[Federal Register Volume 72, Number 120 (Friday, June 22, 2007)]
[Rules and Regulations]
[Pages 34395-34401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-3085]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 75

RIN 2900-AM63


Data Breaches

AGENCY: Department of Veterans Affairs.

ACTION: Interim final rule.

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SUMMARY: This document establishes regulations to address data breaches 
regarding sensitive personal information that is processed or 
maintained by the Department of Veterans Affairs (VA). The regulations 
implement certain provisions of Title IX of the Veterans Benefits, 
Health Care, and Information Technology Act of 2006, which require 
promulgation of these regulations as an interim final rule.

DATES: Effective Date: This interim final rule is effective on June 22, 
2007. Comments must be received on or before August 21, 2007.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to the Director, 
Regulations Management (00REG), Department of Veterans Affairs, 810 
Vermont Ave., NW., Room 1068, Washington, DC 20420; or by fax to (202) 
273-9026. Comments should indicate that they are submitted in response 
to ``RIN 2900-AM63-Data Breaches.'' Copies of comments received will be 
available for public inspection in the Office of Regulation Policy and 
Management, Room 1063B, between the hours of 8 a.m. and 4:30 p.m. 
Monday through Friday (except holidays). Please call (202) 273-9515 for 
an appointment. (This is not a toll-free number.) In addition, during 
the comment period, comments may be viewed online through the Federal 
Docket Management System (FDMS) at www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Terry Simmons, Information Technology 
Specialist, Office of Information Protection and Risk Management 
(005T), (202) 461-9217, Department of Veterans Affairs, 810 Vermont 
Avenue, NW., Washington, DC 20420. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: This document establishes regulations 
captioned ``Data Breaches'' (referred to below as the regulations). The 
regulations implement 38 U.S.C. 5724 and 5727, which were enacted as 
part of Title IX of Public Law 109-461, the Veterans Benefits, Health 
Care, and Information Technology Act of 2006. VA will promulgate 
regulations to implement 38 U.S.C. 5722 and 5723, which were also 
enacted as part of Title IX of Public Law 109-461, in a separate 
rulemaking.
    The regulations, which follow the statutory framework set out in 
section 5724, prescribe a mechanism for taking actions in response to a 
data breach of sensitive personal information. The finding of a data 
breach of sensitive personal information normally triggers a risk 
analysis. A risk analysis provides the basis for a determination as to 
whether individuals subject to a data breach will be given notice of 
the data breach and any other credit protections services authorized by 
VA. Under section 5724, VA must provide at least one credit protection 
service upon a finding that a reasonable risk exists for the potential 
misuse of sensitive personal information involved in a data breach. 
Consistent with this authority, the regulations require compliance with 
notification provisions when such finding occurs. The regulations also 
require that other credit protection services be provided, if 
warranted, based on the consideration of specified factors.
    However, section 5724 does not bar the Secretary from acting 
promptly to address a data breach without first conducting a risk 
analysis where the situation dictates. If the information available to 
the agency indicates that there is an immediate, substantial risk of 
identity theft of the individuals whose data was the subject of the 
data breach, the Secretary may notify the record subjects of the breach 
promptly so that they may take steps to protect themselves, and also 
may offer them other credit protection services without conducting a 
risk analysis. Additionally, the Secretary may offer credit protection 
services to individuals without first performing a risk analysis where 
a previous risk analysis performed by VA or another Federal agency 
involving the same or similar data determined that it was appropriate 
to offer the subject individuals credit protection services, including 
providing notice of the data breach. Finally, the Secretary may provide 
an initial notice of the data breach prior to completion of the risk 
analysis where private entities would be required to provide notice 
under Federal law if they experienced a data breach involving the same 
or similar information. In this last situation, the Secretary may 
provide notice of the breach and subsequently advise individuals 
whether the agency will offer additional credit protection services 
upon completion, and consideration of the results, of any risk 
analysis.
    Contents of this regulation, including notification of data 
breaches which may result in harms other than identity theft, should be 
interpreted to be consistent with OMB Memorandum M-07-16, 
``Safeguarding Against and Responding to Breaches of Personally 
Identifiable Information.'' The regulations are set forth as Subpart B 
in new 38 CFR part 75. Subpart A is reserved.

