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[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]

 
               ASSESSING PERSISTENT AND EMERGING CYBER 
                THREATS TO THE U.S. IN THE HOMELAND
=======================================================================

                             JOINT HEARING

                               before the

                    SUBCOMMITTEE ON COUNTERTERRORISM

                            AND INTELLIGENCE

                                and the

                     SUBCOMMITTEE ON CYBERSECURITY,

                       INFRASTRUCTURE PROTECTION,

                       AND SECURITY TECHNOLOGIES

                                 of the

                     COMMITTEE ON HOMELAND SECURITY

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 21, 2014

                               __________

                           Serial No. 113-69

                               __________

       Printed for the use of the Committee on Homeland Security
                                     
[GRAPHIC] [TIFF OMITTED] 

                                     

      Available via the World Wide Web: http://www.gpo.gov/fdsys/

                               __________

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                     COMMITTEE ON HOMELAND SECURITY

                   Michael T. McCaul, Texas, Chairman
Lamar Smith, Texas                   Bennie G. Thompson, Mississippi
Peter T. King, New York              Loretta Sanchez, California
Mike Rogers, Alabama                 Sheila Jackson Lee, Texas
Paul C. Broun, Georgia               Yvette D. Clarke, New York
Candice S. Miller, Michigan, Vice    Brian Higgins, New York
    Chair                            Cedric L. Richmond, Louisiana
Patrick Meehan, Pennsylvania         William R. Keating, Massachusetts
Jeff Duncan, South Carolina          Ron Barber, Arizona
Tom Marino, Pennsylvania             Dondald M. Payne, Jr., New Jersey
Jason Chaffetz, Utah                 Beto O'Rourke, Texas
Steven M. Palazzo, Mississippi       Filemon Vela, Texas
Lou Barletta, Pennsylvania           Eric Swalwell, California
Richard Hudson, North Carolina       Vacancy
Steve Daines, Montana                Vacancy
Susan W. Brooks, Indiana
Scott Perry, Pennsylvania
Mark Sanford, South Carolina
Vacancy
                   Brendan P. Shields, Staff Director
          Michael Geffroy, Deputy Staff Director/Chief Counsel
                    Michael S. Twinchek, Chief Clerk
         I. Lanier Avant, Minority Subcommittee Staff Director
                                 ------                                

           SUBCOMMITTEE ON COUNTERTERRORISM AND INTELLIGENCE

                   Peter T. King, New York, Chairman
Paul C. Broun, Georgia               Brian Higgins, New York
Patrick Meehan, Pennsylvania, Vice   Loretta Sanchez, California
    Chair                            William R. Keating, Massachusetts
Jason Chaffetz, Utah                 Bennie G. Thompson, Mississippi 
Vacancy                                  (ex officio)
Michael T. McCaul, Texas (ex 
    officio)
               Mandy Bowers, Subcommittee Staff Director
                    Dennis Terry, Subcommittee Clerk
            Hope Goins, Minority Subcommittee Staff Director

                                 ------                                

SUBCOMMITTEE ON CYBERSECURITY, INFRASTRUCTURE PROTECTION, AND SECURITY 
                              TECHNOLOGIES

                 Patrick Meehan, Pennsylvania, Chairman
Mike Rogers, Alabama                 Yvette D. Clarke, New York
Tom Marino, Pennsylvania             William R. Keating, Massachusetts
Jason Chaffetz, Utah                 Filemon Vela, Texas
Steve Daines, Montana                Vacancy
Scott Perry, Pennsylvania, Vice      Bennie G. Thompson, Mississippi 
    Chair                                (ex officio)
Michael T. McCaul, Texas (ex 
    officio)
               Alex Manning, Subcommittee Staff Director
                    Dennis Terry, Subcommittee Clerk

                            C O N T E N T S

                              ----------                              
                                                                   Page

