A Big Lesson From a $60M Fine for Poorly Performed Data Disposition

Posted by Frank Milia

Oct 13, 2020 9:59:39 AM

Last week the Department of the Treasury OCC levied a $60 million dollar fine to Morgan Stanley for data breaches that occurred from poorly managed IT asset disposition projects associated to data center decommissioning activities in 2016 and additional disposal events in 2019. 

In a recent consent order the OCC describes that the bank “…failed to effectively assess or address the risks associated with the decommissioning of its hardware; failed to adequately assess the risk of using third party vendors, including subcontractors; and failed to maintain an appropriate inventory of customer data stored on the devices.”

The responsibility to stop unauthorized access to protected data is disproportionately the responsibility of the data controller, in this case Morgan Stanley. Detailing all of the security controls required to lower risk would not be possible in this short article. In reality there is no one tool, vendor, process, method, policy, or procedure that one could point to that would have guaranteed the bank hundred percent security. 

Secure management of data disposition, especially for large enterprises, requires a robust program that includes policies, procedures, assigned accountability, employee training, contracting and vendor due diligence requirements, and a process for strict oversight of activities all working together to minimize the risk of exposure and regulatory non-compliance.  

From a reading of the previously mentioned description from the OCC it would be easy to characterize Morgan Stanley’s management of these data disposition activities as a failure by every measure.   However, it is the following accusation by the OCC that most likely explains why the fine is so high “The Bank failed to exercise adequate due diligence in selecting the third party vendor engaged by Morgan Stanley and failed to adequately monitor the vendor’s performance”.   

Due Diligence on Black-Golden Watch Face with Closeup View of Watch Mechanism.

Typically, regulatory fines are reduced when the organization under investigation is able to prove that reasonable steps to protect private data were taken. In other words, mistakes will happen but if an organization can display that they have formal and documented data disposition procedures that includes vendor due diligences the penalties for an incident will likely be reduced.

At this time Morgan Stanley has yet to disclose the vendors utilized to perform these services. Considering the OCC’s claims that the bank failed to perform due diligence and oversight of the vendor’s practices it is likely that Morgan Stanley is unable to effectively shift the liability and financial responsibility to the contractor. 

Although there is no legal mechanism for Morgan Stanley to be indemnified of their regulatory obligations, they theoretically would be able to recoup some of the financial impact of the fine if there were well written contracts, documented performance testing and due diligence records. 

Performing documented due diligence in vendor selection and ongoing auditing of a vendor’s practices will significantly reduce the financial impact of breach or other regulatory non-compliance by reducing fines and ensuring an effective method for suing vendors that break contractual obligations. Vendor due diligence should include documented investigation of a vendor’s policies, procedures, methods, breach notification systems, training programs, third party certifications and key management system protocols at selection and at minimum on an annual basis. 

In the most simplest terms it appears that Morgan Stanley did little to deter these breaches from occurring, but the impact of the breaches were multiplied by the inability to establish that any care was taken in their approach to data disposition and vendor management. 

Every organization is at a risk of data breach or regulatory fine associated to poor data disposition. The only way to both minimize the likelihood of an exposure and reduce the financial impact if one would to occur is by investing in your data disposition program and ensuring internal and external stakeholders are regularly tested, results are documented, and corrective actions implemented when applicable. 

 

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Topics: IT Asset Disposal, data breach, education & tips, IT Asset Disposition, Risk Management

Maintaining Rational Policies in the Face of Failure

Posted by Frank Milia

May 29, 2019 2:48:09 PM

When we fail in life, especially at our security, we tend to overreact and make quick and sweeping changes.  If you leave your door open and your home is burglarized, moving out of your neighborhood or installing a state of the art security system may be an irrational response compared to locking your doors from now on. When implementing changes, it is important to address the specific cause of the failure and not let fear of reoccurrence cloud the way you make improvements.         

When organizations uncover regulatory data protection non-compliance or suffer the consequences of an outright data breach, many times they struggle to implement corrective actions that address the root cause of the issue or otherwise implement new policies that can adversely affect the business and fail to focus on addressing the deficiency head on.   Security, IT, and compliance stakeholders need to stay focused on resolving the cause of an issue and not be distracted by fear or be rushed into implementing hastily designed corrective actions.  

Policies - Red Ring Binder on Office Desktop with Office Supplies and Modern Laptop. Business Concept on Blurred Background. Toned Illustration.

To illustrate this point I will provide a common scenario I have witnessed from clients that I provide data disposition and regulatory compliance consulting as well as IT asset disposition and data destruction services to.       

