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Statement for the Record

Worldwide Cyber Threats

House Permanent Select Committee on Intelligence

James R. Clapper

Director of National Intelligence

September 10, 2015

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STATEMENT FOR THE RECORD Worldwide Cyber Threats

September 10, 2015

INTRODUCTION

Chairman Nunes, Ranking Member Schiff, Members of the Committee, thank you for the invitation to offer

this Statement for the Record. My statement reflects the collective insights of the Intelligence

Community’s extraordinary men and women, whom I am privileged and honored to lead. We in the

Intelligence Community are committed every day to provide the nuanced, multidisciplinary intelligence

that policymakers, warfighters, and domestic law enforcement personnel need to protect American lives

and America’s interests anywhere in the world.

Information available as of September 10, 2015 was used in the preparation of this Statement for the

Record.

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Worldwide Cyber Threats

Overview

Cyber threats to US national and economic security are increasing in frequency, scale, sophistication,

and severity of impact. The ranges of cyber threat actors, methods of attack, targeted systems, and

victims are also expanding. Overall, the unclassified information and communication technology (ICT)

networks that support US Government, military, commercial, and social activities remain vulnerable to

espionage and/or disruption. However, the likelihood of a catastrophic attack from any particular actor is

remote at this time. Rather than a “Cyber Armageddon” scenario that debilitates the entire US

infrastructure, we envision something different. We foresee an ongoing series of low-to-moderate level

cyber attacks from a variety of sources over time, which will impose cumulative costs on US economic

competitiveness and national security.

 Several nations—including Iran and North Korea—have undertaken offensive cyber operations

against private sector targets to support their economic and foreign policy objectives, at times

concurrent with political crises.

Risk. Despite ever-improving network defenses, the diverse possibilities available through remote

hacking intrusion, supply chain operations to insert compromised hardware or software, actions by

malicious insiders, and mistakes by system users will hold nearly all ICT networks and systems at risk for

years to come. In short, the cyber threat cannot be eliminated; rather, cyber risk must be managed.

Moreover, the risk calculus some private sector entities employ does not adequately account for foreign

cyber threats or the systemic interdependencies between different critical infrastructure sectors.

Costs. We continue to witness an increase in the scale and scope of reporting on malicious cyber

activity that can be measured by the amount of corporate data stolen or deleted, personally identifiable

information compromised, or remediation costs incurred by US victims. For example:

 Earlier this year, the Office of Personnel Management (OPM) discovered that a number of its systems

were compromised. These systems included those that contain information related to the background

investigations of current, former, and prospective federal government employees, as well as other

individuals for whom a federal background investigation was conducted. OPM announced the

compromise resulted in 21.5 million personal records being stolen.

 After the 2012-13 distributed denial of service (DDOS) attacks on the US financial sector, JPMorgan

Chase (JPMorgan) announced plans for annual cyber security expenditures of $250 million by the

end of 2014. After the company suffered a hacking intrusion in 2014, JPMorgan’s CEO said he would

probably double JPMorgan’s annual computer security budget within the next five years.

 The 2014 data breach at Home Depot exposed information from 56 million credit/debit cards and 53

million customer email addresses. Home Depot estimated the cost of the breach to be $62 million.

 In August 2014, the US company Community Health Systems informed the Securities and Exchange

Commission that it believed hackers “originating from China” had stolen personally identifiable

information on 4.5 million individuals.

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Attribution. Although cyber operators can infiltrate or disrupt targeted ICT networks, most can no longer

assume that their activities will remain undetected indefinitely. Nor can they assume that if detected, they

will be able to conceal their identities. Governmental and private sector security professionals have made

significant advances in detecting and attributing cyber intrusions.

 In May 2014, the US Department of Justice indicted five officers from China’s Peoples’ Liberation

Army on charges of hacking US companies.

 In December 2014, computer security experts reported that members of an Iranian organization were

responsible for computer operations targeting US military, transportation, public utility, and other

critical infrastructure networks.

