Security Experts:

NY Attorney General Proposes Plan to Toughen State's Data Security Laws

New York State Attorney General Eric T. Schneiderman announced plans today to propose state legislation that would require new safeguards for the personal data of consumers.

The sweeping proposal would focus on several areas, including: expanding the definition of personal information; creating requirements for the digital and physical protection of data; mandating administrative safeguards like employee training and providing liability protection for companies sharing forensic data with law enforcement. It would also create a safe harbor for businesses that meet certain standards.

"With some of the largest-ever data breaches occurring in just the last year, it’s long past time we updated our data security laws and expanded protections for consumers," Schneiderman said, in a statement. "We must also remind ourselves that companies can be victims, and that those who take responsible steps to safeguard customer data deserve recognition and protection. Our new law will be the strongest, most comprehensive in the nation."

In July, the attorney general issued a report stating that the number of reported data security breaches in New York more than tripled between 2006 and 2013. The report also found that during that same time period, 22.8 million personal records of New Yorkers were exposed in nearly 5,000 data breaches, costing the public and private sectors in New York more than $1.37 billion in 2013 alone. Hacking intrusions – in which third parties gain unauthorized access to data stored on a computer system – accounted for some 40 percent of all the breaches.

"One very positive aspect of the New York AG’s move is the recognition that such policies can’t be all stick – there has to be some carrot," said Mike Lloyd, CTO at RedSeal.

"This is an interesting new angle," he continued, "and it parallels significant aspects of the President’s proposal – offering shields from liability. This is important, because the interests of individual business decision makers are not always well-aligned with the interests of customers – disclosure can be painful and disruptive, and corporations have several strong motives to keep bad news about a breach hidden. There are lots of existing laws...but they are heavily negative. It’s a timely initiative to give corporations a positive reason to come clean about what is happening."

Earlier this week, U.S. President Barack Obama outlined data security and privacy initiatives the administration plans to pursue. Among them are the Personal Data Notification and Protection Act, which would protect consumers living in states that either lack breach notification laws or have fairly weak ones, and the Student Data Privacy Act, which is aimed at protecting student information stored in online education services and educational software from being collected and repurposed.

Alan Raul, partner and global coordinator of Sidley Austin LLP’s Privacy, Data Security and Information Law Practice, said the NY Attorney General’s proposed bill would offer protection to companies that commit to applying heightened data security standards against investigations by the Attorney General's office and potentially consumer liability.

"This is a creative approach to incentivize companies to adopt stronger safeguards and more rigorous control processes like those of the NIST [National Institute of Standards and Technology] Cybersecurity Framework," Raul said in a statement. "If New York enacts an effective safe harbor, it could be a very positive development to encourage uptake of substantively superior security. This would be a far cry better than merely perpetuating the current 'blame the victim' approach that has done little to prevent data breaches or promote better cybersecurity. Trading higher standards for a safe harbor could even be a productive model for the federal government and other states."

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