfactory assurances that the business associate will appropriately safeguard the information 45 CFR (b)(3) The organization must document the satisfactory assurances through a written contract or other arrangement with the business associate that meet the requirements
11 European Union Data Controllers EU Data Protection Directive + implementation in the EU Member States national laws Article 17 Security of the Processing: Subsection 1: [Data] controllers must implement appropriate technical and organizational measures to protect personal data against. all unlawful forms of processing Such measures shall ensure a level of security appropriate to the risks represented by the processing and the nature of the data to be protected Subsection 2: [Data] controller must, where the processing is carried out on its behalf, choose a processor providing sufficient guarantees in respect of the technical security measures and organizational measures governing the processing to be carried out, and must ensure compliance with those measures
12 European Union Data Processors EU Data Protection Directive Article 17 Security of the Processing Subsection 3: The carrying out of processing by way of a processor must be governed by a contract or legal act binding the processor to the controller, and stipulating, in particular, that: The processor shall act only on instructions from the controller The obligations [to implement appropriate technical and organizational measures to protect personal data] shall also be incumbent on the processor Subsection 4: For the purposes of keeping proof, the parts of the contract or legal act relating to data protection and the requirements relating to the [technical and organizational security measures] shall be in writing or in another equivalent form.
13 European Union Crossborder Data Transfer Restrictions EU Data Protection Directive + EU Member States national laws Article 25 Crossborder data transfer out of the EU/EEA prohibited unless the third country in question ensures an adequate level of protection Article 26(2) Crossborder data transfer permitted if the controller adduces adequate safeguards with respect to the protection of the privacy of individuals, such safeguards may result from appropriate contractual clauses Implemented in: Standard Contractual Clauses Safe Harbor Program
14 US/EU Safe Harbor Principles Notice / Choice / Access Principles Security Principle Take reasonable precautions to protect personal information from loss, misuse and unauthorized access, disclosure, alteration and destruction Onward Transfer Principle: Where an organization wishes to transfer information to a third party that is acting as an agent, it may do so if it: Ascertains that the third party subscribes to the [EU Safe Harbor] Principles, or is subject to the [1995 EU Data Protection] Directive; or Enters into a written agreement with such third party requiring at least the same level of privacy protection as is required by the relevant Principles.
15 Canada PIPEDA Principles for the Protection of Personal Data (see: Principles 7 Safeguards Personal information shall be protected by security safeguards appropriate to the sensitivity of the information. Principle 1 Accountability An organization is responsible for personal information in its possession or control, including information that has been transferred to a third party for processing. The organization must use contractual or other means to provide a comparable level of protection when the information is being processed by a third party
16 Contractual Process Contract Terms
17 Are you Contracting with a Third Party? 3-step process: Conduct appropriate due diligence to determine whether the third party uses and will continue to use appropriate security and other measures Enter into a written contract that requires the third party to use these appropriate security measures Monitor compliance with these obligations throughout the life of the contract (or longer as needed), so long as the service provider holds the company s data This applies to ALL layers of the house of cards Ensure that each service provider or third party that will access your data will do the same with its own service providers
18 Due Diligence? To be performed BEFORE engaging third party How to evaluate a third party s procedures and practices Detailed questionnaire Onsite investigation Interaction with other clients Review third parties certifications, attestations Note: Different types of due diligence depending on the nature of the relationship, bargaining power, etc. Important: Keep track of the nature, scope, extent, responses, results of the due diligence
19 Consequence? Inadequate due diligence may have missed - Practices that: - Do not meet industry standards - do not meet your own legal obligations - are not adapted to your business model - That the service provider lacks the financial backing and financial stability - That the service provider actually relies itself on other service providers, about whom you know nothing
20 Contracts In the cloud, a majority of contracts are not negotiated Even those that are negotiated might provide limited promises Non negotiated contracts: Pay-as-you-go model, where terms of contract may change at any time One sided provisions in favor of cloud provider Do not address security breach disclosure obligations Take it or leave it approach Very limited liability; only downtime, if any Negotiated contracts for the lucky ones Better terms Very difficult to negotiate Price increase if you ask for more warranties, more liability Difficult to acquire the trust of others in these conditions
21 If contract can be negotiated Contractual provisions Service level agreements Damages In case of outage In case of breach of security Amount of damages ; damage limitation Direct Liquidated Indemnification Reports Audit
22 Monitoring During performance of the contract Monitor the company s or the third party s performance Directly? Indirectly: Periodic reports Attestations Certifications What metrics? Transparency reports
23 Consequences Without the proper - Due diligence - Contracts - Monitoring You are riding on a road with a very weak foundation
24 Policies Procedures
25 Policies and Procedures Develop policies and procedures that meet the legal, contractual, and other requirements to which your company is subject, based on applicable or relevant Regulations Standards Best practices Keep track of the rationale for developing them Monitor their application by your personnel Discipline the infringers Ensure that your service providers, contractors, abide by similar rules and enforce them AND communicate these policies, procedures, practices, success, failures to others to acquire their TRUST
26 Security Breaches The reputation killer Anticipate Develop an incident response plan Conduct periodic Fire drills Respond to the breach carefully Important effect on reputation, trust Make sure that you comply with all applicable laws, worldwide Evaluate whether you should go beyond what the laws require Importance of the communication, interaction with customers, affected parties
27 Keep Track Don t let your policies and procedures gather dust Keep track of their application and implementation within the company Develop matrix to measure performance Within the company By third parties, service providers, etc. Look for benchmarks to evaluate your performance or that of your service providers Certifications, e.g. STAR Certification Communicate, communicate, communicate
28 Conclusion
29 Takeaways Trust is fragile. Easy to lose Transparency is a close ally of trust. Meaningful disclosures help bring trust In an era where the cloud that your company uses or wishes to use is likely sitting on top of multiple layers of other third party clouds, about which you may know nothing, it is important to: Understand your company's obligations with respect to the data stored or processed in the cloud Conduct appropriate, in depth due diligence Review service providers disclosures Insist on comprehensive information
30 More Takeaways Keep in mind that it s your data; it s your responsibility You get what you pay for. If using cloud is such a saving from your current operation, there must be a reason. Find out why it is so inexpensive. Be realistic about what you are getting; evaluate whether the service Meets the needs of your own company with respect to the specific categories of data that you will store in the cloud Decide what is the right route to take, and what is needed to fulfill your company s obligations as the custodian of very sensitive, valuable data Do it, and make sure that all your service providers upstream are also doing it to protect your data Insurance assuming that you can purchase some - will not solve all of your problems. Insurance companies may agree to provide coverage only if they have determined that your company has done its homework, uses proper safeguards, is responsible and accountable.
31 Contact Information Francoise Gilbert, JD, CIPP Managing Director IT Law Group Phone: (650) Mail: 555 Bryant Street # 603 Palo Alto, CA
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