Section 75.111 Purpose and Scope

    The purpose and scope section explains that the regulations 
implement

[[Page 34396]]

38 U.S.C. 5724 and 5727 and that the regulations concern actions to 
address data breaches of sensitive personal information that is 
processed or maintained by VA. Thus, the regulations apply to sensitive 
personal information stored on VA computer systems, as well as to VA 
sensitive information stored on non-VA computer systems for VA, such as 
by a contractor. VA employees and contractors legally may perform 
activities for VA and for others. Those duties often require the 
collection, use and maintenance of sensitive personal information for 
both VA and for the other entity on a common electronic storage medium, 
such as a hard drive on a server. In these instances, the VA data are 
to be partitioned or segregated, such as being stored on separate 
virtual servers. Various factors may be different for the VA and non-VA 
data. For example, the data may be different, may have different levels 
of security or be in different formats. Finally, the legal protections 
required for the data, as well as the legal responsibilities for the 
data may be different. Consequently, the regulations apply only to VA 
data in this situation. The owners of the other, non-VA data residing 
on a non-VA storage medium that is lost, stolen or improperly accessed 
are responsible for identifying and complying with the legal 
requirements that those owners consider applicable to their data.
    Based on our interpretation of the statutory requirements, we have 
also added a statement indicating that the regulations do not supersede 
the requirements imposed by other laws, such as the Privacy Act of 
1974, the Administrative Simplification provisions of the Health 
Insurance Portability and Accountability Act of 1996, the Fair Credit 
Reporting Act, and implementing regulations of such Acts.

Section 75.112 Definitions and Terms

    So that the full terms would not have to be written out each time 
they are used in the regulations, ``VA'' means the Department of 
Veterans Affairs, and ``Secretary'' means the Secretary of Veterans 
Affairs or designee.
    The following definitions are exactly the same or the same in 
substance as the corresponding definitions in the authorizing 
legislation at 38 U.S.C. 5727: ``confidentiality,'' ``data breach,'' 
``data breach analysis,'' ``fraud resolution services,'' ``identity 
theft,'' ``identity theft insurance,'' ``information system,'' 
``integrity,'' and ``sensitive personal information.''
    The term ``individual'' is used in the definition of the phrase 
``sensitive personal information,'' but is itself undefined in the 
statute. We have defined ``individual'' to mean a single human being 
who is a citizen of the United States, an alien admitted to permanent 
residence in the United States, a present or former member of the Armed 
Forces, or any dependent of a present or former member of the Armed 
Forces. The first two parts of this definition come from the Privacy 
Act of 1974, 5 U.S.C. 552a(a)(2), and the last two parts come from 38 
U.S.C. 5701(a), which specifically provides confidentiality for the 
names and home addresses of present or former members of the Armed 
Forces and their dependents. It was apparent during the Congressional 
hearings after the May 2006 data breach involving the employee hard 
drive stolen from his home that the Members' focus was on the possible 
impact of a data breach on those individuals on whom VA normally 
maintains individually-identified information. The definition of 
``individual'' to include the human beings on whom VA maintains data is 
consistent with this Congressional concern.
    The phrase ``unauthorized access * * * incidental to the scope of 
employment'' is included in the statutory definition of data breach. We 
have defined this phrase to have the meaning that we believe was 
intended by the statutory authority.
    We defined ``person'' consistent with its common use when intended 
to include individuals and entities and consistent with its use in 
other VA regulations (see 38 CFR 1.460).
    We defined ``processed or maintained by VA'' to include all actions 
by VA regarding sensitive personal information for which VA has 
responsibility under the statutory authority of 38 U.S.C. 5724 and 
5727.

Section 75.113 Data Breach

    Consistent with the definition of ``data breach'' in the definition 
section, the regulations provide that a data breach occurs if there is 
a loss, theft, or other unauthorized access, other than an unauthorized 
access incidental to the scope of employment, to data containing 
sensitive personal information, in electronic or printed form, that 
results in the potential compromise of the confidentiality or integrity 
of the data. To clarify the scope of the regulations, we explain that 
the term ``unauthorized access'' used in the definition of ``data 
breach'' includes access to an electronic information system and 
includes, but is not limited to, viewing, obtaining, or using data 
containing sensitive personal information in any form or in any VA 
information system. The phrase ``unauthorized access incidental to the 
scope of employment'' includes instances when employees of contractors 
and other entities need access to VA sensitive information in order to 
perform a contract or agreement with VA but incidentally obtain access 
to other VA sensitive information. In accordance with this explanation, 
an unauthorized access, other than an unauthorized access incidental to 
the scope of employment, to data containing sensitive personal 
information, in electronic or printed form, which results in the 
potential compromise of the confidentiality or integrity of the data, 
constitutes a data breach. Also, in Sec.  75.113, we note that VA 
interprets data breach to include circumstances in which a user misuses 
sensitive personal information to which he or she has authorized 
access.
    To help interested individuals understand our view of what is not 
included in the definition of data breach, and, consequently, what is 
not subject to the provisions of the regulations, we have added an 
example in Sec.  75.113(a) to illustrate when an occurrence constitutes 
an unauthorized access incidental to the scope of employment.
    The following is a specific example of unauthorized access that is 
incidental to employment and therefore does not constitute a data 
breach. Contractor A has a contract to perform service 1 for VA. The 
contractor needs access to sensitive personal information to perform 
the contract. Contractor B also has a contract to perform service 2 for 
which contractor B needs access to sensitive personal information in 
order to perform the contract. The sensitive data in each contract is 
substantially the same, e.g., VA beneficiary demographic information 
for different groups of beneficiaries. Both contractors have complied 
with all applicable security and privacy requirements to access and use 
the data to perform each contract. A VA employee inadvertently provides 
contractor B with a CD with the encrypted data that contractor A needs 
to perform its contract. At the same time, the employee inadvertently 
also provides in a separate communication the password to decrypt the 
file. Contractor B opens the encrypted file, realizes that the 
sensitive personal information in the file is not the data that it 
needs to perform contract 2. Contractor B immediately closes and 
properly re-encrypts the data file and returns the CD to the 
appropriate VA official. Contractor B did not retain a copy of the data 
on the CD. Contractor B's access to the data file needed by Contractor 
A is an inadvertent unauthorized viewing of sensitive

