On August 29, the FTC issued a press release announcing a settlement with the operator of a Georgia-based online tax preparation service to resolve allegations that the company failed to implement adequate security procedures to protect client information in violation of several federal privacy and security rules, including the Federal Trade Commission Act and the Gramm-Leach-Bliley Act’s Privacy Rule (Regulation P) and Safeguards Rule. In its complaint, the FTC alleged that the company violated the Safeguards Rule, which requires financial institutions under FTC jurisdiction toprotect customer information by developing, implementing, and maintaining a comprehensive information security program that satisfies certain requirements. The complaint alleged that, because the company failed to implement these requirements and did not have in place adequate risk-based authentication measures, hackers were able to conduct a “list validation attack” between October 2015 and December 2015, which gave them full access to nearly 9,000 customer accounts. Hackers then used the acquired information to engage in tax identity theft. In addition, the FTC alleges that the company failed to notify customers of the list validation attack or alterations until a user called in January 2016 to report suspicious activity, and failed to delivery privacy notices to customers as required by the Privacy Rule.
Under the terms of the decision and order, the company, among other things, is required for 10 years to obtain biennial independent third-party assessments to address the effectiveness of the company’s security programs and safeguard measures to “certify that [the company’s] security program(s) is operating with sufficient effectiveness to provide reasonable assurance that the security, confidentiality, and integrity of personal information is protected and has operated throughout the reporting period.”
The agreement with the FTC will be subject to public comment for 30 days through September 29, at which point the FTC will decide whether to make the proposed consent order final.