Welcome!

Related Topics: @CloudExpo, Microservices Expo, Containers Expo Blog, Cloud Security, @BigDataExpo, SDN Journal

@CloudExpo: Article

Cloud Computing and Data Residency Laws

Irreconcilable differences?

Cloud service providers store data all over the globe, and are constantly moving that data from one datacenter to the next for reasons as wide-ranging as cost considerations and redundancy requirements. Does this mean that the requirements outlined in varying data residency laws and privacy regulations are directly at odds with how cloud computing works?

The question is an especially delicate one when the cloud service provider stores and processes data in a jurisdiction that is perceived to have far less stringent privacy and data protection requirements - or may allow government agencies far broader data subpoena powers. Since the cloud computing model relies on distributed infrastructure to generate cost and flexibility benefits for customers, building a datacenter in each data residency jurisdiction quickly becomes cost-prohibitive. And, applying a set of constraints to the movement of data introduces an additional layer of complexity that further erodes the value proposition of cloud computing for customers.

Just as cloud computing represents a novel way of delivering IT computing and functionality, a new model for maintaining ownership and direct control of data in the cloud is increasingly required. However, this new model requires that the encryption mechanism is maintained externally and independently of the cloud service provider's environment, and that data is encrypted before it is sent to the cloud.

The Issues Surrounding Information Security and Data Protection Laws
Over the past 18 months, concerns about the feasibility of enforcing data residency laws and regulations in the cloud have increasingly come to the forefront. Multiple countries including India, Switzerland, Germany, Australia, South Africa and Canada have enacted laws restricting corporations from storing data outside their physical country borders. Additionally, EU Safe Harbor Principles mandate that companies operating within the European Union are forbidden from sending personally identifiable information (PII) outside the European Economic area, unless it is guaranteed that the data will receive equivalent levels of protection.

This is partly as a result of broader understanding of cloud computing architecture and processes, but also because of the ambiguity of safeguards for the privacy of cloud data. For example, national security concerns have driven the definition of US legislation such as The Foreign Intelligence Surveillance Amendments (FISA) Act and the USA PATRIOT Act, to extend the ability of the federal government and law enforcement agencies to subpoena communications and emails stored in the cloud. The concern is now as much whether data is leaving the jurisdiction as it is what the privacy laws hold where the data lands. Inconsistent approaches to privacy further complicate the picture.

The current response to this challenge is either not to move to the cloud, or require cloud service providers to store data within each jurisdiction. For cloud service providers, this presents a business challenge in delivering a level of flexibility, cost and effective service while altering their delivery and management models to satisfy data residency and privacy requirements. To address the mandates set forth by these laws, a cloud provider would ostensibly have to build datacenters in each jurisdiction, resulting in significant cost and overhead that would reduce the overall gain of cloud storage.

Cloud Encryption and Cloud Data Residency Regulations
The interaction between the evolution of information security and the definition of data protection mandates by legislative bodies or industry groups is a dynamic one. At the heart of the concern is how organizations can continue to maintain ownership and control of data to protect personal information, even when the information resides with a third-party service that relies on a distributed infrastructure in order to deliver resiliency, availability and flexibility to customers.

By way of illustration, compliance requirements and data breach laws have been regularly updated as new information security alternatives have been developed. In the US, more than 40 states currently have breach notification laws mandating that if a company is aware of lost or stolen personally identifiable information, they are required to directly notify the consumer. When these laws were initially enacted (starting with the State of California in 2002), they generally stated that regardless of the circumstances, the company was required to notify the consumer. However, the laws have been gradually amended, and more than 25 states have now enacted an exemption for encrypted personal data. In other words, in instances where lost or stolen data is encrypted, the company is no longer required under law to notify the consumer.

The underlying argument for differentiating between unencrypted data and encrypted data in the context of breach notification is that in the instance where data is encrypted, the attacker has gained access to useless "gibberish" if they do not hold the encryption keys.

