Cybersecurity Governance Update: New FFIEC Requirements cliftonlarsonallen.com

Overview Up To Date Cybersecurity and Fraud Risks Current threat environment Industry examples and case studies FFIEC Cybersecurity Assessments and Governance Requirements Strategies to mitigate and manage risks 2

Cyber Fraud Risk Themes Hackers have monetized their activity More hacking More sophistication More hands on effort Smaller organizations targeted Social engineering on the rise Hackers targeting members and member businesses 3

Three Largest Cyber Fraud Trends Organized Crime Wholesale theft of personal financial information CATO Corporate Account Takeover Use of online credentials for ACH, CC and wire fraud Ransomware Your data held for ransom 4

Theft of PFI Target Home Depot Goodwill Jimmy Johns University of Maryland University of Indiana Neiman Marcus Dairy Queen Sally Beauty Harbor Freight Olmsted Medical Center Community Health Systems 5

Stolen Card Data Carder or Carding websites A peek inside a carding operation: http://krebsonsecurity.com/2014/06/peek inside aprofessional carding shop/ 6

Credit Card Data For Sale 7

Corporate Account Takeover Catholic church parish Hospice Finance company Main Street newspaper stand Electrical contractor Utility company Industry trade association Rural hospital Mining company On and on and on and on.. 8

CATO Lawsuits UCC a payment order received by the [bank] is effective as the order of the customer, whether or not authorized, if the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and the bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer. 9

CATO Lawsuits UCC Choice Escrow vs BancorpSouth $440,000 stolen via single wire through CATO CE passed on dual control offered by the bank Court ruled in favor of bank CE attorneys failed to demonstrate bank s procedures were not commercially reasonable 10

CATO Defensive Measures Multi layer authentication Multi factor authentication Out of band authentication Positive pay ACH block and filter IP address filtering Dual control Activity monitoring Manual vs. Automated controls 11

Ransomware Malware encrypts everything it can interact with i.e. anything the infected user has access to CryptoLocker Kovter Also displays and adds child pornography images May 20, 2014 Ransomware attacks doubled in last month (7,000 to 15,000) http://insurancenewsnet.com/oarticle/2014/05/20/cryptolocker goes spearphishing infections soar warns knowbe4 a 506966.html 12

Ransomware Working (tested) backups are key 13

Keys to Successful Breaches 2013 2014 https://www2.trustwave.com/gsr2014. 14

Keys to Successful Breaches Reliance/dependence on 3 rd party service providers is at root of most breaches 15

How do hackers and fraudsters break in? Amateurs hack systems, professionals hack people. Bruce Schneier Social Engineering relies on the following: The appearance of authority People want to avoid inconvenience Timing, timing, timing 16

Pre text Phone Calls Hi, this is Randy from Fiserv users support. I am working with Dave, and I need your help Name dropping Establish a rapport Ask for help Inject some techno babble Think telemarketers script Home Equity Line of Credit (HELOC) fraud calls Ongoing high profile ACH frauds 17

Email Attacks Spoofing and Phishing Impersonate someone in authority and: Ask them to visit a web site Ask them to open an attachment or run update Examples Better Business Bureau complaint http://www.millersmiles.co.uk/email/visa usabetterbusiness bureaucall for action visa Microsoft Security Patch Download 18

Email Phishing Targeted Attack 19

Strategies to Combat Social Engineering (Ongoing) user awareness training SANS First Five Layers behind the people 1. Secure/Standard Configurations (hardening) 2. Critical Patches Operating Systems 3. Critical Patches Applications 4. Application White Listing 5. Minimized user access rights No browsing/email with admin rights Logging, Monitoring, and Alerting capabilities The 3 R s : Recognize, React, Respond More on this at the end 20

FFIEC Executive Leadership of Cybresecurity cliftonlarsonallen.com 21

Executive Order 13636 Improving Critical Infrastructure Cybersecurity February 2013 22

Executive Order 13636 Improving Critical Infrastructure Cybersecurity Issued on February 12, 2013 The cyber threat to critical infrastructure represents one of the most serious national security challenges to the national and economic security of the US Enhance the security and resilience of the Nation's critical infrastructure Maintain a cyber environment that encourages efficiency, innovation, and economic prosperity while promoting safety, security, business confidentiality, privacy, and civil liberties. Partnership with the owners and operators of critical infrastructure 23