[[Page 34397]]

personal information by a person acting on behalf of VA and therefore 
is not a data breach.
    We also have added examples in Sec.  75.113(b) to illustrate when 
an occurrence would not be one ``that results in the potential 
compromise of the confidentiality or integrity of the data.'' The 
addition of the clause ``that results in the potential compromise of 
the confidentiality or integrity of the data'' could not have been 
intended to mean zero percent possibility of creating a compromise of 
the confidentiality or integrity of the data, since such zero percent 
possibility would have applied if the clause had not been added. In our 
view, in order to trigger the need for a risk analysis, the added 
clause is appropriately interpreted to mean that a loss, theft, or 
other unauthorized access to data containing sensitive personal 
information that has even a minimal possibility of compromising the 
confidentiality or integrity of data constitutes a data breach and the 
examples reflect this conclusion.
    The following is another concrete example of an event that does not 
constitute a data breach. An employee is transporting a CD containing 
an encrypted flat file containing sensitive personal information. The 
file is encrypted using a software program that has been certified by 
the National Institute of Standards and Technology (NIST) as complying 
with the most recent security standards and certification of 
cryptographic modules. The vehicle in which the employee is riding 
crashes through a bridge railing and falls into a river. The car and 
the CD are recovered, and it is determined that the CD is destroyed. 
The likelihood that the CD will be recovered is minimal, and if 
recovered, the encryption would not permit access to the data. 
Therefore, there is no possibility of compromising the confidentiality 
or integrity of the data, and accordingly, this is not a data breach.

Section 75.114 Accelerated Response

    If the information available to the agency when VA learns of the 
data breach indicates that there is an immediate, substantial risk of 
identity theft for individuals as a result of the data breach, prior to 
completing a risk analysis, the Secretary may promptly notify the 
record subjects of the breach, and/or offer them other credit 
protection services as the Secretary determines in the exercise of his 
or her discretion what would be likely to assist the record subjects in 
preventing, or mitigating the results of, identity theft based on the 
compromised VA sensitive personal information. Additionally, Secretary 
may provide initial notice of the data breach without, or prior to 
completion of, a risk analysis where private entities would be required 
to provide notice under Federal law if they experienced a data breach 
involving the same or similar information. In such cases, the Secretary 
may provide notice of the breach and subsequently advise individuals 
whether the agency will offer additional credit protection services 
upon completion and consideration of the results of the risk analysis. 
The agency will provide the notice and/or other credit protection 
services under this section in accordance with Sec. Sec.  75.117 and 
75.118 of these regulations.

Section 75.115 Risk Analysis

    Under 38 U.S.C. 5724, VA must ensure that, as soon as possible 
after a data breach, a non-VA entity or the VA Office of Inspector 
General conducts an independent risk analysis of the data breach (which 
under 38 U.S.C. 5724 may include data mining as necessary to obtain 
relevant information) to determine the level of risk for potential 
misuse of sensitive personal information. To provide information that 
the Secretary will use in making determinations required under the 
regulations, this section requires that the risk analysis address 
identified factors relating to risks and potential harms.

Section 75.116 Secretary Determination

    Under 38 U.S.C. 5724, VA must consider the findings of each risk 
analysis and determine, based on criteria in the regulation, whether a 
reasonable risk exists for the potential misuse of sensitive personal 
information involved in a data breach. Consistent with the statutory 
intent, this section indicates that VA will take no further action 
under the regulations upon a finding that such a reasonable risk does 
not exist. Also, consistent with the statutory intent, this section 
indicates that VA will take further action as provided under the 
regulations (discussed below) upon a finding that a data breach of 
sensitive personal information poses a reasonable risk of potential 
misuse.

