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On Cyber Warranties

Interesting article discussing cyber-warranties, and whether they are an effective way to transfer risk (as envisioned by Ackerlof’s “market for lemons”) or a marketing trick.

The conclusion:

Warranties must transfer non-negligible amounts of liability to vendors in order to meaningfully overcome the market for lemons. Our preliminary analysis suggests the majority of cyber warranties cover the cost of repairing the device alone. Only cyber-incident warranties cover first-party costs from cyber-attacks — why all such warranties were offered by firms selling intangible products is an open question. Consumers should question whether warranties can function as a costly signal when narrow coverage means vendors accept little risk.

Worse still, buyers cannot compare across cyber-incident warranty contracts due to the diversity of obligations and exclusions. Ambiguous definitions of the buyer’s obligations and excluded events create uncertainty over what is covered. Moving toward standardized terms and conditions may help consumers, as has been pursued in cyber insurance, but this is in tension with innovation and product diversity.

[..]

Theoretical work suggests both the breadth of the warranty and the price of a product determine whether the warranty functions as a quality signal. Our analysis has not touched upon the price of these products. It could be that firms with ineffective products pass the cost of the warranty on to buyers via higher prices. Future studies could analyze warranties and price together to probe this issue.

In conclusion, cyber warranties — particularly cyber-product warranties — do not transfer enough risk to be a market fix as imagined in Woods. But this does not mean they are pure marketing tricks either. The most valuable feature of warranties is in preventing vendors from exaggerating what their products can do. Consumers who read the fine print can place greater trust in marketing claims so long as the functionality is covered by a cyber-incident warranty.

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WhatsApp Sues NSO Group

WhatsApp is suing the Israeli cyberweapons arms manufacturer NSO Group in California court:

WhatsApp’s lawsuit, filed in a California court on Tuesday, has demanded a permanent injunction blocking NSO from attempting to access WhatsApp computer systems and those of its parent company, Facebook.

It has also asked the court to rule that NSO violated US federal law and California state law against computer fraud, breached their contracts with WhatsApp and “wrongfully trespassed” on Facebook’s property.

This could be interesting.

EDITED TO ADD: Citizen Lab has a research paper in the technology involved in this case. WhatsApp has an op ed on their actions. And this is a good news article on how the attack worked.

EDITED TO ADD: Facebook is deleting the accounts of NSA Group employees.

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Hackers Expose Russian FSB Cyberattack Projects

More nation-state activity in cyberspace, this time from Russia:

Per the different reports in Russian media, the files indicate that SyTech had worked since 2009 on a multitude of projects since 2009 for FSB unit 71330 and for fellow contractor Quantum. Projects include:

  • Nautilus — a project for collecting data about social media users (such as Facebook, MySpace, and LinkedIn).

  • Nautilus-S — a project for deanonymizing Tor traffic with the help of rogue Tor servers.

  • Reward — a project to covertly penetrate P2P networks, like the one used for torrents.

  • Mentor — a project to monitor and search email communications on the servers of Russian companies.

  • Hope — a project to investigate the topology of the Russian internet and how it connects to other countries’ network.

  • Tax-3 — a project for the creation of a closed intranet to store the information of highly-sensitive state figures, judges, and local administration officials, separate from the rest of the state’s IT networks.

BBC Russia, who received the full trove of documents, claims there were other older projects for researching other network protocols such as Jabber (instant messaging), ED2K (eDonkey), and OpenFT (enterprise file transfer).

Other files posted on the Digital Revolution Twitter account claimed that the FSB was also tracking students and pensioners.

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First Physical Retaliation for a Cyberattack

Israel has acknowledged that its recent airstrikes against Hamas were a real-time response to an ongoing cyberattack. From Twitter:

CLEARED FOR RELEASE: We thwarted an attempted Hamas cyber offensive against Israeli targets. Following our successful cyber defensive operation, we targeted a building where the Hamas cyber operatives work.

