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  4. Written testimony of U.S. Secret Service for a Senate Banking, Housing and Urban Affairs Subcommittee on National Security and International Trade and Finance hearing titled “Safeguarding Consumers' Financial Data”

Written testimony of USSS Criminal Investigative Division Deputy Special Agent in Charge William Noonan for a Senate Committee on Banking, Housing and Urban Affairs, Subcommittee on National Security and International Trade and Finance hearing titled “Safeguarding Consumers' Financial Data”

Release Date: February 3, 2014

538 Dirksen Senate Office Building

Good afternoon Chairman Warner, Ranking Member Kirk, and distinguished Members of the Committee. Thank you for the opportunity to testify on the risks and challenges the Nation faces from large-scale data breaches like those that have been recently reported and are of great concern to our Nation. The U.S. Secret Service (Secret Service) has decades of experience investigating large-scale criminal cyber intrusions, in addition to other crimes that impact our Nation’s financial payment systems. Based on investigative experience and the understanding we have developed regarding transnational organized cyber criminals that are engaged in these data breaches and associated frauds, I hope to provide this committee useful insight into this issue from a federal law enforcement perspective to help inform your deliberations.

The Role of the Secret Service

The Secret Service was founded in 1865 to protect the U.S. financial system from the counterfeiting of our national currency. As the Nation’s financial system evolved from paper to plastic to electronic transactions, so too has the Secret Service’s investigative mission. Today, our modern financial system depends heavily on information technology for convenience and efficiency. Accordingly, criminals have adapted their methods and are increasingly using cyberspace to exploit our Nation’s financial payment system by engaging in fraud and other illicit activities. This is not a new trend; criminals have been committing cyber financial crimes since at least 1970.1

Congress established 18 USC § 1029-1030 as part of the Comprehensive Crime Control Act of 1984; these statutes criminalized unauthorized access to computers2 and the fraudulent use or trafficking of access devices3—defined as any piece of information or tangible item that is a means of account access that can be used to obtain money, goods, services, or other thing of value.4 Congress specifically gave the Secret Service authority to investigate violations of both statutes.5

Secret Service investigations have resulted in the arrest and successful prosecution of cyber criminals involved in the largest known data breaches, including those of TJ Maxx, Dave & Buster’s, Heartland Payment Systems, and others. Over the past four years Secret Service cyber crime investigations have resulted in over 4,900 arrests, associated with approximately $1.37 billion in fraud losses and the prevention of over $11.24 billion in potential fraud losses. Through our work with our partners at the Department of Justice (DOJ), in particular the local U.S. Attorney Offices, the Computer Crimes and Intellectual Property section (CCIPS), the International Organized Crime Intelligence and Operations Center (IOC-2), and others, we are confident we will continue to bring the cyber criminals that perpetrate major data breaches to justice.

1 Beginning in 1970, and over the course of three years, the chief teller at the Park Avenue branch of New York’s Union Dime Savings Bank manipulated the account information on the bank’s computer system to embezzle over $1.5 million from hundreds of customer accounts. This early example of cyber crime not only illustrates the long history of cyber crime, but the difficulty companies have in identifying and stopping cyber criminals in a timely manner—a trend that continues today.
2 See 18 USC § 1030
3 See 18 USC § 1029
4 See 18 USC § 1029(e)(1)
5 See 18 USC § 1029(d) & 1030(d)(1)


The Transnational Cyber Crime Threat

Advances in computer technology and greater access to personally identifiable information (PII) via the Internet have created a virtual marketplace for transnational cyber criminals to share stolen information and criminal methodologies. As a result, the Secret Service has observed a marked increase in the quality, quantity, and complexity of cyber crimes targeting private industry and critical infrastructure. These crimes include network intrusions, hacking attacks, malicious software, and account takeovers leading to significant data breaches affecting every sector of the world economy. The recently reported data breaches of Target and Neiman Marcus are just the most recent, well-publicized examples of this decade-long trend of major data breaches perpetrated by cyber criminals who are intent on targeting our Nation’s retailers and financial payment systems.