Section 75.117 Notification

    To implement 38 U.S.C. 5724, we are establishing procedures for 
notifying individuals whose sensitive personal information are subject 
to a reasonable risk for potential misuse from a data breach. Under 
this statutory provision, we have authority to provide notification 
once there is a finding that a reasonable risk exists for the potential 
misuse of any sensitive personal information involved in the data 
breach. The regulations reflect our view that the notification 
procedures should be utilized whenever this threshold determination is 
made by the Secretary.
    Paragraph (a) includes the information that we believe should be 
provided to affected individuals to ensure that they understand what 
has happened and what they can expect from VA with regard to other 
credit protection services. Under paragraph (a), affected individuals 
will receive letters sent via first-class mail explaining the 
circumstances of the data breach and possible responses for such 
individuals. We believe that this is an effective means of providing 
information. However, paragraph (b) contains alternative means of 
providing information if we are unable to contact an affected 
individual by mail. Further, paragraph (c) clarifies that VA will also 
provide notification using a quicker method, such as notification by 
telephone, when there is a possible imminent misuse of sensitive 
personal information due to a data breach. However, we have also 
included information in paragraph (d) explaining that in determining 
when to provide notification, we will consider lawful requests, from 
other Federal agencies, for the delay of notifications in order to 
prevent interference with the conduct of an investigation or efforts to 
recover the data.

Section 75.118 Other Credit Protection Services

    Under 38 U.S.C. 5724, VA may provide other credit protection 
services to individuals found to be subject to a reasonable risk for 
the potential misuse of any sensitive personal information because of a 
data breach. VA is specifically authorized to provide credit 
monitoring, data breach analysis, fraud resolution services, and 
identity theft insurance. Accordingly, the Secretary may offer one or 
more of the following if warranted based on considerations specified 
below:
     One year of credit monitoring services consisting of 
automatic daily monitoring of at least 3 relevant credit bureau reports 
(this is a standard credit monitoring policy);
     Data breach analysis;
     Fraud resolutions services, including writing dispute 
letters, initiating fraud alerts and credit freezes, to assist affected 
individuals to bring matters to resolution; and/or
     One year of identity theft insurance with $20,000.00 
coverage at $0

[[Page 34398]]

deductible (this is a standard identity theft insurance policy).
    The determination by the Secretary regarding whether any or all of 
these credit protection services will be offered to individuals subject 
to a data breach will depend on the particular facts in a case. 
Accordingly, we have established the following considerations for 
helping to determine what credit protection services will be offered to 
individuals subject to a data breach:
     The data elements involved;
     The number of individuals affected or potentially 
affected;
     The likelihood that sensitive personal information will be 
or has been compromised (made accessible to and usable by unauthorized 
persons);
     The risk of harm to the affected individuals; and
     The ability to prevent or mitigate the risk of harm by 
offering credit protection services.
    Pursuant to authority in 38 U.S.C. 5724, the regulations also 
provide that VA will obtain data mining and data breach analyses 
services, as appropriate, to obtain information relevant for making 
determinations under this subpart.

Section 75.119 Finality of Secretary Determination

    Under 38 U.S.C. 5724, the Secretary is required to make various 
determinations concerning a particular data breach incident. Any 
determination made by the Secretary under this subpart will be 
considered a final agency decision.

Solicitation of Comments

    VA solicits comments on the following matters. VA will consider 
comments on all provisions of this Interim Final Rule received during 
the 60-day public comment period.

Section 75.115 Risk Analysis

    VA solicits comments on use of data mining as necessary for the 
development of relevant information to assist in preparation of risk 
analysis following a data breach. In particular, we seek comments on 
the purposes for which data mining would be appropriate and acceptable 
uses of the information resulting from data mining.

Section 75.117 Notification

    We are considering not providing written notification if the 
Secretary determines that the data breach incident has been widely 
disseminated through the media. Specifically, we are soliciting comment 
on the following possible draft provision:

    (e) Notwithstanding other provisions of this section, the 
Secretary may forgo notification by first-class mail upon a 
determination that the information in paragraphs (a)(1) through 
(a)(5) of this section has been widely disseminated through the 
media, a mailing would virtually duplicate information that has 
already been provided to individuals subject to a data breach, and 
the agency can determine with reasonable certainty all of the 
affected individuals have received actual notice of (1) the data 
breach and (2) their inclusion in the affected class of individuals. 
In determining whether media dissemination has already provided 
adequate notice to affected individuals, the Secretary will also 
consider media coverage at the national level, and, where the data 
breach is limited to individuals within a particular, defined 
geographic area or areas, the media coverage in that area. The 
Secretary will further consider the extent of the accuracy of media 
coverage, frequency of repetition of such media coverage (number of 
articles or frequency of publications or broadcasts), and the 
variety of media outlets carrying such media coverage.