HamasCyberHQ.exe has been removed. pic.twitter.com/AhgKjiOqS7

­Israel Defense Forces (@IDF) May 5, 2019

I expect this sort of thing to happen more — not against major countries, but by larger countries against smaller powers. Cyberattacks are too much of a nation-state equalizer otherwise.

Another article.

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What Happened to Cyber 9/11?

A recent article in the Atlantic asks why we haven’t seen a”cyber 9/11″ in the past fifteen or so years. (I, too, remember the increasingly frantic and fearful warnings of a “cyber Peal Harbor,” “cyber Katrina” — when that was a thing — or “cyber 9/11.” I made fun of those warnings back then.) The author’s answer:

Three main barriers are likely preventing this. For one, cyberattacks can lack the kind of drama and immediate physical carnage that terrorists seek. Identifying the specific perpetrator of a cyberattack can also be difficult, meaning terrorists might have trouble reaping the propaganda benefits of clear attribution. Finally, and most simply, it’s possible that they just can’t pull it off.

Commenting on the article, Rob Graham adds:

I think there are lots of warning from so-called “experts” who aren’t qualified to make such warnings, that the press errs on the side of giving such warnings credibility instead of challenging them.

I think mostly the reason why cyberterrorism doesn’t happen is that which motivates violent people is different than what which motivates technical people, pulling apart the groups who would want to commit cyberterrorism from those who can.

These are all good reasons, but I think both authors missed the most important one: there simply aren’t a lot of terrorists out there. Let’s ask the question more generally: why hasn’t there been another 9/11 since 2001? I also remember dire predictions that large-scale terrorism was the new normal, and that we would see 9/11-scale attacks regularly. But since then, nothing. We could credit the fantastic counterterrorism work of the US and other countries, but a more reasonable explanation is that there are very few terrorists and even fewer organized ones. Our fear of terrorism is far greater than the actual risk.

This isn’t to say that cyberterrorism can never happen. Of course it will, sooner or later. But I don’t foresee it becoming a preferred terrorism method anytime soon. Graham again:

In the end, if your goal is to cause major power blackouts, your best bet is to bomb power lines and distribution centers, rather than hack them.

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How to Punish Cybercriminals

Interesting policy paper by Third Way: “To Catch a Hacker: Toward a comprehensive strategy to identify, pursue, and punish malicious cyber actors“:

In this paper, we argue that the United States currently lacks a comprehensive overarching strategic approach to identify, stop and punish cyberattackers. We show that:

  • There is a burgeoning cybercrime wave: A rising and often unseen crime wave is mushrooming in America. There are approximately 300,000 reported malicious cyber incidents per year, including up to 194,000 that could credibly be called individual or system-wide breaches or attempted breaches. This is likely a vast undercount since many victims don’t report break-ins to begin with. Attacks cost the US economy anywhere from $57 billion to $109 billion annually and these costs are increasing.

  • There is a stunning cyber enforcement gap: Our analysis of publicly available data shows that cybercriminals can operate with near impunity compared to their real-world counterparts. We estimate that cyber enforcement efforts are so scattered that less than 1% of malicious cyber incidents see an enforcement action taken against the attackers.

  • There is no comprehensive US cyber enforcement strategy aimed at the human attacker: Despite the recent release of a National Cyber Strategy, the United States still lacks a comprehensive strategic approach to how it identifies, pursues, and punishes malicious human cyberattackers and the organizations and countries often behind them. We believe that the United States is as far from this human attacker strategy as the nation was toward a strategic approach to countering terrorism in the weeks and months before 9/11.

In order to close the cyber enforcement gap, we argue for a comprehensive enforcement strategy that makes a fundamental rebalance in US cybersecurity policies: from a heavy focus on building better cyber defenses against intrusion to also waging a more robust effort at going after human attackers. We call for ten US policy actions that could form the contours of a comprehensive enforcement strategy to better identify, pursue and bring to justice malicious cyber actors that include building up law enforcement, enhancing diplomatic efforts, and developing a measurable strategic plan to do so.

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