Was OFAC’s Advisory an October Surprise or More of the Same?

Lee A. Casey and Theodore J. Kobus III of BakerHostetler comment on the recent OFAC advisory that made a lot of headlines this past week.  As I had pointed out in my preface to coverage of the advisory, it was footnoted that the advisory does not have the force of law or change any regulations or laws. But it seemed to make a lot of people start asking questions that they may not have asked before.

BakerHostetler is one of my go-to law firms when I want to know what the legal profession is seeing and doing with regard to ransomware attacks as they have a lot of experience.  In their client advisory this week, they address the OFAC advisory, in the context of their extensive experience:

We produce a yearly report that provides statistics and insights based on the data security incidents we worked on over the prior year.[1] This year’s Report analyzes the more than 1,000 incidents we worked on in 2019. 24% of our 2019 incidents were ransomware. In 2018, the average ransom amount was $28,920. In 2019, the average ransom amount increased to $302,539. Ransom demands have continued to grow in 2020, and as our next report will reflect, we are seeing demands in excess of $50 million. Exfiltration is an issue in a growing number of incidents (whereas only 6% of ransomware incidents in 2019 involved notification obligations being triggered).

One of the initial questions that our clients ask us is whether companies actually pay ransom and whether there is any prohibition against making payments. Yes, companies pay ransom. And, we are seeing payments made on a daily basis—that’s how big this issue is. Before a payment is made, the company generally retains a third-party to conduct due diligence to ensure that the payment is appropriate, i.e., that is not being made to a sanctioned organization or a group reasonably suspected of being tied to a sanctioned organization. Additionally, checks are in place to ensure that anti-money laundering laws are not being violated.

As they note, attribution is extremely difficult, and entities should not be relying on those who are just speculating about attribution. We’ve certainly seen such speculation on social media and even on this blog, where I once commented on how Maze was claiming to be North Korean, which if true, might raise issues or risks in paying them — but as soon as I pointed they out, someone suddenly claimed to have discovered that they are Romanian. DataBreaches.net is not making any authoritative claims as to what any group might be or whether they are connected to any governments.  As Casey and Kobus wisely advise,  “Companies can and must rely on their own thorough due diligence efforts and risk-based compliance programs.”

What they do see in the advisory is more of a push to get entities to contact the FBI promptly. They write that one of the takeaways is:

Cooperating with law enforcement is critical. The U.S. Government benefits because it can gather more information about these threat actors to help with prosecution. Although our clients are generally working with law enforcement, we are hearing that many companies are not reporting these incidents to the FBI. OFAC’s guidance is pushing companies to work with the FBI more closely. The benefit to the company is the threat information sharing, which could also include information about the origin of the threat actor. In addition, OFAC has identified early and continuing cooperation with law enforcement as a “significant mitigating” factor in an enforcement context.

Read more on BakerHostetler Law.

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