                               Statements

The Honorable Peter T. King, a Representative in Congress From 
  the State of New York, and Chairman, Subcommittee on 
  Counterterrorism and Intelligence..............................     1
The Honorable Brian Higgins, a Representative in Congress From 
  the State of New York, and Ranking Member, Subcommittee on 
  Counterterrorism and Intelligence:
  Oral Statement.................................................     3
  Prepared Statement.............................................     3
The Honorable Patrick Meehan, a Representative in Congress From 
  the State of Pennsylvania, and Chairman, Subcommittee on 
  Cybersecurity, Infrastructure Protection, and Security 
  Technologies...................................................     4
The Honorable Yvette D. Clarke, a Representative in Congress From 
  the State of New York, and Ranking Member, Subcommittee on 
  Cybersecurity, Infrastructure Protection, and Security 
  Technologies:
  Oral Statement.................................................    19
  Prepared Statement.............................................    21
The Honorable Bennie G. Thompson, a Representative in Congress 
  From the State of Mississippi, and Ranking Member, Committee on 
  Homeland Security:
  Prepared Statement.............................................     5

                               Witnesses

Mr. Glenn Lemons, Senior Intelligence Officer, Cyber Intelligence 
  Analysis Division, Office of Intelligence and Analysis, U.S. 
  Department of Homeland Security................................     6
Mr. Joseph Demarest, Assistant Director, Cyber Division, Federal 
  Bureau of Investigation:
  Oral Statement.................................................     8
  Prepared Statement.............................................    10
Mr. Larry Zelvin, Director, National Cybersecurity and 
  Communications Integration Center, National Protection and 
  Programs Directorate, U.S. Department of Homeland Security:
  Oral Statement.................................................    14
  Prepared Statement.............................................    16

