Ransomware Ransom Payments: A Geostrategic Risk

The following is a Google-translated statement addressing the significant and negative impact of ransom payments on the German economy and recommendations to reduce and eliminate the payment of ransoms.

In the original German, “Lösegeldzahlungen bei Ransomware-Angriffen: ein geostrategisches Risiko” can be found at https://ransomletter.github.io/:

Blackmail Trojans in the form of so-called ransomware have grown into a serious and permanent threat to the German and European economy in recent years. A current Bitkom study puts the damage caused by data theft, espionage and sabotage for the German economy alone at EUR 223 billion annually – this corresponds to over 6% of the entire German gross domestic product for 2021 (EUR 3.57 trillion). Nine out of ten German companies are now affected, and authorities and critical infrastructures are not immune to attacks either. According to the study, ransomware is responsible for a large part of the damage. Even data backups now only help the victims to a limited extent, because for some time criminal gangs have been copying data before encrypting it and then threatening the victims with the public disclosure of confidential data if the required ransom payment is not made.

Due to this problem, the willingness of companies to make ransom payments has recently increased significantly. According to a current study by the security service provider Sophos , around 42% of all German companies pay the requested ransom, on average over EUR 250,000 – and this despite contrary recommendations from the BSI and BKA . Given the enormous costs of restarting operations without paying a ransom (according to the study , an average of around EUR 1.6 million), this decision is hardly surprising. Paying the ransom is not only financially cheaper for the individual company, it can also be covered by so-called cyber insurance can now also be planned quite easily in the annual budget. Around 80% of the companies surveyed by Sophos are insured against ransomware attacks. In addition to recovery measures, the majority of insurers may also pay the required ransom if this minimizes the damage to the company.

However, ransomware payments are the root of all evil with ransomware: ransomware has been a highly organized crime for years, with sales in Germany exceeding that of the entire European drug trade by around eight times . If victims of ransomware did not pay the ransom demanded, this business model would be nipped in the bud. Conversely, however, the victims’ willingness to pay made this criminal business model possible in the first place. Reinvestments by active criminal gangs have led to the fact that they are now able to proceed in a highly professional manner and are technically and methodically better positioned than the companies attacked. Profits primarily benefit states that Germany actually sanctions.recent BBC study shows that 74% of all ransomware ransoms in 2021 were paid to criminal gangs in Russia. Various media outlets have repeatedly reported on the Kremlin’s strong ties to the criminal gangs in question. Ransom payments thus significantly weaken the current EU embargo against Russia. North Korea is also directly involved in ransomware attacks , but also regularly steals the corresponding cryptocurrencies to finance its nuclear missile program .

Against this background, it can be stated that the willingness to pay ransoms has now developed into a massive geostrategic risk for Germany that can no longer be ignored. Ransom payments strengthen Germany’s geopolitical competitors and weaken the German economy and the German state, endangering our critical infrastructure. But even here on site, ransom payments create the wrong incentives, because they give companies and authorities a supposedly easy way out that alleviates suffering in the short term, but causes more problems in the medium term than it solves: instead of investing in improving their IT security and performance , victims pay ransom, increasing the likelihood of further successful attacks against themselves and others. Smaller companies in particular are at a disadvantage because they cannot afford ransoms and cyber insurance and are potentially bankrupt in the event of an attack.

The signatories therefore call on federal politics:

  • Adopt measures and set incentives that effectively prevent ransom payments in ransomware attacks.
  • Abolish the tax deductibility of ransomware ransom payments (§ 33 EStG).
  • Enforce reporting of ransomware attacks and ransom payments for companies over a certain size.
  • Stop insurance companies backing these ransom payments.
  • Instead, promote insurance that covers the loss of revenue and recovery efforts caused. Since insurers are increasingly demanding strong security measures from policyholders, there is an opportunity here to significantly increase IT security across the board without having to take further regulatory measures.
  • Provide appropriate support, such as a relief fund, to organizations in financial distress from ransomware attacks so they are not forced to pay ransoms. However, support should be subject to conditions that ensure that victims do not neglect their duty to protect themselves.
  • Force measures that German companies will provide in the future with methods and technologies in order to be able to meet the IT security requirements placed on them effectively and yet as cost-effectively as possible.

You can read the names of the signatories at ransomletter.github.io/.

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