The increasing level of collaboration among cyber-criminals allows them to compartmentalize their operations, greatly increasing the sophistication of their criminal endeavors and allowing for development of expert specialization. These specialties raise both the complexity of investigating these cases, as well as the level of potential harm to companies and individuals. For example, illicit underground cyber crime market places allow criminals to buy, sell and trade malicious software, access to sensitive networks, spamming services, credit, debit and ATM card data, PII, bank account information, brokerage account information, hacking services, and counterfeit identity documents. These illicit digital marketplaces vary in size, with some of the more popular sites boasting membership of approximately 80,000 users. These digital marketplaces often use various digital currencies, and cyber criminals have made extensive use of digital currencies to pay for criminal goods and services or launder illicit proceeds.

The Secret Service has successfully investigated many underground cyber criminal marketplaces. In one such infiltration, the Secret Service initiated and conducted a three-year investigation that led to the indictment of 11 perpetrators allegedly involved in hacking nine major U.S. retailers and the theft and sale of more than 40 million credit and debit card numbers. The investigation revealed that defendants from the United States, Estonia, China and Belarus successfully obtained credit and debit card numbers by hacking into the wireless computer networks of major retailers — including TJ Maxx, BJ’s Wholesale Club, Office Max, Boston Market, Barnes & Noble, Sports Authority and Dave & Buster’s. Once inside the networks, these cyber criminals installed “sniffer” programs6 that would capture card numbers, as well as password and account information, as they moved through the retailers’ credit and debit processing networks. After the data was collected, the conspirators concealed the information in encrypted computer servers that they controlled in the United States and Eastern Europe. The credit and debit card numbers were then sold through online transactions to other criminals in the United States and Eastern Europe. The stolen numbers were “cashed out” by encoding card numbers on the magnetic strips of blank cards. The defendants then used these fraudulent cards to withdraw tens of thousands of dollars at a time from ATMs. The defendants were able to conceal and launder their illegal proceeds by using anonymous Internet-based digital currencies within the United States and abroad, and by channeling funds through bank accounts in Eastern Europe.7

In data breaches like these the effects of the criminal acts extended well beyond the companies compromised, potentially affecting millions of individual card holders. Proactive and swift law enforcement action protects consumers by preventing and limiting the fraudulent use of payment card data, identity theft, or both. Cyber crime directly impacts the U.S. economy by requiring additional investment in implementing enhanced security measures, inflicting reputational damage on U.S. firms, and direct financial losses from fraud—all costs that are ultimately passed on to consumers.

6 Sniffers are programs that detect particular information transiting computer networks, and can be used by criminals to acquire sensitive information from computer systems.
7 Additional information on the criminal use of digital currencies can be referenced in testimony provided by U.S. Secret Service Special Agent in Charge Edward Lowery before the Senate Homeland Security and Governmental Affairs Committee in a hearing titled, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies” (November 18, 2013).


Secret Service Strategy for Combating this Threat

The Secret Service proactively investigates cyber crime using a variety of investigative means to infiltrate these transnational cyber criminal groups. As a result of these proactive investigations, the Secret Service is often the first to learn of planned or ongoing data breaches and is quick to notify financial institutions and the victim companies with actionable information to mitigate the damage from the data breach and terminate the criminal’s unauthorized access to their networks. One of the most poorly understood facts regarding data breaches is that it is rarely the victim company that first discovers the criminal’s unauthorized access to their network; rather it is law enforcement, financial institutions, or other third parties that identify and notify the likely victim company of the data breach by identifying the common point of origin of the sensitive data being trafficked in cyber crime marketplaces.

A trusted relationship with the victim is essential for confirming the crime, remediating the situation, beginning a criminal investigation, and collecting evidence. The Secret Service’s worldwide network of 33 Electronic Crimes Task Forces (ECTF), located within our field offices, are essential for building and maintaining these trusted relationships, along with the Secret Service’s commitment to protecting victim privacy.