Furthermore, the IC is regularly gaining and losing sources of intelligence; that is the nature of the business. Of late, unauthorized disclosures and foreign defensive improvements have cost us some technical accesses, but we are also deriving valuable new insight from cyber security investigations of incidents caused by foreign actors and new means of aggregating and processing big data. Those avenues will help offset some more traditional collection modes that are obsolescent.

Deterrence. Numerous actors remain undeterred from conducting economic cyber espionage or

perpetrating cyber attacks. The absence of universally accepted and enforceable norms of behavior in

cyberspace has contributed to this situation. The motivation to conduct cyber attacks and cyber

espionage will probably remain strong because of the relative ease of these operations and the gains

they bring to the perpetrators. The result is a cyber environment in which multiple actors continue to test

their adversaries’ technical capabilities, political resolve, and thresholds. The muted response by most

victims to cyber attacks has created a permissive environment in which low-level attacks can be used as

a coercive tool short of war, with relatively low risk of retaliation. Additionally, even when a cyber attack

can be attributed to a specific actor, the forensic attribution often requires a significant amount of time to

complete. Long delays between the cyber attack and determination of attribution likewise reinforce a

permissive environment.

Threat Actors

Politically motivated cyber attacks are now a growing reality, and foreign actors are reconnoitering and

developing access to US critical infrastructure systems, which might be quickly exploited for disruption if

an adversary’s intent became hostile. In addition, those conducting cyber espionage are targeting US

government, military, and commercial networks on a daily basis. These threats come from a range of

actors, including: (1) nation states with highly sophisticated cyber programs (such as Russia or China),

(2) nations with lesser technical capabilities but possibly more disruptive intent (such as Iran or North

Korea), (3) profit-motivated criminals, and (4) ideologically motivated hackers or extremists.

Distinguishing between state and non-state actors within the same country is often difficult—especially

when those varied actors actively collaborate, tacitly cooperate, condone criminal activity that only harms

foreign victims, or utilize similar cyber tools.

Russia. Russia’s Ministry of Defense is establishing its own cyber command, which—according to senior

Russian military officials—will be responsible for conducting offensive cyber activities, including

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propaganda operations and inserting malware into enemy command and control systems. Russia’s

armed forces are also establishing a specialized branch for computer network operations.

 Computer security studies assert that Russian cyber actors are developing means to remotely access

industrial control systems (ICS) used to manage critical infrastructures. Unknown Russian actors

successfully compromised the product supply chains of at least three ICS vendors so that customers

downloaded malicious software (“malware”) designed to facilitate exploitation directly from the

vendors’ websites along with legitimate software updates, according to private sector cyber security

experts.

China. Chinese cyber espionage continues to target a broad spectrum of US interests, ranging from

national security information to sensitive economic data and US intellectual property. Although China is

an advanced cyber actor in terms of capabilities, Chinese hackers are often able to gain access to their

targets without having to resort to using advanced capabilities. Improved US cybersecurity would

complicate Chinese cyber espionage activities by addressing the less sophisticated threats, and raising

the cost and risk if China persists.

Iran. Iranian actors have been implicated in the 2012-13 DDOS attacks against US financial institutions

and in the February 2014 cyber attack on the Las Vegas Sands casino company. Iran very likely views

its cyber program as one of many tools for carrying out asymmetric but proportional retaliation against

political foes, as well as a sophisticated means of collecting intelligence.

North Korea. North Korea is another state actor that uses its cyber capabilities for political objectives.

The North Korean Government was responsible for the November 2014 cyber attack on Sony Pictures

Entertainment (SPE), which stole corporate information and introduced hard drive erasing malware into

the company’s network infrastructure, according to the FBI. The attack coincided with the planned

release of a SPE feature film satire that depicted the fictional assassination of the North Korean

president.

