With the explosion of mobile, cloud, and the blurring of work and personal data, companies considering M&A have a lot to worry about when it comes to insider threats.

Eleonore Fournier-Tombs, Field Data Scientist, RedOwl

June 28, 2016

4 Min Read

Microsoft’s recent announcement of plans to acquire LinkedIn will likely go down as the largest acquisition the tech industry sees this year. Yet, alongside the excitement, it has been noted that stocks began surging the Friday prior to the official announcement, surfacing rumors that insider trading may have been in play.

While the SEC will likely open an investigation, it’s important to note that insiders are incredibly difficult to uncover, especially if you don’t know what signs to look for. The latest speculation also puts the spotlight on the fact that about half of all security incidents — defined as those that compromise the confidentiality, integrity or availability of an information asset — are caused by people inside an organization. The vast majority (91 percent) of insider attacks in 2015 took weeks, months, or even years, to discover.

For Microsoft and LinkedIn, if an insider leaked the news, it may have happened long before the spike was seen in trading activity. The explosion of mobile devices, cloud services, and the blurring of work and personal data have exacerbated this problem. Humans add a complex layer to security risks for any company today, especially those considering mergers and acquisitions, Banks, investment funds, and other financial institutions, including those working with Microsoft and LinkedIn on this deal, also have a lot to worry about when it comes to insider threats.

Typically, these threats are bucketed into two broad categories: information security and compliance, which are addressed by two completely separate teams. But when a threat spans both areas, how can a firm create a coherent program that apprehends and minimizes the risk?

Many well-known rogue trading cases involve overlapping scenarios. Kweku Adoboli, the trader apprehended in 2011 for unapproved trades eventually costing the bank $2 billion traded above his risk score, didn’t hedge his trades, colluded with other employees, wasn’t supervised properly by his superior, moved money illicitly between corporate and personal accounts -- and the list goes on. Each case represents an anomaly that could have been caught under a more rigorous surveillance program, one that considered many different signals, actors, and potential data sources. In the Microsoft-LinkedIn case, any one of these red flags could have surfaced an internal risk before impacting stocks.

Catching rogue traders

From an information security perspective, the greatest risk is sensitive data leaving the company, specifically, intellectual property, client data, or sensitive information that could be sent to media, and the like. From a compliance perspective, companies are often most aware of illicitly obtained data entering their company, such as unapproved expert meetings or research reports. A common example:  press releases.  Early copies of press releases making their way around a company--and outside of it--can greatly impact enterprises and markets. In fact, releases are a common target for external attackers and insiders hoping for advanced information on acquisitions, earnings or executive changes. Often, an information leakage in one company leads to a case of insider trading in another.

However, from a risk perspective, both scenarios are information crimes of illegally leaking, obtaining, and using data. How can information security and compliance teams collaborate in order to address these hybrid threats? Start with these four steps:

Step 1: Build a culture of integrity. In the same way that financial institutions are encouraged to build a culture of compliance to discourage insider trading, organizations including Microsoft should broaden this approach to encourage the secure treatment of corporate data, through policies and internal communications campaigns.

Step 2: Develop an inter-departmental task force. Taking a collaborative, risk-based approach will go a long way in ensuring that hybrid cases will not fall through the cracks.

Step 3: Adopt a flexible, scalable platform that can ingest, categorize, and analyze data in order to address all risk scenarios. For LinkedIn, or any company hoping to find the tracks that an insider threat has left, an appropriate data management strategy must be adopted, using a central data source from which emails, account logins, print logs, and dozens more data sources can be accessed.

Step 4: Implement meaningful review of multiple overlapping data sources. When the trader Roomy Khan was finally apprehended in early 2016 for leaking information from Intel and colluding for insider trading at Galleon, a salient point of the story was that it took the investigators six months to find the one message that incriminated her. This investigation could have taken place in a fraction of that time with meaningful computational analysis. 

Risk is complex, and insider threats can seem like elusive, ever-changing targets. Companies taking the risk-based approach will be addressing this complexity head-on, ready to apprehend these threats far before real damage has happened. As of now, we don’t yet know if surging stocks were a result of an insider trader anticipating the Microsoft-LinkedIn acquisition or a timely coincidence. What we do know now is how to catch and prevent rogue traders definitively.

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About the Author(s)

Eleonore Fournier-Tombs

Field Data Scientist, RedOwl

Eleonore Fournier-Tombs is a field data scientist at RedOwl where she performs data modeling and computational analysis to detect fraud and insider threats in the financial sector. She has more than a decade of experience in information technology, programming, and systems analysis and deployment, previously working for the United Nations, where she managed the data associated with the global Human Development Index, and developed a platform to track high-level commitments to the Millennium Development Goals. She was also a member of the ICT team for the Rio + 20 Conference on Sustainable Development in Brazil.

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