In order to confirm the source of data breaches and to stop the continued theft of sensitive information and the exploitation of a network, the Secret Service contacts the owner of the suspected compromised computer systems. Once the victim of a data breach confirms that unauthorized access to their networks has occurred, the Secret Service works with the local U.S. Attorney’s office, or appropriate state and local officials, to begin a criminal investigation of the potential violation of 18 USC § 1030. During the course of this criminal investigation, the Secret Service identifies the malware and means of access used to acquire data from the victim’s computer network. In order to enable other companies to mitigate their cyber risk based on current cyber crime methods, we quickly share information concerning the cybersecurity incident with the widest audience possible, while protecting grand jury information, the integrity of ongoing criminal investigations, and the victims’ privacy. We share this cybersecurity information through:

  • Our Department’s National Cybersecurity & Communications Integration Center (NCCIC);
  • The Information Sharing and Analysis Centers (ISAC);
  • Our ECTFs;
  • The publication of joint industry notices;
  • Our numerous partnerships developed over the past three decades in investigating cyber crimes; and,
  • Contributions to leading industry and academic reports like the Verizon Data Breach Investigations Report, the Trustwave Global Security Report, and the Carnegie Mellon CERT Insider Threat Study.

As we share cybersecurity information discovered in the course of our criminal investigation, we also continue our investigation in order to apprehend and bring to justice those involved. Due to the inherent challenges in investigating transnational crime, particularly the lack of cooperation of some countries with law enforcement investigations, occasionally it takes years to finally apprehend the top tier criminals responsible. For example, Dmitriy Smilianets and Vladimir Drinkman were arrested in June 2012, as part of a multi-year investigation Secret Service investigation, while they were traveling in the Netherlands thanks to the assistance of Dutch law enforcement. The alleged total fraud loss from their cyber crimes exceeds $105 million.

As a part of our cyber crime investigations, the Secret Service also targets individuals who operate illicit infrastructure that supports the transnational organized cyber criminal. For example, in May 2013 the Secret Service, as part of a joint investigation through the Global Illicit Financial Team, shut down the digital currency provider Liberty Reserve. Liberty Reserve is alleged to have had more than one million users worldwide and to have laundered more than $6 billion in criminal proceeds. This case is believed to be the largest money laundering case ever prosecuted in the United States and is being jointly prosecuted by the U.S. Attorney’s Office for the Southern District of New York and DOJ’s Asset Forfeiture and Money Laundering Section. In a coordinated action with the Department of the Treasury, Liberty Reserve was identified as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act, effectively cutting it off from the U.S. financial system.

Collaboration with Other Federal Agencies and International Law Enforcement

While cyber-criminals operate in a world without borders, the law enforcement community does not. The increasingly multi-national, multi-jurisdictional nature of cyber crime cases has increased the time and resources needed for successful investigation and adjudication. The partnerships developed through our ECTFs, the support provided by our Criminal Investigative Division, the liaison established by our overseas offices, and the training provided to our special agents via Electronic Crimes Special Agent Program are all instrumental to the Secret Service’s successful network intrusion investigations.

One example of the Secret Service’s success in these investigations is the case involving Heartland Payment Systems. As described in the August 2009 indictment, a transnational organized criminal group allegedly used various network intrusion techniques to breach security and navigate the credit card processing environment. Once inside the networks, they installed “sniffer” programs to capture card numbers, as well as password and account information. The Secret Service investigation, the largest and most complex data breach investigation ever prosecuted in the United States, revealed that data from more than 130 million credit card accounts were at risk of being compromised and exfiltrated to a command and control server operated by an international group directly related to other ongoing Secret Service investigations. During the course of the investigation, the Secret Service uncovered that this international group committed other intrusions into multiple corporate networks to steal credit and debit card data. The Secret Service relied on various investigative methods, including subpoenas, search warrants, and Mutual Legal Assistance Treaty (MLAT) requests through our foreign law enforcement partners to identify three main suspects. As a result of the investigation, these primary suspects were indicted for various computer-related crimes. The lead defendant in the indictment pled guilty and was sentenced to twenty years in federal prison. This investigation is ongoing with over 100 additional victim companies identified.

Recognizing these complexities, several federal agencies are collaborating to investigate cases and identify proactive strategies. Greater collaboration within the federal, state and local law enforcement community enhances information sharing, promotes efficiency in investigations, and facilitates efforts to de-conflict in cases of concurrent jurisdiction. For example, the Secret Service has collaborated extensively with DOJ’s CCIPS, which “prevents, investigates, and prosecutes computer crimes by working with other government agencies, the private sector, academic institutions, and foreign counterparts.”8 The Secret Service’s ECTFs are a natural complement to CCIPS, resulting in an excellent partnership over the years. In the last decade, nearly every major cyber investigation conducted by the Secret Service has benefited from CCIPS contributions.

