Cybersecurity

This is the thirty-fourth in a series of Covington blogs on implementation of Executive Order 14028, “Improving the Nation’s Cybersecurity,” issued by President Biden on May 12, 2021 (the “Cyber EO”).  The first blog summarized the Cyber EO’s key provisions and timelines, and the subsequent blogs describes described the actions taken by various government agencies to implement the Cyber EO from June 2021through January 2024.  This blog describes key actions taken to implement the Cyber EO, as well as the U.S. National Cybersecurity Strategy, during February 2024.  It also describes key actions taken during February 2024 to implement President Biden’s Executive Order on Artificial Intelligence (the “AI EO”), particularly its provisions that impact cybersecurity, secure software, and federal government contractors. 

NIST Publishes Cybersecurity Framework 2.0

            On February 26, 2024, the U.S. National Institute of Standards and Technology (“NIST”) published version 2.0 of its Cybersecurity Framework.  The NIST Cybersecurity Framework (“CSF” or “Framework”) provides a taxonomy of high-level cybersecurity outcomes that can be used by any organization, regardless of its size, sector, or relative maturity, to better understand, assess, prioritize, and communicate its cybersecurity efforts.  CSF 2.0 makes some significant changes to the Framework, particularly in the areas of Governance and Cybersecurity Supply Chain Risk Management (“C-SCRM”).  Covington’s Privacy and Cybersecurity group has posted a blog that discusses CSF 2.0 and those changes in greater detail.

NTIA Requests Comment Regarding “Open Weight”

Dual-Use Foundation AI Models

            Also on February 26, the National Telecommunications and Information Administration (“NTIA”) published a request for comments on the risks, benefits, and possible regulation of “dual-use foundation models for which the model weights are widely available.”  Among other questions raised by NTIA in the document are whether the availability of public model weights could pose risks to infrastructure or the defense sector.  NTIA is seeking comments in order to prepare a report that the AI EO requires by July 26, 2024 on the risks and benefits of private companies making the weights of their foundational AI models publicly available.  NTIA’s request for comments notes that “openness” or “wide availability” are terms without clear definition, and that “more information [is] needed to detail the relationship between openness and the wide availability of both model weights and open foundation models more generally.”  NTIA also requests comments on potential regulatory regimes for dual-use foundation models with widely available model weights, as well as the kinds of regulatory structures “that could deal with not only the large scale of these foundation models, but also the declining level of computing resources needed to fine-tune and retrain them.”Continue Reading February 2024 Developments Under President Biden’s Cybersecurity Executive Order, National Cybersecurity Strategy, and AI Executive Order

On March 27, 2024, the U.S. Cybersecurity and Infrastructure Security Agency’s (“CISA”) Notice of Proposed Rulemaking (“Proposed Rule”) related to the Cyber Incident Reporting for Critical Infrastructure Act of 2022 (“CIRCIA”) was released on the Federal Register website.  The Proposed Rule, which will be formally published in the Federal Register on April 4, 2024, proposes draft regulations to implement the incident reporting requirements for critical infrastructure entities from CIRCIA, which President Biden signed into law in March 2022.  CIRCIA established two cyber incident reporting requirements for covered critical infrastructure entities: a 24-hour requirement to report ransomware payments and a 72-hour requirement to report covered cyber incidents to CISA.  While the overarching requirements and structure of the reporting process were established under the law, CIRCIA also directed CISA to issue the Proposed Rule within 24 months of the law’s enactment to provide further detail on the scope and implementation of these requirements.  Under CIRCIA, the final rule must be published by September 2025.

The Proposed Rule addresses various elements of CIRCIA, which will be covered in a forthcoming Client Alert.  This blog post focuses primarily on the proposed definitions of two pivotal terms that were left to further rulemaking under CIRCIA (Covered Entity and Covered Cyber Incident), which illustrate the broad scope of CIRCIA’s reporting requirements, as well as certain proposed exceptions to the reporting requirements.  The Proposed Rule will be subject to a review and comment period for 60 days after publication in the Federal Register. 

Covered Entities

CIRCIA broadly defined “Covered Entity” to include entities that are in one of the 16 critical infrastructure sectors established under Presidential Policy Directive 21 (“PPD-21”) and directed CISA to develop a more comprehensive definition in subsequent rulemaking.  Accordingly, the Proposed Rule (1) addresses how to determine whether an entity is “in” one of the 16 sectors and (2) proposed two additional criteria for the Covered Entity definition, either of which must be met in order for an entity to be covered.  Notably, the Proposed Rule’s definition of Covered Entity would encompass the entire corporate entity, even if only a constituent part of its business or operations meets the criteria.  Thus, Covered Cyber Incidents experienced by a Covered Entity would be reportable regardless of which part of the organization suffered the impact.  In total, CISA estimates that over 300,000 entities would be covered by the Proposed Rule.