Potential Procedures for Appeals or Reconsiderations of Decisions Made 
Under Subpart B

    Public Law 109-461 was silent regarding appeals or reconsiderations 
of decisions made under Section 902 Department of Veterans Affairs 
Information Security Programs and Requirements. VA solicits comments on 
potential procedures for appeals and reconsiderations.

Administrative Procedure Act

    This rule is exempt from the prior notice and comment and delayed 
effective date provisions of 5 U.S.C. 553 for good cause because they 
are unnecessary based on the statutory mandate in 38 U.S.C. 5724 to 
publish this document as an interim final rule. 5 U.S.C. 553(b)(B), 
(d)(3).

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This rule would have no such effect on 
State, local, and tribal governments or the private sector.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity). The Executive 
Order classifies a ``significant regulatory action,'' requiring review 
by the Office of Management and Budget (OMB) unless OMB waives such 
review, as any regulatory action that is likely to result in a rule 
that may: (1) Have an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order.
    The economic, interagency, budgetary, legal, and policy 
implications of this interim final rule have been examined and it has 
been determined to be a significant regulatory action under the 
Executive Order because it is likely to result in a rule that may raise 
novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order.

Regulatory Flexibility Act

    The provisions of the Regulatory Flexibility Act (5 U.S.C. 601-612) 
do not apply to this interim final rule because the provisions of 38 
U.S.C. 5724 require that this document be promulgated as an interim 
final rule, and, consequently, a notice of proposed rulemaking was not 
required for the rule. 5 U.S.C. 603-604.

Catalog of Federal Domestic Assistance Numbers

    There are no Catalog of Federal Domestic Assistance numbers and 
titles for this rule.

List of Subjects in 38 CFR Part 75

    Administrative practice and procedure, Credit monitoring, Data 
breach, Data breach analysis, Data mining, Fraud alerts, Identity theft 
insurance, Information, Notification, Risk analysis, Security measures.


[[Page 34399]]


    Approved: June 13, 2007.
Gordon H. Mansfield,
Deputy Secretary of Veterans Affairs.

0
For reasons set forth in the preamble, VA is amending 38 CFR chapter I 
by adding part 75 to read as follows:

PART 75--INFORMATION SECURITY MATTERS

Subpart A--[Reserved]
Subpart B--Data Breaches
Sec.
75.111 Purpose and scope.
75.112 Definitions and terms.
75.113 Data breach.
75.114 Accelerated response.
75.115 Risk analysis.
75.116 Secretary determination.
75.117 Notification.
75.118 Other credit protection services.
75.119 Finality of Secretary determination.

    Authority: 38 U.S.C. 501, 5724, 5727, 7906.

Subpart A--[Reserved]

Subpart B--Data Breaches


Sec.  75.111  Purpose and scope.

    This subpart implements provisions of 38 U.S.C. 5724 and 5727, 
which are set forth in Title IX of the Veterans Benefits, Health Care, 
and Information Technology Act of 2006. It only concerns actions to 
address a data breach regarding sensitive personal information that is 
processed or maintained by VA. This subpart does not supersede the 
requirements imposed by other laws, such as the Privacy Act of 1974, 
the Administrative Simplification provisions of the Health Insurance 
Portability and Accountability Act of 1996, the Fair Credit Reporting 
Act, and implementing regulations of such Acts.

(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.112  Definitions and terms.