Scenario:

A large financial institution has internal policies and procedures to perform erasure of hard drives prior to performing lease returns and disposal of retired assets.  The firm is notified that a shipment back to a vendor contained drives that were not wiped. The drives were encrypted so at the time of this event there were no regulations in the USA that would consider this event a breach requiring disclosure.  However, the company’s internal policies and procedures were not followed therefore an investigation and corrective action was required by internal stakeholders. 

The company identified the risk was from allowing erasure and reuse of the hard drives and implemented a new policy and procedure that all hard drives would now have to be physically destroyed before disposal or lease return.  Although one could argue that this approach makes sense considering the high cost and risk of a data breach, it is actually a flawed response that does not address the root cause of the non-conformity (an employee’s actions failed to adhere to company policy). 

When I analyze and investigate events like this, common root causes tend to include:

  1. Technician(s) failed to erase and document erasure as designed and provided in existing management system
  2. Management system failed to assign accountability of such events
  3. Technician(s) not properly trained or no documented training sessions found
  4. Routine audit of applicable work not practiced
  5. Process for erasure and equipment returns failed to have redundancies, spot checks, and/or verification steps to ensure compliance
  6. Inadequate managerial oversight or approval system in place for data destruction and return management
  7. Detailed processes and work flow procedures poorly documented or none in writing found

The client’s response to require on-site destruction of all media does not address any of the issues noted above.  The firm can change the method, destruction tool, and policy but without addressing the core deficiencies in the management system, procedures, training, and redundancies the threat of a non-conformity or event that leads to a data breach remains. 

Not only has the firm made a policy change that will cost millions of dollars in lost revenue from resale and increased lease return fees but they have also done little to reduce the risk stemming from the lack of accountability and the imperfect system that lead to a technician shipping a device with live data still residing on the hard drive.   This same flawed system left unchanged, other than method of destruction, will likely lead to a technician again shipping a device with a hard drive (not wiped or physically shredded).   

Security is too often judged as a consensus of feelings. Many times even the most sophisticated organizations and experienced practitioners will make irrational policies based on how a policy makes them feel.  In this case although the financial firm’s policy to destroy the drives does not address the root-cause, it does make them feel more secure now that all drives will be destroyed.  Organizations incorrectly choose abrupt and elementary policy changes rather than more complicated procedural updates that require greater oversight and investment but will more effectively address deficiencies.          

As security professionals we need to analyze the logical and empirical security deficiencies, prescribe solutions based on the root causes, assign accountability and test and evaluate our systems and programs all the while taking care to prove the value of such investment to the business’s stakeholders.  When changing policies in the face of failure, it is important to remove fear from the equation and focus on addressing the problem with a clear mindset. 

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Topics: education & tips, IT Best Practices, IT Management, Risk Management, Information Security

Add NIST 800-88 to Your DoD Data Destruction Playbook

Posted by Frank Milia

Oct 9, 2017 3:00:25 PM

It’s time your IT asset disposal program manager ditches a murky understanding of DoD data destruction(Department of Defense 5220.22-M) by adding a clearer understanding of the NIST 800-88 (National Institute of Standards and Technology 800-88 Guidelines for Media Sanitization).

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The DoD data destruction standard does not provide the adequate specifics an organization or business will require in order to run a secure program in a real world operation. The DoD does provide broad guidelines that should be adhered to by any organization maintaining or disposing of sensitive data.

The NIST 800-88 Guidelines, however, provides a detailed roadmap for creating a data destruction program built on the principles of identifying risk, life cycle stage of media, selecting and implementing appropriate methods of destruction, verifying and overseeing success, and documenting procedures and work performed.

“We perform DoD data destruction” has been a mantra of the ITAD (IT asset disposal) industry for well over a decade. But when one pushes for more specifics from a vendor or program manager one is likely to find inconsistent interpretations of the standard from a belief that it exclusively refers to three pass binary wiping, seven pass binary wiping, to a misconception that only physical shredding and pulverization of media can achieve data security.

In reality the DoD data destruction method does have recommended standards for two step erasure of drives using a clear and binary pass overwriting. It also includes basic standards for the removal of physical identifiers, chain of custody documentation, and physical destruction of optical media. The DoD standard does not recommend any specific tools, software, machinery, or provide any types of certifications to vendors or products.

The NIST 800-88 provides a clear manual that guides IT professionals to select the appropriate tool by the life cycle, risk level, and type of media. For example the document points out that a degausser should never be used for solid state media. Since SSD media is not magnetic media the degausser would not destroy the data on the chip sets. This type of granular knowledge is a must have for every IT asset manager.

Here at ITAMG we help our clients understand the NIST 800-88 model and how to develop custom programs that address unique business, industry, and regulatory compliance requirements.  

For more information on appropriate methods and documentation of data destruction practices please review our short guide to NIST 800-88.

