The Legal Implications of Cybersecurity Breaches: Protecting Your Digital Assets

IBM reports that the global average cost of a data breach in 2023 rose to $4.45 million, a 15% increase over the past 3 years. This is not only a widespread threat of cybersecurity breaches, but also a growing financial impact on organizations.

This article will unveil the legal effects of cybersecurity breaches and how to safeguard your digital assets.

What are Cybersecurity Breaches?

Сybersecurity breaches are incidents that involve unauthorized access to personal or corporate data by bypassing security controls. Those can range from data theft to disruption of critical services.

In 2022, healthcare, finance, and manufacturing had the most data breaches. According to Statista, the most common cybercrimes are phishing, personal data leakage, and extortion. In October 2022 alone, 599 brands faced phishing attacks.

Most data breaches occur in healthcare, finance, and manufacturing. Statistics on cyberattacks show that criminals often resort to blackmail when they obtain the personal data of customers and companies. But is blackmail illegal under the law? Yes, and per 18 U.S. Code § 873, this action is a felony. The same applies to European legislation and most countries of the world.

Legal Framework for Cybersecurity

In this section, we will explore key cybersecurity regulations such as GDPR, HIPAA, and CCPA, and how they impact businesses and individuals.

1. GDPR (General Data Protection Regulation)

The GDPR is the legislation that contains the data protection laws in the European Union (EU). Companies that collect, process, or store personal data of European citizens must meet these rules:

• Protect personal data from unauthorized access, alteration, or destruction.
• Identify cybersecurity risks.
• Report data breaches, complying with GDPR.
• Consider data protection and cybersecurity when developing products, services, or systems.
• Conduct DPIAs (Data Protection Impact Assessments) for high-risk data processing.
• Collect and process only necessary personal data.
• Upholds individuals' rights to access, rectify, or delete their data.
• Safeguard data when transferring it outside the European Economic Area (EEA).

The GDPR requires organizations to take appropriate measures to protect personal data, assess and manage cybersecurity risks, and respond to data breaches.

2. HIPAA (Health Insurance Portability and Accountability Act)

HIPAA mandates the secure handling of protected health information and safeguards patients' privacy. Healthcare organizations must install administrative, physical, and technical security measures and reporting procedures to ensure compliance. Failure to do so can result in large fines.

Let's break down the key HIPAA regulations:

• If a cyber-attack occurs, your organization must respond and resolve technical issues to halt the attack. Prevent unauthorized access to patient health data.
• In case of a cyber-attack, report it to law enforcement agencies like local police or the FBI. Only include patient health info if HIPAA permits.
• Share cyber threat signs with federal agencies like the Department of Homeland Security. Don't include patient health data.
• Notify OCR (Office for Civil Rights) within 60 days if a cyber-attack affects 500+ people. Inform affected individuals and media, unless law enforcement requests a delay.
• OCR considers all actions taken during a breach investigation, including sharing info with law enforcement and federal agencies.

Timely and appropriate action is crucial to cut the impact of such incidents and ensure compliance with HIPAA rules.

3. CCPA (California Consumer Privacy Act)

The CCPA is California's response to growing concerns about personal data privacy. It grants California residents rights over their data and requires businesses to be transparent about their data collection practices. While it's specific to California, it has implications for businesses across the United States, as many operate in the state or handle Californians' data.

Here are the key points related to CCPA cybersecurity requirements:

• Businesses must protect personal data with reasonable security measures, focusing on risks.
• Keep a record of all data activities, data types, and rights requests. Classify data to know what's used or shared.
• Set up processes for consumer data rights. For instance, if someone wants their data deleted, make it easy to find and delete while telling them.
• Enhance cybersecurity, especially for high-risk data, to meet CCPA security standards. It's worth the cost to avoid fines.
• Check and update contracts with third-party data processors to ensure they follow CCPA rules.
• Train those handling consumer data, with suggested annual refreshers.
• Update privacy policies every year to inform consumers about data changes.
• The California Attorney General enforces CCPA and imposes fines based on non-compliance.

CCPA underscores data security, transparency, and consumer rights. Businesses must safeguard data and meet CCPA rules to avoid penalties and legal issues.

What are the Legal Implications of a Data Breach?

The loss of privacy data has implications. It is not only about technical fixes but also about eliminating the consequences.

1. Fines

Regulators can impose heavy fines on organizations that fail to protect data. These fines can run into millions of dollars, depending on the severity of the breach and the number of individuals affected.

GDPR fines and penalties

• For minor violations of the GDPR, fines can be up to EUR 10 million or 2% of annual global revenue (whichever is greater).
• Serious violations, such as breaches of consent or data privacy, can result in fines of up to €20 million or 4% of annual global revenue (whichever is greater).
• Employees can be personally fined for misusing data.

Individuals can claim compensation for GDPR violations that cause damage. The fines depend on the seriousness of the breach, intent, mitigation efforts, safeguards, cooperation, type of data, the impact of the data breach on individuals, etc.

HIPAA fines

The amount of the fine depends on the severity of the violation:

• $100 - $50,000 per violation.
• $1,000 - $50,000 per violation.
• $10,000 - $50,000 per violation.
• From $50,000 per violation.

These fines may change over time, depending on indexation. The fine considers violation severity, affected people, etc. In addition, states may impose annual fines of up to $25,000 for each category of violation. Usually, individuals are not subject to fines unless they are legal entities or business partners.

CCPA fines

• Intentional violations of the CCPA can result in fines of up to $7,500 for each violation. The California Attorney General can enforce these penalties on behalf of the state's people.
• If a breach isn't intentional, the largest fine is $2,500 per violation.

