Townsend Security Data Privacy Blog

The new European Union General Data Protection Regulation (EU GDPR) has now passed both the EU Council and Parliament and replaces the earlier Data Protection Directive (Directive 94/46/EC). Unlike an EU directive, this regulation does not require individual countries to pass legislation and it goes into effect immediately. Organizations have a two-year transition period to comply with the new data protection regulations, but it would be unwise to delay. Smart organizations will start work immediately so that there are no gaps upon the arrival of the deadline, and so that their public reputation is preserved. A good overview of the regulation can be found here and it contains a link to the full regulation.

There are many aspects to the new GDPR, and if you are required to meet the regulation you should take a very close look at the entire publication. Let’s look at a few of the elements of the GDPR with a focus on data protection.

What information must be protected?

The regulation uses two terms that are important to understand. The term “data subject” means an individual person. The term “personal data” means any data that either directly identifies an individual person, or which can be used indirectly to identify an individual. A few examples of data that indirectly identify an individual would include a medical identification number, location data such as an IP address, or social identity such as an email address or Facebook account.

The definition of personal information is quite broad. It would be a mistake to narrowly focus on just a few fields of data in your database, you should look for all information about a person that you store. If any information uniquely identifies a person, or if information can be combined to identify a person, it should be protected.

What constitutes a data breach?

The definition of a data breach is much broader than defined in the US. It certainly includes the the accidental loss of data or the loss of data in the course of a data breach by cybercriminals. But it also includes other activities including the accidental or unlawful:

• Destruction of personal information.
• Alteration of personal information.
• Unauthorized disclosure of information, even without criminal intent.
• Access to personal information.

In other words, assume that the data you store about an individual belongs to them exclusively, and is valuable. You are holding it in trust, and you have a fundamental responsibility to preserve and protect that information! This will be a conceptual challenge for organizations more familiar with US data protection rules.

Non-EU organizations should pay special attention to this definition of a data breach. It goes far beyond what typical regulations in the US define as a data breach.

What are my breach notification requirements?

The data breach definition applies to all personal information that is transmitted (data in motion) or stored (data at rest) or in any other way processed by your organization. In the event you experience a data breach you must notify the appropriate authorities and the individuals who are affected. There are stringent time constraints on the notification requirements and this will require special preparation to meet those requirements.

Important note: If your data is encrypted you may be exempt from some notification requirements (from Article 32):

The communication of a personal data breach to the data subject shall not be required
if the controller demonstrates to the satisfaction of the supervisory authority that it has implemented appropriate technological protection measures, and that those
measures were applied to the data concerned by the personal data breach. Such
technological protection measures shall render the data unintelligible to any person
who is not authorised to access it.

Who is covered by the regulation?

The GDPR uses the special term “Controller” for an organization that transmits, stores, or processes personal information. You are a Controller of personal information if in any way you transmit, store or process personal information. This applies in equal measure to service organizations that receive personal information in a secondary capacity.

The GDPR also uses the special term “Processor”. You are a Processor if personal information flows through a system that you control. This applies to information you provide to other organizations and to third party computing service providers such as cloud service providers (CSPs).

Are non-EU organizations covered by the EU GDPR?

Yes, if you are located outside of the EU but are doing business in the EU or operating in the EU (you are a controller or processor of personal information of EU citizens), you fall under the requirements of the EU GDPR. This will surprise many organizations who do not have offices or employees located in the EU zone.

Are there any special categories for protection?

The EU General Data Protection Regulation establishes some special categories of individuals and information that come in for additional controls. Information about children and the information of medical patients require special attention on the part of organizations who process this type of information.

What are the penalties for non-compliance with data protection requirements?

While there is some flexibility in how fines are levied for unintentional non-compliance to the GDPR and depends somewhat on which rules you are out of compliance with, the penalties can be quite severe. The failure to protect sensitive data with encryption with appropriate technical controls is considered a severe violation. No one should ignore the potential impact of these fines. For example, an enterprise that fails to protect data can be subject to fines of up to 1,000,000 EUR (1 Million Euro) or up to 2 percent of annual worldwide revenue. You can see why this new regulation is getting a lot of attention in the European Union!

See Article 79 of the GDPR for more information about fines and penalties:

Is encryption a mandate?

This is from the GDPR recitals:

(23) The principles of protection should apply to any information concerning an identified
or identifiable person. To determine whether a person is identifiable, account should
be taken of all the means likely reasonably to be used either by the controller or by any
other person to identify the individual. The principles of data protection should not
apply to data rendered anonymous in such a way that the data subject is no longer
Identifiable.

The most common way of making data anonymous is encryption with good encryption key management.

