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US bill would make concealing data breaches a crime

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US-based companies would be required to report data breaches that threaten consumer privacy and could face stiff penalties for concealing them under federal legislation that was introduced in the Senate on Tuesday.

The Personal Data Privacy and Security Act aims to set national standards for protecting the growing amount of personally identifiable information being stored online. Its approval by the Senate Judiciary Committee represents the fourth year the bill has been introduced, said its sponsor, Senator Patrick Leahy of Vermont.

The latest incarnation comes amid a glut of high-profile hack attacks on networks operated by Sony, email marketer Silverpop Systems, gossip publisher Gawker Media, and others, which have exposed sensitive data for hundreds of millions of Americans in the past six months.

“The many recent and troubling data breaches in the private sector and in our government are clear evidence that developing a comprehensive national strategy to protect data privacy and security is one of the most challenging and important issues facing our country,” Leahy said in a statement.  “The Personal Data Privacy and Security Act will help meet that challenge, by better protecting Americans from the growing threats of data breaches and identity theft.”

In addition to breaches affecting consumers, several high-profile attacks on networks operated by the US government and government contractors have potentially jeopardized national security by exposing confidential information related to the military, and government-funded research.

Examples include recent security breaches at contractors Lockheed Martin and L3 Communications, and at RSA Security, the latter which exposed confidential information that compromised the security of its widely used SecurID product, which some 40 million employees use to secure remote access to confidential networks.

Under the proposed legislation, companies that “intentionally or willfully” conceal breaches that cause economic damage to consumers would be subject to criminal penalties, including up to five years in prison. The bill also requires that companies that store consumer data implement internal policies to secure it. Government agencies that hire third-party contractors would be required ensure they are adequately protecting consumer data.

Last month the Obama Administration released a proposal that would imposed some of the same requirements.

A PDF of the bill is here. ®

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