    For purposes of this subpart:
    Confidentiality means preserving authorized restrictions on access 
and disclosure, including means for protecting personal privacy and 
proprietary information.
    Data breach means the loss or theft of, or other unauthorized 
access to, other than an unauthorized access incidental to the scope of 
employment, data containing sensitive personal information, in 
electronic or printed form, that results in the potential compromise of 
the confidentiality or integrity of the data.
    Data breach analysis means the process used to determine if a data 
breach has resulted in the misuse of sensitive personal information.
    Fraud resolution services means services to assist an individual in 
the process of recovering and rehabilitating the credit of the 
individual after the individual experiences identity theft.
    Identity theft has the meaning given such term under section 603 of 
the Fair Credit Reporting Act (15 U.S.C. 1681a).
    Identity theft insurance means any insurance policy that pays 
benefits for costs, including travel costs, notary fees, and postage 
costs, lost wages, and legal fees and expenses associated with efforts 
to correct and ameliorate the effects and results of identity theft of 
the insured individual.
    Individual means a single human being who is a citizen of the 
United States, an alien admitted to permanent residence in the United 
States, a present or former member of the Armed Forces, or any 
dependent of a present or former member of the Armed Forces.
    Information system means a discrete set of information resources 
organized for the collection, processing, maintenance, use, sharing, 
dissemination, or disposition of information, whether automated or 
manual.
    Integrity means guarding against improper information modification 
or destruction, and includes ensuring information non-repudiation and 
authenticity.
    Logical data access means the ability of a person to translate the 
data for misuse. This can lead to inappropriate access to lost, stolen 
or improperly obtained data.
    Person means an individual; partnership; corporation; Federal, 
State, or local government agency; or any other legal entity.
    Processed or maintained by VA means created, stored, transmitted, 
or manipulated by VA personnel or by a person acting on behalf of VA, 
including a contractor or other organization or any level of 
subcontractor or other suborganization.
    Secretary means the Secretary of Veterans Affairs or designee.
    Sensitive personal information, with respect to an individual, 
means any information about the individual maintained by an agency, 
including the following:
    (1) Education, financial transactions, medical history, and 
criminal or employment history.
    (2) Information that can be used to distinguish or trace the 
individual's identity, including name, Social Security number, date and 
place of birth, mother's maiden name, or biometric records.
    Unauthorized access incidental to the scope of employment means 
access, in accordance with VA data security and confidentiality 
policies and practices, that is a by-product or result of a permitted 
use of the data, that is inadvertent and cannot reasonably be 
prevented, and that is limited in nature.
    VA means the Department of Veterans Affairs.


(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.113  Data breach.

    Consistent with the definition of data breach in Sec.  75.112 of 
this subpart, a data breach occurs under this subpart if there is a 
loss or theft of, or other unauthorized access to, other than an 
unauthorized access incidental to the scope of employment, data 
containing sensitive personal information, in electronic or printed 
form, that results in the potential compromise of the confidentiality 
or integrity of the data. The term ``unauthorized access'' used in the 
definition of ``data breach'' includes access to an electronic 
information system and includes, but is not limited to, viewing, 
obtaining, or using data containing sensitive personal information in 
any form or in any VA information system. The phrase ``unauthorized 
access incidental to the scope of employment'' includes instances when 
employees of contractors and other entities need access to VA sensitive 
information in order to perform a contract or agreement with VA but 
incidentally obtain access to other VA sensitive information. 
Accordingly, an unauthorized access, other than an unauthorized access 
incidental to the scope of employment, to data containing sensitive 
personal information, in electronic or printed form, that results in 
the potential compromise of the confidentiality or integrity of the 
data, constitutes a data breach. In addition to these circumstances, VA 
also interprets data breach to include circumstances in which a user 
misuses sensitive personal information to which he or she has 
authorized access. The following circumstances do not constitute a data 
breach and, consequently, are not subject to the provisions of this 
subpart:
    (a) An unauthorized access to data containing sensitive personal 
information that was determined by the Secretary to be incidental to 
the scope of employment, such as an inadvertent unauthorized viewing of 
sensitive personal information by a VA employee or a person acting on 
behalf of VA.
    (b) A loss, theft, or other unauthorized access to data containing 
sensitive personal information that the Secretary determined to have no 
possibility of compromising the confidentiality or integrity of the 
data, such as the inability of compromising the

[[Page 34400]]

confidentiality or integrity of the data because of encryption or the 
inadvertent disclosure to another entity that is required to provide 
the same or a similar level of protection for the data under statutory 
or regulatory authority.

(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.114  Accelerated response.