And you should know this from Article 30 of the GDPR:

1. The controller and the processor shall implement appropriate technical and
organisational measures to ensure a level of security appropriate to the risks
represented by the processing and the nature of the personal data to be protected,
having regard to the state of the art and the costs of their implementation.

2. The controller and the processor shall, following an evaluation of the risks, take the
measures referred to in paragraph 1 to protect personal data against accidental or
unlawful destruction or accidental loss and to prevent any unlawful forms of
processing, in particular any unauthorised disclosure, dissemination or access, or
alteration of personal data.

It is likely that in almost all cases the only appropriate technical measure to ensure anonymization and security appropriate to the risk of loss is encryption with appropriate key management controls. When encryption is not specifically required we sometimes call this a “backdoor” mandate - you are not required to implement encryption, but in the context of a data breach anything else will be deemed inadequate, and subject the organization to fines. You don’t want that to happen to you.

I hope this helps you understand the basic data protection requirements of the new EU General Data Protection Regulation. I know that the regulation is complex and there remain some ambiguities. In future blog posts I will go into more detail on various aspects of the GDPR and how our solutions at Townsend Security are helping EU organizations meet the data protection requirements.

In a ruling that shocked Internet service providers and businesses in the US and abroad, the European Court of Justice ruled this week that current data Safe Harbour rules may not be adequate to protect the privacy of EU citizens and that individual countries may make their own rules about data privacy. Anyone who has lived in Europe and knows the historical context of governmental tracking and abuse of individual rights will certainly not be surprised by this ruling.

But why is this such a big deal?

Have you noticed how good Google, Facebook, Microsoft, Amazon, Yahoo and others are at showing you advertising that reflects your interests? They are really good at this because they are the ultimate data aggregators. They use their vast network of global systems to bring data about you together and then perform sophisticated analytics. This means that most Internet service providers are moving data across country boundaries into the United States or areas controlled by the US where that data is subject to government inspection.

Beyond the obvious advertising aspects of Internet services, many backup and archival systems are built on Internet-based storage services. This means sensitive backup data moves over the Internet and may move to servers or networks outside of the host country. Internet service providers have been working hard to make their systems resilient and this often means integrating across borders.

In fairness, it is not just the US government that snoops on individual activity - many governments around the world do the same thing. And that is the concern of the European courts.

If data can’t leave a country, that will have a major impact on Internet service providers. And, of course, that will have a major impact on the small and large businesses that use these services. It’s potentially a very large problem!

In a Computer Weekly interview with Andy Hardy, Managing Director of Code42, he noted the importance of encryption and key management in meeting the new requirements. Andy said:

“It need not be the end of business as we know it in terms of data handling. What businesses need to do now is safeguard data,” he said.

According to Hardy, businesses must ensure they can keep company and customer data private, even when backed up into a public cloud.

“The right technology will ensure data it is encrypted before it leaves the endpoint device, so that it cannot be decrypted in the cloud and hence remains private. The best technologies will ensure that encryption keys are kept by our customers on-premise, so only they can decrypt the data and that no one else can access it unless with prior direct request. This is the only way to ensure privacy in the public cloud post-Safe Harbour,” he said.

I think Andy has this exactly right. When encryption is done right it makes the data unintelligible to anyone without the encryption keys. Using a key management solution that is resident in the EU, which is dedicated to the data holder, and which does not allow third party administrative access will be crucial to meeting the new EU privacy laws.

That’s exactly what we do with our encryption solutions that integrate with Alliance Key Manager and we are already helping EU customers protect their data with strong encryption. EU customers can locate Alliance Key Manager within their own data center, or in a country-specific hosting center, or even in a cloud service provider platform where there are adequate guarantees around in-country hosting.

Article 29 Security Guidelines on Data Protection

The Article 29 Working Party is composed of representatives of the national data protection authorities (DPA), the European Data Protection Supervisor (EDPS), and the European Commission. It is a very important platform for cooperation, and its main tasks are to:

1. Provide expert advice from the national level to the European Commission on data protection matters.
2. Promote the uniform application of Directive 95/46 in all Member States of the EU, as well as in Norway, Liechtenstein and Iceland.
3. Advise the Commission on any European Community law (so called first pillar), that affects the right to protection of personal data.

Under EU law, personal data can only be gathered legally under strict conditions, for a legitimate purpose. Furthermore, persons or organisations which collect and manage personal information must protect it from misuse and must respect certain rights of the data owners which are guaranteed by EU law.

Every day within the EU, businesses, public authorities and individuals transfer vast amounts of personal data across borders. Conflicting data protection rules in different countries would disrupt international exchanges. Individuals might also be unwilling to transfer personal data abroad if they were uncertain about the level of protection in other countries.