Executive Order 13636 Improving Critical Infrastructure Cybersecurity Definition of Critical Infrastructure Cybersecurity Information Sharing Privacy and Civil Liberties Protections Consultative Process Baseline Framework to Reduce Cyber Risk to Critical Infrastructure Voluntary Critical Infrastructure Cybersecurity Program Identification of Critical Infrastructure at Greatest Risk Adoption of Framework Updates to NIST Framework (CSF) 24

Executive Order Definition of Critical Infrastructure Systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters. 25

FFIEC Executive Leadership Cybersecurity Webinar May 7, 2014 26

Cybersecurity Leadership FFIEC https://www.fdic.gov/news/news/financial/2014/fil14021.html 27

May 7, 2014 FFIEC Executive Leadership Cybersecurity webinar Importance of identifying emerging cyber threats and the need for Board/C suite involvement, including: Setting the tone at the top and building a security culture Identifying, measuring, mitigating, and monitoring risks Developing risk management processes commensurate with the risks and complexity of the institutions Aligning cybersecurity strategy with business strategy and accounting for how risks will be managed now and in the future Creating a governance process to ensure ongoing awareness and accountability Ensuring timely reports to senior management that include meaningful information addressing the institution's vulnerability to cyber risks 29

Cybersecurity Assessments July August 2014 34

Current FFIEC IT Examination Process Each FFIEC agency (FDIC, Federal Reserve, OCC, NCUA) will perform periodic information technology examinations at regulated financial institutions. Examination procedures are based on the FFIEC IT Handbooks (http://ithandbook.ffiec.gov/) and supplemented by periodic agency guidance. IT Examinations review the financial institution s Information Security Program. 35

Information Security Program Section 501(b) of the Gramm Leach Bliley Act of 1999 (GLBA) for the safeguarding of customer information Board of Directors will develop an Information Security Program that addresses the requirements of: Section 501(b) of the GLBA; Federal Financial Institutions Examination Council s (FFIEC) Interagency Guidelines Establishing Information Security Standards (501[b] Guidelines); and Agency specific guidelines (i.e. Appendix B to Part 364 of the FDIC s Rules and Regulations) The Information Security Program (ISP) is comprised of: Risk Assessment Risk Management Audit Business Continuity/Disaster Recovery/Incident Response Vendor Management Board and Committee Oversight 36

Information Security Program Risk Assessment and Risk Management Assess risk periodically to identify reasonably foreseeable internal and external threats to data and information technology assets that could negatively impact confidentiality and integrity of data and/or availability of systems. Risk is determined based on the likelihood of a given threatsource s ability to exercise a particular potential vulnerability, and the resulting impact of that adverse event on the organization. The results of the risk assessment are used as a basis for establishing and implementing appropriate administrative, technical, and physical controls to reduce or eliminate the impact of the threat. 37

Information Security Program Audit ISP related Audits/Reviews ISP Review/IT General Controls Review External/Internal Vulnerability and Penetration Assessments Social Engineering Assessments E Banking Reviews ACH Audit Wire Transfer Audit Remote/Mobile Deposit Capture Audit Audit/Exam Recommendation Tracking and Reporting 38

Information Security Program Business Continuity/Disaster Recovery Incident Response Business Continuity/Disaster Recovery Plan Annual Testing of Critical Systems Annual Employee Tabletop/Scenario Testing Board Reporting Incident Response Plan Compromise of customer information Annual Testing FS ISAC Cybersecurity Examinations? 39

Information Security Program Vendor Management Vendor Management Policy Vendor Risk Assessment Access to Customer Information Criticality to Bank Operations Ease of Replacement New Vendor Due Diligence and Annual Reviews Continuous Monitoring 40

FFIEC Cybersecurity Assessments In the summer of 2014, the Federal Financial Institutions Examination Council (FFIEC) agencies piloted new Cybersecurity Assessment procedures at over 500 community financial institutions to raise awareness of and evaluate their preparedness to mitigate cybersecurity risks. Integrated into regular IT Examination process Cyber Risk Management and Oversight Cyber Security Controls External Dependency Management Threat Intelligence and Collaboration Cyber Resilience Launched a cybercrime website https://www.ffiec.gov/cybersecurity.htm 41