    (a) The Secretary, in the exercise of his or her discretion, may 
provide notice to records subjects of a data breach and/or offer them 
other credit protection services prior to the completion of a risk 
analysis if:
    (1) The Secretary determines, based on the information available to 
the agency when it learns of the data breach, that there is an 
immediate, substantial risk of identity theft of the individuals whose 
data was the subject of the data breach, and providing timely notice 
may enable the record subjects to promptly take steps to protect 
themselves, and/or the offer of other credit protection services will 
assist in timely mitigation of possible harm to individuals from the 
data breach; or
    (2) Private entities would be required to provide notice under 
Federal law if they experienced a data breach involving the same or 
similar information.
    (3) In situations described in paragraphs (a)(1) or (a)(2) of this 
section, the Secretary may provide notice of the breach prior to 
completion of a risk analysis, and subsequently advise individuals 
whether the agency will offer additional credit protection services 
upon completion, and consideration of the results, of the risk 
analysis, if the Secretary directs that one be completed.
    (b) In determining whether to promptly notify individuals and/or 
offer them other credit protection services under paragraph (a)(1) of 
this section, the Secretary shall make the decision based upon the 
totality of the circumstances and information available to the 
Secretary at the time of the decision, including whether providing 
notice and offering other credit protection services would be likely to 
assist record subjects in preventing, or mitigating the results of, 
identity theft based on the compromised VA sensitive personal 
information. The Secretary's exercise of this discretion will be based 
on good cause, including consideration of the following factors:
    (1) The nature and content of the lost, stolen or improperly 
accessed data, e.g., the data elements involved, such as name, social 
security number, date of birth;
    (2) The ability of an unauthorized party to use the lost, stolen or 
improperly accessed data, either by itself or with data or applications 
generally available, to commit identity theft or otherwise misuse the 
data to the disadvantage of the record subjects, if able to access and 
use the data;
    (3) Ease of logical data access to the lost, stolen or improperly 
accessed data in light of the degree of protection for the data, e.g., 
unencrypted, plain text;
    (4) Ease of physical access to the lost, stolen or improperly 
accessed data, e.g., the degree to which the data is readily available 
to unauthorized access, such as being in a dumpster readily accessible 
by members of the general public;
    (5) The format of the lost, stolen or improperly accessed data, 
e.g., in a standard electronic format, such as ASCII, or in paper;
    (6) Evidence indicating that the lost, stolen or improperly 
accessed data may have been the target of unlawful acquisition; and
    (7) Evidence that the same or similar data had been acquired from 
other sources improperly and used for identity theft.
    (c) VA will provide notice and/or other credit protection services 
under this section as provided in Sec. Sec.  75.117 and 75.118.

(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.115  Risk analysis.

    If a data breach involving sensitive personal information that is 
processed or maintained by VA occurs and the Secretary has not 
determined under Sec.  75.114 that an accelerated response is 
appropriate, the Secretary shall ensure that, as soon as possible after 
the data breach, a non-VA entity with relevant expertise in data breach 
assessment and risk analysis or VA's Office of Inspector General 
conducts an independent risk analysis of the data breach. The 
preparation of the risk analysis may include data mining if necessary 
for the development of relevant information. The risk analysis shall 
include a finding with supporting rationale concerning whether the 
circumstances create a reasonable risk that sensitive personal 
information potentially may be misused. If the risk analysis concludes 
that the data breach presents a reasonable risk for the potential 
misuse of sensitive personal information, the risk analysis must also 
contain operational recommendations for responding to the data breach. 
Each risk analysis, regardless of findings and operational 
recommendations, shall also address all relevant information concerning 
the data breach, including the following:
    (a) Nature of the event (loss, theft, unauthorized access).
    (b) Description of the event, including:
    (1) Date of occurrence;
    (2) Data elements involved, including any personally identifiable 
information, such as full name, social security number, date of birth, 
home address, account number, disability code;
    (3) Number of individuals affected or potentially affected;
    (4) Individuals or groups affected or potentially affected;
    (5) Ease of logical data access to the lost, stolen or improperly 
accessed data in light of the degree of protection for the data, e.g., 
unencrypted, plain text;
    (6) Time the data has been out of VA control;
    (7) The likelihood that the sensitive personal information will or 
has been compromised (made accessible to and usable by unauthorized 
persons); and
    (8) Known misuses of data containing sensitive personal 
information, if any.
    (c) Assessment of the potential harm to the affected individuals.
    (d) Data breach analysis, as appropriate.

(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.116  Secretary determination.

    (a) Upon receipt of a risk analysis prepared under this subpart, 
the Secretary will consider the findings and other information 
contained in the risk analysis to determine whether the data breach 
caused a reasonable risk for the potential misuse of sensitive personal 
information. If the Secretary finds that such a reasonable risk does 
not exist, the Secretary will take no further action under this 
subpart. However, if the Secretary finds that such a reasonable risk 
exists, the Secretary will take responsive action as specified in this 
subpart based on the potential harms to individuals subject to a data 
breach.
    (b) In determining whether the data breach resulted in a reasonable 
risk for the potential misuse of the compromised sensitive personal 
information, the Secretary shall consider all factors that the 
Secretary, in his or her discretion, considers relevant to the 
decision, including:
    (1) The likelihood that the sensitive personal information will be 
or has been made accessible to and usable by unauthorized persons;
    (2) Known misuses, if any, of the same or similar sensitive 
personal information;
    (3) Any assessment of the potential harm to the affected 
individuals provided in the risk analysis;
    (4) Whether the credit protection services that VA may offer under 
38 U.S.C. 5724 may assist record subjects in avoiding or mitigating the 
results of

[[Page 34401]]

identity theft based on the VA sensitive personal information that had 
been compromised;
    (5) Whether private entities are required under Federal law to 
offer credit protection services to individuals if the same or similar 
data of the private entities had been similarly compromised; and
    (6) The recommendations, if any, concerning the offer of, or 
benefits to be derived from, credit protection services in this case 
that are in the risk analysis report.