Decision tree that demonstrates the overarching elements of the Covered Entity definition. For illustrative purposes only.Continue Reading CISA Issues Notice of Proposed Rulemaking for Critical Infrastructure Cybersecurity Incident Reporting

Yesterday, the European Commission, Council and Parliament announced that they had reached an agreement on the text of the Cyber Resilience Act (“CRA”). As a result, the CRA now looks set to finish its journey through the EU legislative process early next year. As we explained in our prior post about the Commission proposal

Earlier this month, the New York Department of Financial Services (“NYDFS”) announced that it had finalized the Second Amendment to its “first-in-the-nation” cybersecurity regulation, 23 NYCRR Part 500.  This Amendment implements many of the changes that NYDFS originally proposed in prior versions of the Second Amendment released for public comment in November 2022 and June 2023, respectively.  The first version of the Proposed Second Amendment proposed increased cybersecurity governance and board oversight requirements, the expansion of the types of policies and controls companies would be required to implement, the creation of a new class of companies subject to additional requirements, expanded incident reporting requirements, and the introduction of enumerated factors to be considered in enforcement decisions, among others.  The revisions in the second version reflect adjustments rather than substantial changes from the first version.  Compliance periods for the newly finalized requirements in the Second Amendment will be phased over the next two years, as set forth in additional detail below.

The finalized Second Amendment largely adheres to the revisions from the second version of the Proposed Second Amendment but includes a few substantive changes, including those described below:

  • The finalized Amendment removes the previously-proposed requirement that each class A company conduct independent audits of its cybersecurity program “at least annually.”  While the finalized Amendment does require each class A company to conduct such audits, they should occur at a frequency based on its risk assessments.  NYDFS stated that it made this change in response to comments that an annual audit requirement would be overly burdensome and with the understanding that class A companies typically conduct more than one audit annually.  See Section 500.2 (c).
  • The finalized Amendment updates the oversight requirements for the senior governing body of a covered entity with respect to the covered entity’s cybersecurity risk management.  Updates include, among others, a requirement to confirm that the covered entity’s management has allocated sufficient resources to implement and maintain a cybersecurity program.  This requirement was part of the proposed definition of “Chief Information Security Officer.”  NYDFS stated that it moved this requirement to the senior governing bodies in response to comments that CISOs do not typically make enterprise-wide resource allocation decisions, which are instead the responsibility of senior management.  See Section 500.4 (d).
  • The finalized Amendment removes a proposed additional requirement to report certain privileged account compromises to NYDFS.  NYDFS stated that it did so in response to public comments that this proposed requirement “is overbroad and would lead to overreporting.”  However, the finalized Amendment retains previously-proposed changes that will require covered entities to report certain ransomware deployments or extortion payments to NYDFS.  See Section 500.17 (a).

Continue Reading New York Department of Financial Services Finalizes Second Amendment to Cybersecurity Regulation

On October 10, 2023, California Governor Gavin Newsom signed S.B. 362, the Delete Act (the “Act”), into law.  The new law represents a substantive overhaul of California’s existing data broker statute, which requires data brokers to register with the California Attorney General annually.  The passage of the Act follows a renewed interest in data

A would-be technical development could have potentially significant consequences for cloud service providers established outside the EU. The proposed EU Cybersecurity Certification Scheme for Cloud Services (EUCS)—which has been developed by the EU cybersecurity agency ENISA over the past two years and is expected to be adopted by the European Commission as an implementing act in Q1 2024—would, if adopted in its current form, establish certain requirements that could:

  1. exclude non-EU cloud providers from providing certain (“high” level) services to European companies, and
  2. preclude EU cloud customers from accessing the services of these non-EU providers.

Data Localization and EU Headquarters

The EUCS arises from the EU’s Cybersecurity Act, which called for the creation of an EU-wide security certification scheme for cloud providers, to be developed by ENISA and adopted by the Commission through secondary law (as noted in an earlier blog). After public consultations in 2021, ENISA set up an ad hoc working group tasked with preparing a draft.

France, Italy, and Spain submitted a proposal to the working group advocating to add new criteria to the scheme in order for companies to qualify as eligible to offer services providing the highest level of security. The proposed criteria included localization of cloud services and data within the EU – meaning in essence that providers would need to be headquartered in, and have their cloud services provided from, the EU. Ireland, Sweden and the Netherlands argued that such requirements do not belong in a cybersecurity certification scheme, as requiring cloud providers to be based in Europe reflected political rather than cybersecurity concerns, and therefore proposed that the issue should be discussed by the Council of the EU.Continue Reading Implications of the EU Cybersecurity Scheme for Cloud Services

Updated August 8, 2023.  Originally posted May 1, 2023.