However, cloud computing is an evolving paradigm where both the obligations of the data owner and acceptable forms of data protection are still in the process of initial definition. As the technology gains popularity and becomes a well-established method of data storage and processing, the laws pertaining to cloud computing will also continue to evolve in the same way that data breach laws have.

For example, regulations are also now moving towards excluding encrypted data from data residency legislation. Encryption is recognized in the State of Nevada as a means of securing data outside of geographic boundaries: "A data collector doing business in this State shall not: (a) Transfer any personal information through an electronic, non-voice transmission other than a facsimile to a person outside of the secure system of the data collector unless the data collector uses encryption to ensure the security of electronic transmission; or (b) Move any data storage device containing personal information beyond the logical or physical controls of the data collector or its data storage contractor unless the data collector uses encryption to ensure the security of the information."[1]

While data residency regulations can be narrowly defined, in many jurisdictions laws can be interpreted as not applying to data that has been encrypted before being sent to the cloud. Dr. Thilo Weichert, head of the Independent Center for Privacy Protection for the German state of Schleswig-Holstein, argues in his Cloud Computing & Data Privacy paper that if data is anonymized or sufficiently aliased to the extent that the identity of individuals is indecipherable, then data residency law does not apply. Encryption takes anonymizing and aliasing a step further, where the data is completely indecipherable. Similarly, under the European Union's Data Protection Directive[2] (EU DPD), as long as the data is encrypted, where it resides should not present a legal obstacle.

Likewise, under Canadian privacy law, both federal bodies and commercial organizations domiciled within Canadian borders are responsible for the privacy and protection of personal information in their custody. This requirement applies regardless of where the data resides. While significant concerns have been articulated with regards to the probability of disclosure to law enforcement agencies for data that resides within US datacenters, the requirements pertain directly to the safeguards in place to maintain control.

Ann Cavoukian, Information and Privacy Commissioner for the Province of Ontario, noted in her formal response to a question related to the compliance with the Freedom of Information and Protection of Privacy Act concerning the privacy and security of personal information collected by the Ministry of Natural Resources being stored in the US that: "to the extent that the data owner retains the encryption keys, the location of the encrypted data is a secondary issue."

In other words, if the encrypted data leaves the jurisdiction, but the keys remain under the data owner's direct control, the level of protection can be sufficient in terms of data residency requirements.

However, this model also implies that the data encryption scheme is maintained externally and independently of the cloud service provider's environment, and that data is encrypted before it is sent to the cloud.

Persistent Encryption and Data Residency
The most effective method to address the jurisdictional and residency requirements of data processed by third-party services is via control of encryption keys and the application of persistent encryption. By applying persistent encryption, data that is encrypted at the boundary of the network remains encrypted even when processed and stored within a cloud service provider environment. As a result, persistent encryption ensures that data is never decrypted when in a third-party's environment and the ability to access useable data remains solely with the organization that holds the encryption key.

Therefore, businesses can comply with jurisdictional and residency requirements by virtue of keeping the encryption keys within the jurisdiction regardless of the actual physical location of the data. Laws relating to data residency are now undergoing a historic transition from the old paradigm where it mattered where the data was physically located to the new paradigm where it only matters where the encryption keys are located.

With the application of persistent encryption, control of the keys in combination with encryption across the data lifecycle - in transit, at rest and in use - provide the foundation to satisfy requirements for control and adequate safeguards for the privacy of personal information. Although the encrypted data may leave the physical borders of a specific country, the data is always fully encrypted while outside of the defined jurisdiction. As the keys are retained within a business's legal jurisdiction, the data cannot be accessed or read until it returns to the physical borders in which the organization resides.

Global Pharmaceutical Company Case Study: Cloud Data Ownership and Control Concerns
The following example depicts a privately held multinational pharmaceutical company that engages in research, development, production, and marketing of prescription and over-the-counter medicines and healthcare products. The company has thousands of employees across the globe, as well as multiple subsidiaries and entities.