(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.117  Notification.

    (a) With respect to individuals found under this subpart by the 
Secretary to be subject to a reasonable risk for the potential misuse 
of any sensitive personal information, the Secretary will promptly 
provide written notification by first-class mail to the individual (or 
the next of kin if the individual is deceased) at the last known 
address of the individual. The notification may be sent in one or more 
mailings as information is available and will include the following:
    (1) A brief description of what happened, including the date[s] of 
the data breach and of its discovery if known;
    (2) To the extent possible, a description of the types of personal 
information that were involved in the data breach (e.g., full name, 
Social Security number, date of birth, home address, account number, 
disability code);
    (3) A brief description of what the agency is doing to investigate 
the breach, to mitigate losses, and to protect against any further 
breach of the data;
    (4) Contact procedures for those wishing to ask questions or learn 
additional information, which will include a toll-free telephone 
number, an e-mail address, Web site, and/or postal address;
    (5) Steps individuals should take to protect themselves from the 
risk of identity theft, including steps to obtain fraud alerts (alerts 
of any key changes to such reports and on demand personal access to 
credit reports and scores), if appropriate, and instruction for 
obtaining other credit protection services offered under this subpart; 
and
    (6) A statement whether the information was encrypted or protected 
by other means, when determined such information would be beneficial 
and would not compromise the security of the system.
    (b) In those instances where there is insufficient, or out-of-date 
contact information that precludes direct written notification to an 
individual subject to a data breach, a substitute form of notice may be 
provided, such as a conspicuous posting on the home page of VA's Web 
site and notification in major print and broadcast media, including 
major media in geographic areas where the affected individuals likely 
reside. Such a notice in media will include a toll-free phone number 
where an individual can learn whether or not his or her personal 
information is possibly included in the data breach.
    (c) In those cases deemed by the Secretary to require urgency 
because of possible imminent misuse of sensitive personal information, 
the Secretary, in addition to notification under paragraph (a) of this 
section, may provide information to individuals by telephone or other 
means, as appropriate.
    (d) Notwithstanding other provisions in this section, notifications 
may be delayed upon lawful requests, from other Federal agencies, for 
the delay of notifications in order to protect data or computer 
resources from further compromise or to prevent interference with the 
conduct of an investigation or efforts to recover the data. A lawful 
request is one made in writing by the entity or VA component 
responsible for the investigation or data recovery efforts that may be 
adversely affected by providing notification. Any lawful request for 
delay in notification must state an estimated date after which the 
requesting entity believes that notification will not adversely affect 
the conduct of the investigation or efforts to recover the data. 
However, any delay should not exacerbate risk or harm to any affected 
individual(s). Decisions to delay notification should be made by the 
Secretary.


(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.118  Other credit protection services.

    (a) With respect to individuals found under this subpart by the 
Secretary to be subject to a reasonable risk for the potential misuse 
of any sensitive personal information under this subpart, the Secretary 
may offer one or more of the following as warranted based on 
considerations specified in paragraph (b) of this section:
    (1) One year of credit monitoring services consisting of automatic 
daily monitoring of at least 3 relevant credit bureau reports;
    (2) Data breach analysis;
    (3) Fraud resolution services, including writing dispute letters, 
initiating fraud alerts and credit freezes, to assist affected 
individuals to bring matters to resolution; and/or
    (4) One year of identity theft insurance with $20,000.00 coverage 
at $0 deductible.
    (b) Consistent with the requirements of the Fair Credit Reporting 
Act (15 U.S.C. 1681 et seq.) as interpreted and applied by the Federal 
Trade Commission, the notice to the individual offering other credit 
protection services will explain how the individual may obtain the 
services, including the information required to be submitted by the 
individual to obtain the services, and the time period within which the 
individual must act to take advantage of the credit protection services 
offered.
    (c) In determining whether any or all of the credit protection 
services specified in paragraph (a) of this section will be offered to 
individuals subject to a data breach, the Secretary will consider the 
following:
    (1) The data elements involved;
    (2) The number of individuals affected or potentially affected;
    (3) The likelihood the sensitive personal information will be or 
has been made accessible to and usable by unauthorized persons;
    (4) The risk of potential harm to the affected individuals; and
    (5) The ability to mitigate the risk of harm.
    (c) The Secretary will take action to obtain data mining and data 
breach analyses services, as appropriate, to obtain information 
relevant for making determinations under this subpart.


(Authority: 38 U.S.C. 501, 5724, 5727)

Sec.  75.119  Finality of Secretary determination.

    A determination made by the Secretary under this subpart will be a 
final agency decision.

[FR Doc. 07-3085 Filed 6-20-07: 9:50 am]
BILLING CODE 8320-01-P