The Secret Service also maintains a positive relationship with the DOJ’s Federal Bureau of Investigation (FBI). The Secret Service has a permanent presence at the National Cyber Investigative Joint Task Force (NCIJTF), which coordinates, integrates, and shares information related to investigations of national security cyber threats. The Secret Service also often partners with the FBI on various criminal cyber investigations. For example, in August 2010, a joint operation involving the Secret Service, FBI, and the Security Service of Ukraine (SBU), yielded the seizure of 143 computer systems – one of the largest international seizures of digital media gathered by U.S. law enforcement – consisting of 85 terabytes of data, which was eventually transferred to law enforcement authorities in the United States. The data was seized from a criminal Internet service provider located in Odessa, Ukraine, also referred to as a “Bullet Proof Hoster.” Thus far, the forensic analysis of these systems has already identified a significant amount of criminal information pertaining to numerous investigations currently underway by both agencies, including malware, criminal chat communications, and PII of U.S. citizens.

The case of Vladislav Horohorin is another example of successful cooperation between the Secret Service and its law enforcement partners around the world. Mr. Horohorin, one of the world’s most notorious traffickers of stolen financial information, was arrested on August 25, 2010, pursuant to a U.S. arrest warrant issued by the Secret Service. Mr. Horohorin created the first fully-automated online store which was responsible for selling stolen credit card data. Both CCIPS and the Office of International Affairs at DOJ played critical roles in this apprehension. Furthermore, as a result of information sharing, the FBI was able to bring additional charges against Mr. Horohorin for his involvement in a Royal Bank of Scotland network intrusion. This type of cooperation is crucial if law enforcement is to be successful in disrupting and dismantling criminal organizations involved in cyber crime.

This case demonstrates the importance of international law enforcement cooperation. Through the Secret Service’s 24 international field offices the Service develops close partnerships with numerous foreign law enforcement agencies in order to combat transnational crime. Successfully investigating transnational crime depends not only on the efforts of the Department of State and the DOJ’s Office of International Affairs to establish and execute MLATs, and other forms of international law enforcement cooperation, but also on the personal relationships that develop between U.S. law enforcement officers and their foreign counterparts. Both the CCIPS and the Office of International Affairs at DOJ played critical roles in this apprehension. Furthermore, as a result of information sharing, the FBI was able to bring additional charges against Mr. Horohorin for his involvement in a Royal Bank of Scotland network intrusion. This type of cooperation is crucial if law enforcement is to be successful in disrupting and dismantling criminal organizations involved in cyber crime.

Within DHS, the Secret Service benefits from a close relationship with Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI). Since 1997, the Secret Service, ICE-HSI, and IRS-CI have jointly trained on computer investigations through the Electronic Crimes Special Agent Program (ECSAP). ICE-HSI is also a member of Secret Service ECTFs, and ICE-HSI and the Secret Service have partnered on numerous cyber crime investigations including the recent take down of the digital currency Liberty Reserve.

To further its cybersecurity information sharing efforts, the Secret Service has strengthened its relationship with the National Protection and Programs Directorate (NPPD), including the NCCIC. As the Secret Service identifies malware, suspicious IPs and other information through its criminal investigations, it shares information with our Department’s NCCIC. The Secret Service continues to build upon its full-time presence at NCCIC to coordinate its cyber programs with other federal agencies.

As a part of these efforts, and to ensure that information is shared in a timely and effective manner, the Secret Service has personnel assigned to the following DHS and non-DHS entities:

  • NPPD’s National Cybersecurity & Communications Integration Center (NCCIC);
  • NPPD’s Office of Infrastructure Protection;
  • DHS’s Science and Technology Directorate (S&T);
  • DOJ National Cyber Investigative Joint Task Force (NCIJTF);
  • Each FBI Joint Terrorism Task Force (JTTF), including the National JTTF;
  • Department of the Treasury - Office of Terrorist Financing and Financial Crimes (TFFC);
  • Department of the Treasury - Financial Crimes Enforcement Network (FinCEN);
  • Central Intelligence Agency;
  • DOJ, International Organized Crime and Intelligence Operations Center (IOC-2);
  • Drug Enforcement Administration’s Special Operations Division;
  • EUROPOL; and

The Secret Service is committed to ensuring that all its information sharing activities comply with applicable laws, regulations, and policies, including those that pertain to privacy and civil liberties.

