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The steady leak of documents during the past eight months detailing the operations of the NSA intelligence collection activities has damaged both U.S. policy efforts abroad and the business of a variety of multinational companies, especially cloud providers. Efforts to implement strong security guidelines for the cloud will have to overcome efforts by other nations to implement data residency restrictions to hinder competition, Clarke said.
"Non-U.S. companies are using the NSA revelations as a marketing tool," he said. "There is a great deal of hypocrisy in all of this. People are suddenly amazed that intelligence agencies were collecting intelligence."
Requirements to force cloud providers to keep data in the country of origin and not allow data to transit through the U.S. amount to technological nationalism and, worse, do not make the data any appreciably safer, Clarke said. Data hosting in Europe will be just as easy to get access to as data hosted in the U.S. or another country, Clarke said.
"I'm not revealing away any secrets here if I say that the NSA, and any other world-class intelligence agency, can hack into databases, even if they are not in the United States," he said. "If you think that by passing a law making data localization a requirement for databases in the EU or Argentina or Venezuela or wherever stops the NSA from getting into those databases, think again."
Yet Europe's own technical guru, Udo Heimbrecht, executive director of the European Union Agency for Network and Information Security (ENISA), an EU agency that works to enhance information security, argued that data that travels through the U.S. is at greater risk of interception.
"If you are sending an e-mail from Germany to Estonia, why should it go through the U.S.?" he said. "And that is the idea that we keep our data in Europe."
[Companies need cloud providers to delineate responsibilities for the security of data, provide better security information, and encrypt data everywhere. See 5 Ways Cloud Services Can Soothe Security Fears In 2014.]
Clarke served on President Obama's Review Group on Intelligence and Communications Technologies, the five-member group that issued a 308-page report on the U.S.'s intelligence-gathering efforts. The report underscored that the competing goals of the U.S. intelligence community -- protecting liberty and the right to privacy while at the same time rooting out and combatting terrorism -- could not always be met simultaneously.
Clarke voiced support for the NSA's mission, but underscored that there was a disconnect between policy makers and the intelligence collectors. While legislators gave the NSA powers to accomplish certain goals and missions, the intelligence collectors sought all manner of information that would help them achieve those goals. The technological infrastructure, however, could be used for laudable aims as well as nefarious, he said.
"We may have created, along with the CIA and FBI and other intelligence agencies, and with all these technologies ... the potential -- the potential -- for a police surveillance state," Clarke said. "We are not there yet, but the technology is."
For most companies that put their data into cloud services, there are more practical concerns of data security. Questions of security boil down to questions of trust, said David Miller, chief security officer at Covisint, a cloud identity provider.
"Do I trust the cloud? That's a little bit of a broad statement," Miller said. "I trust some vendors on the cloud; I don't trust other vendors in the cloud. I do know that we are at a point where we are going to have to use it."
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