Whether a violation is intentional depends on whether the business corrected it within 30 days. Failure to do so may indicate that the breach was intentional.

The CCPA also allows for consumer lawsuits. The amount of compensation ranges from $100 to $750 per consumer per incident or actual damages, whichever is greater.

2. Data breach lawsuit damages

Individuals and affected parties have the right to file lawsuits against organizations responsible for data breaches. For example, penalties for intentionally breaking HIPAA rules include:

• Tier 1: Up to 1 year in jail for not knowing about the violation.
• Tier 2: Up to 5 years in jail for pretending to have a reason for accessing data.
• Tier 3: Up to 10 years in jail for personal gain or harm intent.

This can lead to expensive court battles. In some cases, class action lawsuits have resulted in significant compensation.

In addition, the most insidious consequence of a cybersecurity breach is the damage done to an organization's reputation. Trust is hard to gain and easy to lose. News of a breach can undermine customer confidence and lead to a loss of business.

For example, in July 2023, a data breach at HCA Healthcare affected about 11 million patients. Case included sensitive information such as names, addresses, email addresses, phone numbers, dates of birth, gender, dates of service, and location, which are protected by the federal HIPAA Privacy Rule. The breach resulted in significant reputational damage as the case received widespread media coverage and more than 25 class action lawsuits from affected individuals.

Steps to Protect Digital Assets

IBM reports that 51% of organizations are preparing to increase their security investments in response to the threat of a data breach. These increased investments cover critical areas such as:

• incident response (IR) planning and testing; .
• employee training initiatives;.
• the implementation of advanced threat detection and response tools.

While the threat of cybersecurity breaches is ever-present, there are concrete steps individuals and organizations can take to strengthen their defenses.

1. Regular Audits and Testing

Auditing and testing your cybersecurity infrastructure can identify vulnerabilities before they are exploited by attackers. The components of this process include penetration testing, vulnerability assessment, and security audits. To do this, compare your cybersecurity policy with regulatory standards. You can also hire external auditors or penetration testing companies. Be sure to constantly monitor the data for gaps.

2. Employee Training

Human error remains the main cause of cybersecurity breaches. Therefore, companies must train their employees in cybersecurity. This can be done in the following ways:

• Online courses.
• In-person seminars.
• Simulations of phishing attacks.
• Informational emails.
• Virtual training in real-time.
• Simulation of spear phishing and vishing scenarios.
• Internal chat channels.
• Informational posters and videos.
• Contests and rewards.
• Сybersecurity wiki.

Training programs can cover recognizing phishing attempts and maintaining strict password hygiene.

3. Usage of Security AI and Automation

It's worth noting that 28% of organizations make extensive use of security AI and automation. Their average cost savings amounted to USD 1.76 million compared to those who did not implement AI in cybersecurity.

The most common ways to use AI for cybersecurity include:

• To analyze historical and real-time data to identify patterns and anomalies that may indicate security threats.
• To monitor user and network behavior for anomalies.
• For automated alerts for rapid response to security incidents (e.g., Security Orchestration and Response Automation (SOAR) platforms).

4. Cloud Data Safety

IBM reported that 82% of data breaches implicated data stored in the cloud. To ensure the security of your cloud data, be sure to research the safety certifications and reliability of the cloud service. Strong authentication, such as MFA, and data encryption should be provided. You can also use the default Zero Trust strategy if necessary. According to this strategy, you verify all access requests yourself.

Data Breach Response Plan

This plan outlines how to respond in the event of a breach, including notifying affected parties, law enforcement, and regulatory authorities.

Here are the steps to take when your business experiences a data breach:

1. Respond to secure systems and address vulnerabilities that led to the breach, preventing further incidents. Secure physical access points if involved, and change access codes.
2. Remove data from websites and contact search engines to prevent archiving.
3. Gather information from those who discovered the breach and ensure customer service knows where to relay pertinent details for investigation.
4. Preserve forensic evidence throughout the process and engage forensic experts to understand the breach's origin. Analyze data backups, review access logs, and install recommended remedies.
5. Develop a clear communication plan for all affected parties, maintaining transparency and accuracy. Follow relevant laws, notifying regulatory authorities, law enforcement, and affected individuals.
6. Notify the relevant financial institutions. If handling data for other businesses, inform them of the breach.
7. Inform affected individuals with specifics about the breach, its impact, and actions taken to address it. Provide contact information.
8. Tell individuals about protective measures, such as fraud alerts or credit freezes, based on the exposed data type.
9. Offer guidance on recovering from identity theft.
10. Maintain comprehensive records of all response actions, including incident reports, communication logs, and forensic findings.

The faster and more effective an organization responds, the better it can mitigate the damage and legal consequences.

Frequently Asked Questions

1. How often do cyber attacks occur?

According to a study by the University of Maryland, a hacker attack takes place every 39 seconds in the world.

2. When must data breaches involving personal data be reported?

Under GDPR, companies must notify the authorities of a personal data breach within 72 hours of the incident. Under other regulations, the time varies between 30-60 days.

What is the most common cause of cybersecurity breaches?

The most common cause of cybersecurity breaches is employee error. This applies to the following situations:

1. bad and unreliable passwords;.
2. misuse of employees' personal e-mail;.
3. excessive sharing of information on social networks;.
4. careless use of smartphones;.
5. improper use of collaboration tools.

In addition, cybersecurity breaches often arise from software vulnerabilities, malware, social engineering tactics, and theft of devices containing sensitive data.