Therefore, common EU rules have been established to ensure personal data enjoys a high standard of protection everywhere in the EU. The EU's Data Protection Directive also foresees specific rules for the transfer of personal data outside the EU to ensure the best possible protection of sensitive data when it is exported abroad.

In order to help address these EU objectives, Patrick Townsend, Founder and CEO of Townsend Security recommends the following data protection best practices:

• Encrypt Data at Rest
  Make a full inventory of all sensitive personal information that you collect and store. Use strong encryption to protect this data on servers, PCs, laptops, tablets, mobile devices, and on backups.
• Use Industry Standard Encryption
  Advanced Encryption Standard (AES, also known as Rijndael) is recognized world-wide as the leading standard for data encryption.
• Use Strong Encryption Keys
  Always use cryptographically secure 128-bit or 256- bit AES encryption keys and never use passwords as encryption keys or the basis for creating encryption keys.
• Protect Encryption Keys from Loss
  Encryption keys must be stored away from the data they protect.  Keys must be securely managed and should be compliant with the industry standards such as NIST FIPS 140-2 which is recognized and accepted worldwide.
• Change Encryption Keys Regularly
  Change your encryption keys on a quarterly or semi-annual basis. Using one encryption key for a long period of time can expose you to a breach notification for historical data.
• Use Strong, Industry Standard Hash Algorithms
  Never use MD5 or other weaker hash methods. Use the SHA-256 or SHA-512 methods for your hash requirements.
• Use Keys or Salt with Your Hashes
  You can use the Hashed Message Authentication Code (HMAC) method with an encryption key or use a strong encryption key under the protection of a key manager as the salt for the hash method.

For more detailed information on these recommendations, download the white paper on the "EU Data Privacy Protections and Encryption":

Here is a sneak peek at the introduction for the latest regulatory guidance white paper from Townsend Security. For detailed information, download the entire document:

On March 25, 2014, the Article 29 Data Protection Working Party of the European Union issued new guidance on data breach notification and the use of data protection technologies such as encryption and encryption key management. Extending beyond just Internet Service Providers, the new regulations cover all organizations that process, store, or transmit private information of EU citizens. Along with these new regulations, there are substantial financial penalties for failing to protect sensitive information. These penalties can reach into the 10’s of millions of Euros depending on the organization’s size and amount of data compromised.

The European Union does not mandate that all organizations immediately encrypt sensitive data, but the only exclusion for subject data breach notification and financial penalties will be for those organizations who use encryption and other security methods to protect the data. Applying these security methods after a breach will not remove the notification requirements and penalties.

EU Data Protection Directive (also known as Directive 95/46/EC) is a directive adopted by the European Union designed to protect the privacy and protection of all personal data collected for or about citizens of the EU, especially as it relates to processing, using, or exchanging such data. The following guidelines will help meet these new EU objectives:

Encrypt Data at Rest

Make a full inventory of all sensitive personal information that you collect and store. Use strong encryption to protect this data on servers, PCs, laptops, tablets, mobile devices, and on backups. Personal data should always be encrypted as it flows through your systems, and when you transmit it to outside organizations.

Use Industry Standard Encryption

Use industry standard encryption such as Advanced Encryption Standard (AES, also known as Rijndael). AES is recognized world-wide as the leading standard for data encryption. Never use home-grown or non-standard encryption algorithms.

Use Strong Encryption Keys

Always use cryptographically secure 128-bit and 256- bit AES encryption keys and never use passwords as encryption keys or the basis for creating encryption keys. Encryption keys based on passwords will never meet minimum standards for strong encryption keys. Keys should be generated using a cryptographically secure random bit generator (CS-RBG) validated to international standards.

Protect Encryption Keys from Loss

Encryption keys must be stored away from the data they protect and must be securely managed. Manual procedures cannot accomplish the goal of proper encryption key management. Use a professional encryption key management solution to protect keys and provide different keys for different data protection needs. Key management solutions should implement key creation, management, and distribution and be compliant with the NIST FIPS 140-2 standard recognized and accepted worldwide.

Change Encryption Keys Regularly

Using one encryption key for a long period of time can expose you to a breach notification for historical data. Change your encryption keys on a quarterly or semi-annual basis. A good key management solution can automatically change encryption keys at an interval you define.

Use Strong, Industry Standard Hash Algorithms

Use strong, industry standard secure hash algorithms when protecting passwords and other information. Never use MD5 or other weaker hash methods. Use the SHA-256 or SHA-512 methods for your hash requirements.

Use Keys or Salt with Your Hashes

When using a strong secure hash algorithm, always use an encryption key or random salt to strengthen the resulting hash value. You can use the Hashed Message Authentication Code (HMAC) method with an encryption key or use a strong encryption key under the protection of a key manager as the salt for the hash method.

For details on the EU Data Protection Directive...