  ASSESSING PERSISTENT AND EMERGING CYBER THREATS TO THE U.S. IN THE 
                                HOMELAND

                              ----------                              

                        Wednesday, May 21, 2014

     U.S. House of Representatives,        
      Committee on Homeland Security,      
      Subcommittee on Counterterrorism and 
                          Intelligence, and
     Subcommittee on Cybersecurity, Infrastructure 
             Protection, and Security Technologies,
                                            Washington, DC.
    The subcommittees met, pursuant to call, at 10:04 a.m., in 
Room 311, Cannon House Office Building, Hon. Peter T. King 
[Chairman of the Subcommittee on Counterterrorism and 
Intelligence] presiding.
    Present: Representatives King, Broun, Meehan, Perry, 
Clarke, Higgins, and Vela.
    Mr. King. Good morning. The Committee on Homeland Security, 
Subcommittee on Counterterrorism and Intelligence, and the 
Subcommittee--chaired by Mr. Meehan--on Cybersecurity, 
Infrastructure Protection, and Security Technologies will come 
to order.
    The subcommittees are meeting today to hear testimony 
examining persistent and emerging cyber threats to the United 
States. It is particularly fortuitous or appropriate that we 
hold this hearing in view of the fact that just the other day 
the Justice Department announced indictments of several Chinese 
Army officials for their role in violating cybersecurity. 
Again, this hearing had been scheduled for several weeks. 
Ranking Member Higgins and I have been working on this for 
quite a while now. But again I think the fact that we are 
holding it this week is particularly appropriate.
    Due to the sensitivity of today's hearing, the 
subcommittees will enter a closed portion with the witnesses to 
discuss Classified and sensitive matters, and I ask unanimous 
consent that at the appropriate time the subcommittees recess 
and reconvene in closed session in the committee's secure 
space. Without objection, so ordered.
    I will now recognize myself for an opening statement.
    The expanding number of cyber actors, ranging from nation-
states to terrorists to criminals, as well as increasing attack 
capability and the increasing intensity of cyber attacks around 
the globe, have made cyber warfare and cyber crime one of the 
most significant threats facing the United States. This week 
the Department of Justice unsealed an indictment against five 
Chinese individuals working for the Chinese military for 
hacking into multiple private-sector U.S. businesses to steal 
their sensitive proprietary information. Additionally, this 
week the FBI and international law enforcement arrested over 
100 people for using malicious software called Blackshades, 
which is used remotely to take over a computer, turn on the web 
cam, and access passwords and other information without the 
owner's knowledge.
    I am encouraged by the DOJ indictment and the recent law 
enforcement operation. I hope it is a signal of more aggressive 
U.S. actions to address the cyber threat as we move forward, 
because this threat is not going away. Cyber attacks have 
economic consequences, harm our National security, and could be 
used to carry out attacks on the U.S. homeland.
    Over the last decade the threats facing the United States 
have become more diverse, as have the tools for conducting 
attacks and waging war. While the United States has made great 
strides to secure the homeland since 9/11, our enemies have 
evolved, and we must now consider that a foreign adversary, 
terrorist network, or a criminal organization will use 
cyberspace to penetrate America's defenses.
    Director of National Intelligence James Clapper featured 
the cyber threat prominently in his annual threat update to 
Congress this year. Along with other U.S. officials, he painted 
a sobering picture of the potential fallout from a cyber 
attack.
    Nation-states comprise the most capable cyber actors around 
the globe. Countries such as Russia, China, and Iran have 
demonstrated a willingness to use cyber space to steal our 
military secrets, target our critical infrastructure, and even 
attack our free press and financial sector. Each has invested a 
great deal in cyber defenses and offensive capabilities, and 
some have even used cyber attacks as a proxy in a physical 
military confrontation. Many experts have suggested that 
Russian actors engaged in offensive attacks in Estonia to 
support military forces during their 2008 invasion of Georgia 
and again during the recent annexation of Crimea.
    In addition to the threat from foreign powers, American 
citizens and companies lose billions from organized cyber crime 
every year. Traditional criminal networks have wasted no time 
in developing their on-line tradecraft to scam, steal, and 
destroy valuable data. The recent data breach at Target is a 
great example of exactly how far-reaching and sophisticated 
these operations are. Department of Homeland Security plays a 
major role in helping private companies keep their networks 
secure, and this will only become more important in years to 
come.
    Finally, we are accustomed to think of the physical damage 
caused by terrorist networks to life and property. We must now 
be prepared to defend against groups like al-Qaeda using 
increasingly sophisticated cyber attacks and cyber crimes to 
their advantage. For many years we have also seen these groups 
and violent Islamist extremists use the internet to 
communicate, radicalize, and spread their hate.
    Today we will hear about these issues from witnesses 
provided by the FBI and DHS. I am pleased that we will begin 
this hearing in an open session and subsequently move into a 
closed, executive session.
    I am particularly pleased that Chairman Pat Meehan is here 
today and that his subcommittee is engaged in this hearing, 
because he, along with Chairman McCaul, have led this 
committee's efforts to enact serious cybersecurity legislation. 
With the support of the private sector and privacy advocates, 
their bill was passed unanimously out of this committee. It is 
a testament to their hard work; also to the importance of the 
issues. I am really privileged to have Pat working with us here 
today.
    I welcome those on the front line of the issue and I look 
forward to their testimony.
    I now recognize the Ranking Minority Member of the 
Subcommittee on Counterterrorism and Intelligence, the 
gentleman from New York, Mr. Higgins, for any statement he may 
have.
    Mr. Higgins. I would like to thank the Chairman for holding 
this hearing, and in deference to the Chairman and our guests 
today, I will submit my opening statement for the record so we 
can get right to it.
    [The statement of Mr. Higgins follows:]
               Statement of Ranking Member Brian Higgins
                              May 21, 2014
    I would like to thank the Chairman for holding today's hearing. I 
look forward to hearing the testimony of our witnesses as the committee 
continues to expand our interests and understanding of the current and 
evolving cyber threats. I have gone on record before to state that 
cyber threats know no limits and have no boundaries. As a Member 
representing the Buffalo and Niagara region, I dedicate a significant 
amount of my time and interests to issues related to border security 
and the facilitation of commerce.
    However, I understand the threats to our country and our way of 
life are not limited to the reach of planes, trains, and automobiles, 
and also that these threats cannot be contained by Congressional 
districts. As technology continues to mature and our on-line world 
continues to grow, the threats and the means to carry out those threats 
grow as well. For the second consecutive year, the director of national 
intelligence, James Clapper has designated cybersecurity as the top 
global threat. Also, the No. 2 global threat for the United States on 
this same list is related to concerns of espionage.
    As a reflection of the growing espionage cyber threats, on Monday, 
for the first time in U.S. history, the Department of Justice issued 
indictments related to cybersecurity against foreign state actors. 
Pursuant to that indictment, five members of the Chinese military were 
charged with a total of 155 counts of crimes related to computer 
hacking, economic espionage, and other offenses related to 
cybersecurity. I believe this indictment sends a strong message for 
state-actors that the United States will not be intimidated by cyber 
hackers and we will remain vigilant against attempts against cyber 
espionage. While I understand that the unprecedented nature of this 
indictment has and will continue to interest Members of this committee 
and Congress as a whole, I will refrain from interfering with the on-
going judicial process.
    However, I would request that as information can be shared with us, 
our witnesses will return to brief Members of this committee in the 
appropriate setting. America's economic prosperity depends on 
cybersecurity, and that is why we need effective oversight and robust 
cyber legislation that includes strategic initiatives, including 
public-private partnerships that protect our Nation from hackers, 
nefarious state actors, and foreign intelligence services from 
countries such as China.
    While I understand that it would be inappropriate for our witnesses 
to go into detail about specific cyber threats in this open setting; 
when possible, I believe an open discussion of the threats that we do 
know about, the technologies being used, and massive vulnerabilities 
can be helpful to the American public. It is clear to everyone that our 
dependence on technology is growing exponentially by the day.
    Therefore our Nation depends on us, both Congress and Federal 
agencies and departments, to have a robust, comprehensive set of 
cybersecurity policies and procedures in place. Therefore, we must not 
only examine the threat, but also protect critical infrastructure and 
safeguard our personal and financial information, while promoting 
research and development to ensure that we have the proper protocols in 
place.

