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How to Comply with Data Encryption Laws

What the Law Requires

In my last blog post, I pointed out the new laws in Massachusetts and Nevada that require all personal data in transit to be encrypted. That post generated lots of discussion, including thoughtful responses from Steve Duplessie and Joseph Martins, and I urge you to read those as well.

Two key questions remain: What exactly do these laws demand and how will you actually comply with them? Sure, encryption technology is widely available, but actually implementing it has been a slow uphill climb for most IT organizations. Let's examine the implications!

What the Law Requires

In my years of IT consulting, and especially over the last two, where I focused on litigation readiness, I've come to see that laws are rarely as cut and dried and actionable as IT would like. As pointed out by Martins, the Nevada statute is particularly vague. But even the much more lengthy Massachusetts law does not answer the key IT implementation questions. Time will tell how these requirements are interpreted and implemented by the Attourneys General and courts of these two states. Until then, we will have to make some educated guesses based on both the letter and intent of the lawmakers.

Let's examine some of the questions these laws raise:

  1. What type of data is covered? These laws do not cover all information, or even most information. Both relate exclusively to personal information that could be used for identity theft or fianancial crime. Massachusetts clarifies that a covered record would include both a name and a key piece of financial or identity information like a social security number, driver's license number, financial account number, or credit card number.
  2. Does it cover all personal data everywhere? Both laws require protection of data everywhere, but neither requires encryption of data inside "secure systems". So data in transport outside the company is the real focus.
  3. Does it only apply to networks? Nevada isn't clear on what constitutes an "electronic transmission" (though it specifically exempts faxes) but Massachusetts is much broader. They specifically include "electrical, digital, magnetic, wireless, optical, electromagnetic or similar" media, and also name "laptops and portable devices" and wireless networks. So tapes, CDs, thumb drives, portable machines, and networks are all definitely included.
  4. Who are these laws designed to protect? Both legislatures clearly want to protect consumers from identity theft, but they went about it very differently. Massachusetts demands protection for all residents of the Commonwealth, while Nevada wrote its law to demand action from businesses in the state. These are two very different requirements: The Massachusetts law could demand action from out-of-state entities doing business with its residents, while the Nevada law could leave some residents unprotected. Conversely, a business in Massachusetts would not necessarily have to encrypt the personal data of non-residents, while a Nevada business would have to protect residents of other states!
  5. Who enforces this? In both cases, the state Attourneys General would be required to select cases and bring legal action if necessary to enforce compliance. This would be a very serious and costly legal case, and the lawmakers clearly expect businesses to self-regulate to make sure it doesn't come to that! Note that HSBC was just fined $5.2 million in the UK for a similar data loss!
  6. To what extent do these apply to companies outside Nevada or Massachusetts? The Nevada law only covers "business in this State", so one would presume that those with no presence in Nevada would not be required to comply. The Massachusetts law would seem to require any business anywhere to comply and protect the data of its residents, but enforcing these requirements with regard to out-of-state businesses would seem to pose a problem.

How Should We Respond?

To put it plainly, if you do business in or with the citizens of Nevada or Massachusetts, you must comply with these laws and encrypt all personal data. Of course, this is easier said than done! Most IT organizations have very little insight into the nature of the data they manage, and many systems lack the ability to encrypt one type of data and not another. The Massachusetts businesses I have talked to are starting by encrypting all data in transit!

Here's what I would do if my business had a presence in Nevada or gathered personal data about Massachusetts residents:

  1. Begin a data classification effort to better understand which data is where. Massachusetts specifically requires that companies inventory the data being transported. This can be a time-consuming process, so start early! But don't wait until it's done to act: Massachusetts also requires data to be encrypted immediately, so you'll probably have to encrypt everything at least in the short term.
  2. Reassess third-party providers to make sure they are ready to comply with these laws. Make sure that they are aware of these requirements, and that they support strong encryption and access control. Also ask for a SAS70 or similar audit that can demonstrate that they have solid controls in place.
  3. Use a good firewall to protect your internal networks and systems and review your access control, password, and VPN settings.
  4. Use encryption on all wireless networks, and specifically use WPA2 since it's much more secure than the old WEP standard.
  5. Encrypt all WAN traffic, since you never can tell what is being transported over the Internet. Enabling SSL or TLS is a great place to start. If you use any outside services, make sure that they support this basic level of network traffic encryption.
  6. Encrypt any data stored remotely, especially if you are using cloud storage or infrastructure as a service (IaaS) providers. This can be a hassle if the provider doesn't natively support encryption, but you are on the hook to make sure third-parties comply as well!
  7. Encrypt your backup tapes starting now. You can't send unencrypted data to Iron Mountain or other providers anymore.
  8. Develop a plan to encrypt the tapes already off-site since you can't recall unencrypted tapes, either. This one is a doozy, especially if you already have tens or hundreds of thousands of tapes out there. One business I talked to plans to contract with a vendor to refresh and encrypt every tape!
  9. Encrypt laptops belonging to anyone who might carry personal information around. This would definitely include HR, Legal, and Compliance, but might also include developers or engineers who are using live data for support, test, or development.

Take Action!

This entire process will be a huge undertaking, but there is a bright side: This requirement is an opportunity to finally tackle the issue of data security! If you're like me, you've always wanted to encrypt those backup tapes, laptops, and network connections. Now is your big chance!

This is also an opportunity to review your backup and archiving practices. Just how useful are 100,000 tapes in some Iron Mountain vault? Wouldn't your business be better served by (finally!) implementing real, separate backup and archiving strategies?

How about using an on-site VTL for operational recovery (backup) and a purpose-built electronic archiving system and getting rid of those tapes altogether? There are lots of great cloud-based archiving and DR solutions these days, and these are a serious upgrade from the 1990's-era "tapes in a vault" approach in terms of accessibility, time-to-recover, and even cost!

I am not a lawyer or providing legal advice! I'm just trying to figure out what all this means. Please consult an attourney familiar with these laws!

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More Stories By Stephen Foskett

Stephen Foskett has provided vendor-independent end user consulting on storage topics for over 10 years. He has been a storage columnist and has authored numerous articles for industry publications. Stephen is a popular presenter at industry events and recently received Microsoft’s MVP award for contributions to the enterprise storage community. As the director of consulting for Nirvanix, Foskett provides strategic consulting to assist Fortune 500 companies in developing strategies for service-based tiered and cloud storage. He holds a bachelor of science in Society/Technology Studies, from Worcester Polytechnic Institute.