Wednesday, October 16, 2024

Morgan Stanley fined $35M after unencrypted, unwiped hard drives are auctioned

“Astonishing failures” over a 5-year span.

Morgan Stanley on Tuesday agreed to pay the Securities and Exchange Commission (SEC) a $35 million penalty for data security lapses that included unencrypted hard drives from decommissioned data centers being resold on auction sites without first being wiped.

The SEC action said that the improper disposal of thousands of hard drives starting in 2016 was part of an “extensive failure” over a five-year period to safeguard customers’ data as required by federal regulations. The agency said that the failures also included the improper disposal of hard drives and backup tapes when decommissioning servers in local branches. In all, the SEC said data for 15 million customers was exposed.

“MSSB’s failures in this case are astonishing,” said Gurbir S. Grewal, director of the SEC’s enforcement division, using the initials for Morgan Stanley Smith Barney, the full name of the firm. “Customers entrust their personal information to financial professionals with the understanding and expectation that it will be protected, and MSSB fell woefully short in doing so.”

Much of the failure stemmed from the 2016 hire of a moving company with no experience or expertise in data destruction services to decommission thousands of hard drives and servers containing the data of millions of customers. The moving company received 53 RAID arrays that collectively contained roughly 1,000 hard drives, and it also removed about 8,000 backup tapes from one of the Morgan Stanley data centers.

The unnamed moving company initially contracted with an IT specialist to wipe or destroy any sensitive data stored on the drives. Eventually, the moving company stopped working with that specialist and began selling the storage devices to a company that in turn sold them at auction. The new company was never vetted by Morgan Stanley or approved as a contractor or subcontractor in the decommissioning project.

Recommended:  Adobe Issues an Emergency Patch to Address an Exploited Commerce Zero-Day Vulnerability

In 2017, more than a year after the data center’s decommissioning, Morgan Stanley officials received an email from an IT consultant in Oklahoma, informing them that hard drives he purchased from an online auction site contained Morgan Stanley data.

In a complaint, SEC officials wrote, “In that email, Consultant informed MSSB that ‘[y]ou are a major financial institution and should be following some very stringent guidelines on how to deal with retiring hardware. Or at the very least getting some kind of verification of data destruction from the vendors you sell equipment to.’ MSSB eventually repurchased the hard drives in Consultant’s possession.”

The SEC action also said that many of the storage devices didn’t have encryption turned on, though the option existed. Even after the investment firm began using encryption options in 2018, only new data written to the disks was protected. In some cases, data still wasn’t properly encrypted because of a flaw in an unidentified vendor’s product.

Without admitting or denying the SEC claims, Morgan Stanley agreed to Tuesday’s finding that it violated the Safeguards and Disposal Rules under Regulation S-P and agreed to pay the $35 million penalty.

In a statement, Morgan Stanley officials wrote, “We are pleased to be resolving this matter. We have previously notified applicable clients regarding these matters, which occurred several years ago, and have not detected any unauthorized access to, or misuse of, personal client information.”

source

Suggest an edit to this article

Go to Cybersecurity Knowledge Base

Got to the Latest Cybersecurity News

Go to Cybersecurity Academy

Recommended:  SOVA Android Banking Trojan Returns With New Capabilities and Targets

Go to Homepage

Stay informed of the latest Cybersecurity trends, threats and developments. Sign up for our Weekly Cybersecurity Newsletter Today.

Remember, CyberSecurity Starts With You!

  • Globally, 30,000 websites are hacked daily.
  • 64% of companies worldwide have experienced at least one form of a cyber attack.
  • There were 20M breached records in March 2021.
  • In 2020, ransomware cases grew by 150%.
  • Email is responsible for around 94% of all malware.
  • Every 39 seconds, there is a new attack somewhere on the web.
  • An average of around 24,000 malicious mobile apps are blocked daily on the internet.
Bookmark
Share the word, let's increase Cybersecurity Awareness as we know it
- Sponsored -

Sponsored Offer

Unleash the Power of the Cloud: Grab $200 Credit for 60 Days on DigitalOcean!

Digital ocean free 200

Discover more infosec

User Avatar
RiSec.Mitch
Just your average information security researcher from Delaware US.

more infosec reads

Subscribe for weekly updates

explore

more

security