Profit-motivated criminals. Profit motivated cyber criminals rely on loosely networked online

marketplaces, often referred to as the cyber underground, that provide a forum for the merchandising of

illicit tools, services, infrastructure, stolen personal identifying information, and financial data. As media

reports have documented, cyber criminals continue to successfully compromise the networks of retail

businesses and financial institutions in order to collect financial information, biographical data, home

addresses, email addresses, and medical records that serve as the building blocks to criminal operations

that facilitate identity theft and healthcare fraud. The most significant financial cyber criminal threats to

US entities and our international partners can be attributed to a relatively small subset of actors,

facilitators, infrastructure, and criminal forums.

However, our federal law enforcement colleagues continue to have successes capturing key cyber

criminals by cooperating with international partners. For example, in late June, the Department of Justice

and the United States Secret Service worked with their German counterparts to extradite Ercan

Findikoglu, a Turkish national, responsible for multiple cyber crime campaigns that targeted the U.S.

financial sector stealing $55 million dollars between 2011 and 2013. Findikoglu was apprehended by the

German Federal Police after US Secret Service agents confirmed he was traveling through Germany in

December 2013. Additionally, last month an FBI-led coalition of international partners from 20 countries

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dismantled an online criminal forum known as Darkode. According to the Department of Justice, this

forum represented one of the gravest threats to the integrity of data stored on computers in the United

States and elsewhere.

Terrorists. Terrorist groups will continue to experiment with hacking, which could serve as the

foundation for developing more advanced capabilities. Terrorist sympathizers will probably conduct low-

level cyber attacks on behalf of terrorist groups and attract attention of the media, which might exaggerate

the capabilities and threat posed by these actors.

With respect to ISIL, since last summer, the group began executing a highly strategic social media

campaign using a diverse array of platforms and thousands of online supporters around the globe. The

group quickly builds expertise in the platforms it uses and often leverages multiple tools within each

platform. ISIL and its adherents’ adept use of social media allows the group to maximize the spread of its

propaganda and reach out to potential recruits.

Integrity of Information

Most of the public discussion regarding cyber threats has focused on the confidentiality and availability of

information; cyber espionage undermines confidentiality, whereas denial-of-service operations and data-

deletion attacks undermine availability. In the future, however, we might also see more cyber operations

that will change or manipulate electronic information in order to compromise its integrity (i.e., accuracy

and reliability) instead of deleting it or disrupting access to it. Decisionmaking by senior government

officials (civilian and military), corporate executives, investors, or others will be impaired if they cannot

trust the information they are receiving.

 Successful cyber operations targeting the integrity of information would need to overcome any

institutionalized checks and balances designed to prevent the manipulation of data, for example,

market monitoring and clearing functions in the financial sector.

Counterintelligence

Internet users are disclosing more information about themselves through social media platforms, online

transactions, and search engine queries. New business models for online services often require

disclosure of personal information or consent to allow corporate monitoring of one’s online activities.

Governments and third parties digitize public records and share them on the Internet for accessibility,

making online records an unavoidable byproduct of living in a digitized society.

Counterintelligence risks are inherent when foreign intelligence agencies obtain access to an individual’s

personally identifiable information or virtual identity information. Foreign intelligence agencies could target

the individual, family members, coworkers, and neighbors using a variety of physical and electronic

methods. The methods foreign intelligence agencies use to exploit targets require a comprehensive

mitigation effort that involves CI awareness not only from the individual, but also from family members

and coworkers that might have their data compromised as part of the individual’s investigation.

Conclusion

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In summary, the breadth of cyber threats posed to US national and economic security has become

increasing diverse, sophisticated, and impactful. Cyber Intelligence—collecting, analyzing, and

disseminating intelligence on the intentions, capabilities, and operational activities of foreign cyber

actors—is one of the core objectives in National Intelligence Strategy we produced last year to guide the

activities of the Intelligence Community. Ensuring the integration of such activities in support of our policy

makers and national security is a core mission for the Office of the Director of National Intelligence, and

was one reason the President directed me to form a Cyber Threat Intelligence Integration Center (CTIIC).

I look forward to working with this Committee to enable the Intelligence Community in general and CTIIC

in particular to support our nation in this vital area. Thank you.