Last week, comment deadlines were announced for a Federal Communications Commission (“FCC”) Order and Notice of Proposed Rulemaking (“NPRM”) that could have significant compliance implications for all holders of international Section 214 authority (i.e., authorization to provide telecommunications services from points in the U.S. to points abroad).  The rule changes on which the FCC seeks comment are far-reaching and, if adopted as written, could result in significant future compliance burdens, both for entities holding international Section 214 authority, as well as the parties holding ownership interests in these entities.  Comments on these rule changes are due Thursday, August 31, with reply comments due October 2.

Adopted in April, the FCC’s item proposing the new rules also includes an Order requiring all holders of international Section 214 authority to respond to a one-time information request concerning their foreign ownership. Although last week’s Federal Register publication sets a comment deadline for the proposed rules, the reporting deadline for the one-time information request has not yet been established.  However, because the FCC has fulfilled its statutory obligations regarding the new information collection presented by the one-time reporting requirement, carriers — as well as entities holding an ownership interest in these carriers — should prepare for the announcement of the reporting deadline.

The FCC’s latest actions underscore the agency’s ongoing desire to closely scrutinize foreign ownership and involvement in telecommunications carriers serving the U.S. market, as well as to play a more active role in cybersecurity policy. These developments should be of interest to any carrier that serves the U.S. market and any financial or strategic investor focused on the telecommunications space, as well as other parties interested in national security developments affecting telecommunications infrastructure.

Proposed Rule Changes for International Section 214 Authority

The FCC’s proposed changes to its regulation of international Section 214 authorizations generally concern additional compliance, disclosure, and reporting requirements. The FCC’s proposed rule changes are far-reaching, but the most notable of the proposals concern the following:Continue Reading Comments Due August 31 on FCC’s Proposal to Step Up Review of Foreign Ownership in Telecom Carriers and Establish Cybersecurity Requirements

On July 18, 2023, Federal Communications Commission (FCC) Chairwoman Jessica Rosenworcel announced that she has circulated a proposal to the FCC’s commissioners to create “a voluntary cybersecurity labeling program that would provide consumers with clear information about the security of their Internet-enabled devices.”

According to the text of her announcement (the proposal itself is not

This quarterly update summarizes key legislative and regulatory developments in the second quarter of 2023 related to key technologies and related topics, including Artificial Intelligence (“AI”), the Internet of Things (“IoT”), connected and automated vehicles (“CAVs”), data privacy and cybersecurity, and online teen safety.

Artificial Intelligence

AI continued to be an area of significant interest of both lawmakers and regulators throughout the second quarter of 2023.  Members of Congress continue to grapple with ways to address risks posed by AI and have held hearings, made public statements, and introduced legislation to regulate AI.  Notably, Senator Chuck Schumer (D-NY) revealed his “SAFE Innovation framework” for AI legislation.  The framework reflects five principles for AI – security, accountability, foundations, explainability, and innovation – and is summarized here.  There were also a number of AI legislative proposals introduced this quarter.  Some proposals, like the National AI Commission Act (H.R. 4223) and Digital Platform Commission Act (S. 1671), propose the creation of an agency or commission to review and regulate AI tools and systems.  Other proposals focus on mandating disclosures of AI systems.  For example, the AI Disclosure Act of 2023 (H.R. 3831) would require generative AI systems to include a specific disclaimer on any outputs generated, and the REAL Political Advertisements Act (S. 1596) would require political advertisements to include a statement within the contents of the advertisement if generative AI was used to generate any image or video footage.  Additionally, Congress convened hearings to explore AI regulation this quarter, including a Senate Judiciary Committee Hearing in May titled “Oversight of A.I.: Rules for Artificial Intelligence.”

There also were several federal Executive Branch and regulatory developments focused on AI in the second quarter of 2023, including, for example:

  • White House:  The White House issued a number of updates on AI this quarter, including the Office of Science and Technology Policy’s strategic plan focused on federal AI research and development, discussed in greater detail here.  The White House also requested comments on the use of automated tools in the workplace, including a request for feedback on tools to surveil, monitor, evaluate, and manage workers, described here.
  • CFPB:  The Consumer Financial Protection Bureau (“CFPB”) issued a spotlight on the adoption and use of chatbots by financial institutions.
  • FTC:  The Federal Trade Commission (“FTC”) continued to issue guidance on AI, such as guidance expressing the FTC’s view that dark patterns extend to AI, that generative AI poses competition concerns, and that tools claiming to spot AI-generated content must make accurate disclosures of their abilities and limitations.
  • HHS Office of National Coordinator for Health IT:  This quarter, the Department of Health and Human Services (“HHS”) released a proposed rule related to certified health IT that enables or interfaces with “predictive decision support interventions” (“DSIs”) that incorporate AI and machine learning technologies.  The proposed rule would require the disclosure of certain information about predictive DSIs to enable users to evaluate DSI quality and whether and how to rely on the DSI recommendations, including a description of the development and validation of the DSI.  Developers of certified health IT would also be required to implement risk management practices for predictive DSIs and make summary information about these practices publicly available.

Continue Reading U.S. Tech Legislative & Regulatory Update – Second Quarter 2023