The company's IT procurement and deployment approach follows a decentralized model in which each entity subsidiary hosts its own servers and datacenters. There are three functional organizational pillars maintained within its technology and IT services division: Technology Planning; Enterprise Architecture and Data Services; and Production Services. The divisions are staffed by IT engineers with managed services providing support for thousands of clients across a multitude of sites. Existing infrastructure includes hardware, software, services, and virtualization from multiple top vendors including Microsoft, VCE, Dell, Oracle, EMC and VMware.

The pharmaceutical company had adopted several cloud-based services for applications that do not process or store critical or regulated business information, such as Web conferencing, spam filtering, compliance training and tracking, and travel and expense management, but was seeking to expand its cloud computing usage to business critical applications by moving low value servers to cloud providers, as well as moving commodity applications such as email to the cloud.

Concerns about the loss of control and ownership of corporate data, however, stood in the way of realizing the increased efficiencies and operational benefits possible through broader adoption of cloud-based services. These concerns were related to:

  • Compliance with international data residency requirements that preclude data leaving a jurisdiction in the clear
  • Compliance with regulations governing the security, privacy and confidentiality of healthcare data
  • Safeguards to limit exposure of its intellectual property when it is stored and processed in the cloud
  • Lack of visibility into service provider responses to information subpoenas that can result in a breach of confidentiality or loss of data

Addressing Residency and Unauthorized Disclosure
While the cloud service provider could attest to the security of the environment based on a framework like the Cloud Security Alliance's Cloud Control Matrix, the global pharmaceutical company required an independent mechanism to protect its intellectual property while resident in the cloud. A common challenge to cloud migration within the pharmaceutical/healthcare industry is confidentiality and sensitivity to a service provider's compliance with government subpoenas as pharmaceutical and healthcare companies maintain sensitive information related to research, clinical study results, and personal medical history. Therefore, it is critical that sensitive information remain under the company's control, without any forfeiture of attorney-client privilege.

In a typical scenario, if a company stores sensitive data in the cloud, and the cloud service provider is faced with a subpoena or other request from the government, they must comply and disclose the company's data to the federal government body. The provider may notify the company after the fact, or in cases of blind subpoenas, not at all.

The Solution
The pharmaceutical company decided to use persistent encryption technology to specifically address the migration of their email infrastructure to the cloud. Deployed as an on-premise gateway, this enabled the company to successfully address the jurisdictional and residency requirements of email data hosted in the cloud, as the company maintains control of the encryption keys - and business data is encrypted when it passes through the gateway's proxy at the boundary of the network and remains encrypted even when processed by and stored within a cloud service provider environment.

The persistent encryption technology ensures that data is never decrypted when in a third-party's environment and the ability to access useable data remains solely with the organization that holds the encryption key. Therefore, the company is able to comply with jurisdictional and residency requirements by virtue of keeping the encryption keys within the jurisdiction regardless of the actual physical location of the data, as well as ensuring complete ownership and control of that data if faced with a subpoena.

References

http://www.paulmudgett.com/resources/Nevada_Data_Security_Law.pdf

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31995L0046:en:HTML

More Stories By Elad Yoran

Elad Yoran is the CEO of Vaultive, Inc. He is a recognized expert on information security market and technology trends. Yoran has 20 years of experience in the cyber security industry as an executive, consultant, investor, investment banker and several-time successful entrepreneur. He is also a member of a number of technology, security and community Boards, including FBI Information Technology Advisory Council (ITAC); Department of Homeland Security Advisory Board for Command, Control and Interoperability for Advanced Data Analysis (CCICADA); and Cloud Security Alliance New York Metro Chapter.