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Topics: IT Asset Disposal, data destruction, NIST 800-88, eWaste Disposal, Risk Management, hard drive disposal, dod data destruction

Bidding a Project to Computer Liquidators

Posted by Frank Milia

Sep 18, 2017 9:14:26 AM

If your IT department generates valuable surplus computer equipment whether through a regular refresh project, office relocation, staff reduction or merger it will be helpful to understand how to bid out an IT asset disposal project to computer liquidators.


We suggest contracting a prime source for ongoing IT asset disposal services, but from time to time it may be required to get a fixed bid on excess IT assets. In this post we will be providing a few tips on how to solicit offers in a way that will fairly evaluate capable vendors.

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1. Qualify a list of bidders before distributing a Request for Proposal. Do not waste time taking offers from vendors that do not meet your company’s security, environmental compliance, or risk assessment requirements. When researching vendors and compiling a list of potential bidders weed out any vendors that do not meet your internal requirements. We suggest only bidding projects to vendors with third party certifications such as ISO 14001, Responsible Recycling (R2), and e-Stewards certification.

2. Create a spec sheet for the equipment that you will be bidding out, including an accurate estimate of the quantity of machines by locations. As an example for a desktop, note the make, model, processor model, RAM configurations, hard drive type and size, and form factor. Sometimes providing a service tag or part number will be enough, but to avoid potential issues from discrepancies it is best to have all bidders on the same page at day one of bidding. For a vendor to include all shipping and packaging costs in an offer they will need to know how many units and where the units are located.

3. Create a fixed timeline to receive accurate pricing. Provide bidders with a deadline for bids and what day the equipment will be released and ready for pickup. Most vendors will have an expiration date for competitive offers. A long timeline for a sale puts the vendor and your organization at risk of a bid expiring and the depreciation of the market effecting value returns for all parties. Reduce your company’s exposure by providing accurate timelines and rebidding if the timelines are not met.

4. Make sure all service level requirements are specified at the time of bid. Clearly outline any packaging services, de-racking, wiring, on-site data destruction, or any other services that will come at a cost to your company or vendor at the time of the bid. In order to fairly evaluate vendors one needs to avoid selecting a vendor and then finding out that there are additional costs and reductions to the value back because the requirements of the equipment sale were not clearly specified at the bidding.

Following these guidelines will help you seamlessly sell surplus IT equipment.

Looking for a tool to get the most value back on your company's IT disposals?

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Topics: IT Asset Disposal, IT Asset Disposition, eWaste Disposal, Risk Management, IT Liquidation

Three Quick IT Liquidation Tips

Posted by Frank Milia

Aug 1, 2017 10:25:22 AM

Evaluating an IT liquidation provider to purchase your corporate IT equipment can be a difficult task to accomplish. There are a good deal of variables that can lead an IT manager down a path where he or she will be unable to accurately evaluate competitive quotes, incur unnecessarily high service costs, or set incorrect expectations of value returns that will not be achieved at the end of a project.

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Here are some quick tips to make you aware of potential pitfalls and help you eliminate these variables.


1. Know what you’re selling. Having a good understanding and detailed inventory of the models, specs, functional conditions, and cosmetic conditions of your equipment is the most empowering tool you will have available in the process. The more details and assurances you’re able to provide to a vendor the more comfortable and competitive the solution the ITAD provider will be able to offer. Its understandable most IT departments will not have the resources to test equipment and note cosmetic issues on every machine, but if you’re aware of equipment defects and issues provide this information to your IT liquidation vendor and get an understanding of what the cost reductions will be ahead of executing the project.


2. Understand your service level requirements. Make sure to provide all IT liquidators bidding on your project with detailed information on what data destruction service level, packaging requirements, building access requirements, shipping requirements, or any other data and asset management requirements you may have. This can be particularly important when the service level will affect the value of the equipment. For example, if you choose to require a vendor to shred the hard drives from a laptop liquidation there be additional costs for the destruction services and the machines’ overall value will be decreased from removing the hard drives.


3. Set a rigid time frame for the project. The secondary markets fluctuate rather quickly and most IT disposal vendors will not be willing to hold aggressive return rates in effect for longer than 10 business days. Keep in mind that if you’re planning a project 30-90 days out to set these expectations upfront so the vendors are able to give realistic pricing that can be met. We suggest in these situations to get the IT asset recovery estimate from vendors early in the planning stage and qualify capable providers. You can then re-price the project and make final decisions closer to the release of the equipment.

Having a good understanding of your disposal inventory, conditions of the equipment, service levels required, and time frame of project will allow you to control the process and meet the expectations set with your IT asset disposal vendor.

Looking for a tool to get the most value back on your company's IT disposals?

Download the ITAMG Inventory Template Today:

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Topics: IT Asset Disposal, IT Asset Disposition, eWaste Disposal, Risk Management, IT Liquidation

   

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