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Threat and Vulnerability Monitoring and Sharing Statement (11/3/14) All FIs AND their critical technology service providers must have appropriate threat identification, information sharing, and response procedures. Recommendation to participate in the Financial Services Information Sharing and Analysis Center (FS ISAC) Improved identification and mitigation of attacks Better identification and understanding of specific vulnerabilities and necessary mitigating controls for systems Sharing information to help other FIs 42

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Threat and Vulnerability Monitoring and Sharing Statement (11/3/14) FI Management should: Monitor and maintain sufficient awareness of cybersecurity threats and vulnerability information so they may evaluate risk and respond accordingly Establish procedures to evaluate and apply the various types and quantity of cyber threat and vulnerability information to meet the needs of their organization FS ISAC: www.fsisac.com FBI Infragard: www.infragard.org U.S. Computer Emergency Readiness Team at US CERT: www.us cert.gov U.S. Secret Service Electronic Crimes Task Force: www.secretservice.gov/ectf.shtml 43

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Assessment General Observations Cybersecurity Inherent Risk Management must understand the FIs INHERENT RISK when assessing cybersecurity preparedness Connection Types: identify and assess the threats to all access points to the internal network VPN Wireless Telnet/FTP Vendor LAN/WAN access BYOD 44

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Assessment General Observations Cybersecurity Inherent Risk (cont.) Products and Services: identify and assess threats to all products and services currently offered and planned Online ACH and Wire Transfer origination External funds transfers (A2A, P2P, bill pay) 45

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Assessment General Observations Cybersecurity Inherent Risk (cont.) Technologies Used: identify and assess threats to all technologies currently used and planned Core systems ATMs Internet and mobile applications Cloud computing 46

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Assessment General Observations Cybersecurity Preparedness Current cybersecurity practices and overall preparedness should include: Cybersecurity Controls: Preventive, detective, or corrective procedures for mitigating identified cybersecurity threats Patching, encryption, limited user access Intrusion detection/prevention systems, firewall alerts Formal audit program with scope and schedule based on an asset s inherent risk, prompt and documented remediation of findings, regular activity report reviews 47

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Assessment General Observations Cybersecurity Preparedness (cont.) Cyber Incident Management and Resilience: Incident detection, response, mitigation, escalation, reporting, and resilience Formal Incident Response Programs, including regulatory and customer notification guidelines and procedures Senior management and board incident reporting 48

FFIEC Cybersecurity Assessments FFIEC Cybersecurity Assessment Implications? Increased Board and C Suite Involvement Participation in information sharing group(s) Cybersecurity scenario testing with employees and management Increased oversight of third party service providers Documentation on how FI is addressing the FFIEC Cybersecurity Assessment findings 49

Very Recent Examiner Supplemental Cyber Security Request List 50

Key Defensive Strategies cliftonlarsonallen.com 53

Strategies Our information security strategy should have the following objectives: Users who are more aware and savvy Networks that are resistant to malware Be Prepared Monitoring, Incident Response, and forensic Capabilities 54

Ten Keys to Mitigate Risk 1. Strong policies 6. Perimeter security layers 2. Defined user access roles Minimum Access 3. Hardened internal systems and end points 4. Encryption strategy data centered 5. Vulnerability management process 7. Centralized logging, analysis and alerting capabilities 8. Incident response capabilities 9. Know / use online banking tools 10.Test, Test, Test Independent validation that it works 55

Centralized Logging, Analysis, and Alerting Centralized audit logging, analysis, and automated alerting capabilities (SIEM) Firewalls Security appliances Routing infrastructure Network authentication Servers Applications *** Archiving vs. Reviewing 56

Call To Action Policies to set foundation Train your users Thoroughly assess your risks Three R s: Recognize, React, Respond Thoroughly validate your controls High expectations of your vendors Penetration testing Application testing Vulnerability scanning Social engineering testing People Tools ` Rules 57

Questions? 58

Jim Kreiser, CISA, CRMA, CFSA Principal Business Risk and Information Security Services james.kreiser@cliftonlarsonallen.com 410 453 0900 cliftonlarsonallen.com twitter.com/ CLA_CPAs facebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen 59