8 U.S. Department of Justice. (n.d.). Computer Crime & Intellectual Property Section: About CCIPS. Retrieved from http://www.justice.gov/criminal/cybercrime/


Secret Service Framework

To protect our financial infrastructure, industry, and the American public, the Secret Service has adopted a multi-faceted approach to aggressively combat cyber and computer-related crimes.

Electronic Crimes Task Forces

In 1995, the Secret Service New York Field Office established the New York Electronic Crimes Task Force (ECTF) to combine the resources of academia, the private sector, and local, state and federal law enforcement agencies to combat computer-based threats to our financial payment systems and critical infrastructures. In 2001, Congress directed the Secret Service to establish a nationwide network of ECTFs to “prevent, detect, and investigate various forms of electronic crimes, including potential terrorist attacks against critical infrastructure and financial payment systems.”9

Secret Service field offices currently operate 33 ECTFs, including two based overseas in Rome, Italy, and London, England. Membership in our ECTFs includes: over 4,000 private sector partners; over 2,500 international, federal, state and local law enforcement partners; and over 350 academic partners. By joining our ECTFs, our partners benefit from the resources, information, expertise and advanced research provided by our international network of members while focusing on issues with significant regional impact.

Cyber Intelligence Section

Another example of our partnership approach with private industry is our Cyber Intelligence Section (CIS) which analyzes evidence collected as a part of Secret Service investigations and disseminates information in support of Secret Service investigations worldwide and generates new investigative leads based upon its findings. CIS leverages technology and information obtained through private sector partnerships to monitor developing technologies and trends in the financial payments industry for information that may be used to enhance the Secret Service’s capabilities to prevent and mitigate attacks against the financial and critical infrastructures. CIS also has an operational unit that investigates international cyber-criminals involved in cyber-intrusions, identity theft, credit card fraud, bank fraud, and other computer-related crimes. The information and coordination provided by CIS is a crucial element to successfully investigating, prosecuting, and dismantling international criminal organizations.

Electronic Crimes Special Agent Program

A central component of the Secret Service’s cyber-crime investigations is its Electronic Crimes Special Agent Program (ECSAP), which is comprised of nearly 1,400 Secret Service special agents who have received at least one of three levels of computer crimes-related training.

Level I – Basic Investigation of Computers and Electronic Crimes (BICEP): The BICEP training program focuses on the investigation of electronic crimes and provides a brief overview of several aspects involved with electronic crimes investigations. This program provides Secret Service agents and our state and local law enforcement partners with a basic understanding of computers and electronic crime investigations and is now part of our core curriculum for newly hired special agents.

Level II – Network Intrusion Responder (ECSAP-NI): ECSAP-NI training provides special agents with specialized training and equipment that allows them to respond to and investigate network intrusions. These may include intrusions into financial sector computer systems, corporate storage servers, or various other targeted platforms. The Level II trained agent will be able to identify critical artifacts that will allow for effective investigation of identity theft, malicious hacking, unauthorized access, and various other related electronic crimes.

Level III – Computer Forensics (ECSAP-CF): ECSAP-CF training provides special agents with specialized training and equipment that allows them to investigate and forensically obtain digital evidence to be utilized in the prosecution of various electronic crimes cases, as well as criminally-focused protective intelligence cases.

These agents are deployed in Secret Service field offices throughout the world and have received extensive training in forensic identification, as well as the preservation and retrieval of electronically stored evidence. ECSAP-trained agents are computer investigative specialists, qualified to conduct examinations on all types of electronic evidence. These special agents are equipped to investigate the continually evolving arena of electronic crimes and have proven invaluable in the successful prosecution of criminal groups involved in computer fraud, bank fraud, identity theft, access device fraud and various other electronic crimes targeting our financial institutions and private sector.