Comments (1) View Comments

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


Most Recent Comments
veronica321 05/22/13 11:13:00 AM EDT

Great article and rightly said, security is still the biggest concern when moving to the cloud , I came across this interesting piece on cloud computing and cloud security in particular that readers might find interesting 'Cloud risks Striking a balance between savings and security' it talks a great deal about securing the cloud and data residency laws that might interest readers 

Latest Stories
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists discussed how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations might...
In their Live Hack” presentation at 17th Cloud Expo, Stephen Coty and Paul Fletcher, Chief Security Evangelists at Alert Logic, provided the audience with a chance to see a live demonstration of the common tools cyber attackers use to attack cloud and traditional IT systems. This “Live Hack” used open source attack tools that are free and available for download by anybody. Attendees learned where to find and how to operate these tools for the purpose of testing their own IT infrastructure. The...
SYS-CON Events announced today that IoT Now has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. IoT Now explores the evolving opportunities and challenges facing CSPs, and it passes on some lessons learned from those who have taken the first steps in next-gen IoT services.
SYS-CON Events announced today that Interoute, owner-operator of one of Europe's largest networks and a global cloud services platform, has been named “Bronze Sponsor” of SYS-CON's 20th Cloud Expo, which will take place on June 6-8, 2017 at the Javits Center in New York, New York. Interoute is the owner-operator of one of Europe's largest networks and a global cloud services platform which encompasses 12 data centers, 14 virtual data centers and 31 colocation centers, with connections to 195 add...
SYS-CON Events announced today that MobiDev, a client-oriented software development company, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. MobiDev is a software company that develops and delivers turn-key mobile apps, websites, web services, and complex softw...
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
Information technology (IT) advances are transforming the way we innovate in business, thereby disrupting the old guard and their predictable status-quo. It’s creating global market turbulence. Industries are converging, and new opportunities and threats are emerging, like never before. So, how are savvy chief information officers (CIOs) leading this transition? Back in 2015, the IBM Institute for Business Value conducted a market study that included the findings from over 1,800 CIO interviews ...
Virtualization over the past years has become a key strategy for IT to acquire multi-tenancy, increase utilization, develop elasticity and improve security. And virtual machines (VMs) are quickly becoming a main vehicle for developing and deploying applications. The introduction of containers seems to be bringing another and perhaps overlapped solution for achieving the same above-mentioned benefits. Are a container and a virtual machine fundamentally the same or different? And how? Is one techn...
What sort of WebRTC based applications can we expect to see over the next year and beyond? One way to predict development trends is to see what sorts of applications startups are building. In his session at @ThingsExpo, Arin Sime, founder of WebRTC.ventures, will discuss the current and likely future trends in WebRTC application development based on real requests for custom applications from real customers, as well as other public sources of information,
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor - all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
As businesses adopt functionalities in cloud computing, it’s imperative that IT operations consistently ensure cloud systems work correctly – all of the time, and to their best capabilities. In his session at @BigDataExpo, Bernd Harzog, CEO and founder of OpsDataStore, will present an industry answer to the common question, “Are you running IT operations as efficiently and as cost effectively as you need to?” He will expound on the industry issues he frequently came up against as an analyst, and...
ChatOps is an emerging topic that has led to the wide availability of integrations between group chat and various other tools/platforms. Currently, HipChat is an extremely powerful collaboration platform due to the various ChatOps integrations that are available. However, DevOps automation can involve orchestration and complex workflows. In his session at @DevOpsSummit at 20th Cloud Expo, Himanshu Chhetri, CTO at Addteq, will cover practical examples and use cases such as self-provisioning infra...
The financial services market is one of the most data-driven industries in the world, yet it’s bogged down by legacy CPU technologies that simply can’t keep up with the task of querying and visualizing billions of records. In his session at 20th Cloud Expo, Jared Parker, Director of Financial Services at Kinetica, will discuss how the advent of advanced in-database analytics on the GPU makes it possible to run sophisticated data science workloads on the same database that is housing the rich inf...
For organizations that have amassed large sums of software complexity, taking a microservices approach is the first step toward DevOps and continuous improvement / development. Integrating system-level analysis with microservices makes it easier to change and add functionality to applications at any time without the increase of risk. Before you start big transformation projects or a cloud migration, make sure these changes won’t take down your entire organization.