August 07, 2006

SWIFT breach - leverage v. due process, Spy v. Spy, audit v. Ajax, three questions for SWIFT

More rumours on how the US Treasury breached SWIFT: It appears that UST knew about certain SWIFT breaches by insiders in the past and used those infractions as leverage to get access.

This may be in contrast to claims by SWIFT itself that UST prepared warrants for seizure as extortion ploys. Indeed, it has been suggested that not only were no warrants prepared, but that the UST provided no written evidence of any form of due process at all. An interesting question to put to SWIFT, #1: show us the evidence!

It gets better: SWIFT was breached not once, not twice, but three times!

Rumour has it that two other agencies of unknown character had also breached the SWIFT record set independently of UST, and that they were better at it than UST in that they really knew how to use the information. The timeline of these breaches is unclear.

At least one of these agencies has found all sorts of interesting information and has used it -- which is how the secret was outed. They apparently have done the datamining thing and fed the results into various cases. It's what you do with data, right? Then, conversations with those implicated groups (read: wall street firms) has led to a suspicion that more than just domestic data was involved. At least one company with rock-solid profitably has already proceeded on an "orderly exit from the market," after having been given "the talk." The people involved read like a who's who of the mothers of the Texas / Washington DC oil industry which raises the idle speculation of political connections and insider trading -- were there suspiciously good trading records in oil? And was this found in the SWIFT analysis? And what sort of agency takes on that power group and lives to tell the tale?

All which rumours might point to TLA2 being a US agency with interests domestic rather than foreign. Likely candidates we could speculate on given the financial regulatory interest would be the SEC or the Federal Reserve.

TLA3 remains obscure. But, once we get to 3 agencies, we can stop counting and also stop pretending that there is any governance in place. SWIFT is an open book for regulators in the US at least, and that makes it just another smoking gun in the never-ending Spy v. Spy game. At the least, this suggests question #2 for SWIFT: how many agencies have your data?

In related gossip, SWIFT itself has conducted an internal audit, perhaps in response to the above rumour of leverage, or perhaps out of caution. It has apparently found additional multiple breaches across the lines -- uncovering misuses of data by employees.

Insiders suggest a strategy of cleaning house before outside regulators come in. Do we audit then Ajax, or is it the other way around? Sustained pressure on privacy and banking regulators in Europe has made intervention a non-trivial risk; latest rumour there is that the Belgian privacy regulator is taking lead on the case for all EU privacy regulators, and they all now working through SWIFT's response to the first round of questioning. The question of whether European companies are alive to the risks of "Restaurant economics," a.k.a. industrial espionage remainsl an open one.

Question #3 for SWIFT: why didn't your prior and no doubt expensive audits uncover signs of data abuses? (Readers of FC already know the answer to that, but SWIFT might not, so it is worth making them think about it.)

Also, there are scurrilous suggestions that the SWIFT breach has triggered a wave of copycat audits across FIs with a wide network of users. Major banks take note -- you may want to now go through and audit how your data has been used and misused, and we ain't talking about Sarbanes Oxley. "One more time, with feeling." Many institutions are apparently already doing this, which has lead to a surge of firings and hirings where misuse of data has been found. Some of the breaches relate to USG as beneficiary, others do not, but details are of course scant. (Companies that are mentioned as having surges in firings/hriings other than SWIFT include three household names, leaders in their respective sectors.)

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Posted by iang at August 7, 2006 01:15 PM | TrackBack
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