National Computer Forensics Institute

The National Computer Forensics Institute (NCFI) initiative is the result of a partnership between the Secret Service, NPPD, the State of Alabama, and the Alabama District Attorney’s Association. The goal of this facility is to provide a national standard of training for a variety of electronic crimes investigations. The program offers state and local law enforcement officers, prosecutors, and judges the training necessary to conduct computer forensics examinations. Investigators are trained to respond to network intrusion incidents and to conduct electronic crimes investigations. Since opening in 2008, the institute has held over 110 cyber and digital forensics courses in 13 separate subjects and trained and equipped more than 2,500 state and local officials, including more than 1,600 police investigators, 570 prosecutors and 180 judges from all 50 states and three U.S. territories. These NCFI graduates represent more than 1,000 agencies nationwide.

Partnerships with Academia

In August 2000, the Secret Service and Carnegie Mellon University Software Engineering Institute (SEI) established the Secret Service CERT10 Liaison Program to provide technical support, opportunities for research and development, as well as public outreach and education to more than 150 scientists and researchers in the fields of computer and network security, malware analysis, forensic development, training and education. Supplementing this effort is research into emerging technologies being used by cyber-criminals and development of technologies and techniques to combat them.

The primary goals of the program are: to broaden the Secret Service’s knowledge of software engineering and networked systems security; to expand and strengthen partnerships and relationships with the technical and academic communities; partner with CERT-SEI and Carnegie Mellon University to support research and development to improve the security of cyberspace and improve the ability of law enforcement to investigate crimes in a digital age; and to present the results of this partnership at the quarterly meetings of our ECTFs.

In August 2004, the Secret Service partnered with CERT-SEI to publish the first “Insider Threat Study” examining the illicit cyber activity and insider fraud in the banking and finance sector. Due to the overwhelming response to this initial study, the Secret Service and CERT-SEI, in partnership with DHS Science & Technology (S&T), updated the study and released the most recent version just last year, which is published at http://www.cert.org/insider_threat/ .

To improve law enforcement’s ability to investigate crimes involving mobile devices, the Secret Service opened the Cell Phone Forensic Facility at the University of Tulsa in 2008. This facility has a three-pronged mission: (1) training federal, state and local law enforcement agents in embedded device forensics; (2) developing novel hardware and software solutions for extracting and analyzing digital evidence from embedded devices; and (3) applying the hardware and software solutions to support criminal investigations conducted by the Secret Service and its partner agencies. To date, investigators trained at the Cell Phone Forensic Facility have completed more than 6,500 examinations on cell phone and embedded devices nationwide. Secret Service agents assigned to the Tulsa facility have contributed to over 300 complex cases that have required the development of sophisticated techniques and tools to extract critical evidence.

These collaborations with academia, among others, have produced valuable innovations that have helped strengthen the cyber ecosystem and improved law enforcement’s ability to investigate cyber crime. The Secret Service will continue to partner closely with academia and DHS S&T, particularly the Cyber Forensics Working Group, to support research and development of innovate tools and methods to support criminal investigations.

9 See Public Law 107-56 Section 105 (appears as note following 18 U.S.C. § 3056).
10 CERT—not an acronym—conducts empirical research and analysis to develop and transition socio-technical solutions to combat insider cyber threats.


Legislative Action to Combat Data Breaches

While there is no single solution to prevent data breaches of U.S. customer information, legislative action could help to improve the Nation’s cybersecurity, reduce regulatory costs on U.S. companies, and strengthen law enforcement’s ability to conduct effective investigations. The Administration previously proposed law enforcement provisions related to computer security through a letter from OMB Director Lew to Congress on May 12, 2011, highlighting the importance of additional tools to combat emerging criminal practices. We continue to support changes like these that will keep up with rapidly-evolving technologies and uses.


The Secret Service is committed to safeguarding the Nation’s financial payment systems by investigating and dismantling criminal organizations involved in cyber crime. Responding to the growth in these types of crimes and the level of sophistication these criminals employ requires significant resources and greater collaboration among law enforcement and its public and private sector partners. Accordingly, the Secret Service dedicates significant resources to improving investigative techniques, providing training for law enforcement partners, and raising public awareness. The Secret Service will continue to be innovative in its approach to cyber crime and cyber security and is pleased that the Committee recognizes the magnitude of these issues and the evolving nature of these crimes.

Last Updated: 10/06/2022
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