    Mr. King. The Ranking Member yields back.
    Chairman Meehan.
    Mr. Meehan. I thank the Ranking Member for yielding, and I 
thank the Chairman for sharing the opportunity to collaborate 
on, as Chairman King said, this very, very important issue. I 
want to thank everybody for attending this important hearing.
    This is the latest in a series of hearings the Subcommittee 
on Cybersecurity, Infrastructure Protection, and Security 
Technologies has held examining the threat to our computer 
networks and what the U.S. Government is doing to mitigate and 
respond to that threat. The threat of cyber attack is real, and 
it is a growing menace in American security and prosperity. 
Over the past year alone we have seen Iranian hackers disrupt 
the computer systems of Saudi energy company Aramco in an 
attempt to take down the American financial sector. We have 
also seen criminals attack some of the icons of our retail 
sector, compromising the personal information of over 100 
million customers. Just this week the Department of Justice 
announced indictments against five Chinese military operatives 
for hacking into U.S. companies to steal proprietary 
information.
    Last month I had the opportunity to travel to China with a 
number of my colleagues, including House Majority Leader Eric 
Cantor, and we met with a number of China's most senior 
leaders, up to and including the Premier, and we specifically 
raised concerns about state-sponsored industrial espionage and 
the importance of protecting and respecting intellectual 
property and the trade secrets of American businesses. China 
has a responsibility to adhere to international law, a 
responsibility it has repeatedly failed to acknowledge.
    The response we received from Chinese officials where we 
raised these concerns was disciplined. The Chinese refused to 
admit that they condoned or supported their state-sponsored 
corporate espionage, and they refused to concede that American 
businesses were routinely targeted by Chinese hackers for 
intrusion.
    In addition to state-sponsored and criminal organizations, 
ideologically motivated actors, including terrorist groups and 
activists, use the internet to attack us and to finance their 
illicit activities. As the 2014 report by the cybersecurity 
firm Mandiant states, threat actors are not just interested in 
seizing the corporate crown jewels, but are also looking for 
ways to publicize their views, to cause physical destruction, 
and to influence global decision makers.
    Defending against and responding to these attacks has a 
real cost, and the cost is primarily borne by the American 
private sector. Companies spend hundreds of millions of dollars 
per year defending their networks. At a hearing we held last 
month in Philadelphia, just an area community bank testified 
that they had to spend a million dollars a year--this is a 
small community bank--on its cybersecurity efforts, and they 
suggested they could spend much more.
    Attacks that cause business disruptions cost companies an 
average of nearly $300,000 each to mitigate the damage, and 
certainly it can be significantly higher where there is real 
damage, and companies that have lost untold amounts of 
intellectual property have found themselves at a competitive 
disadvantage with their global competitors. Identity theft 
alone costs U.S. banks, retailers, and consumers roughly $780 
million a year, and as the Chairman himself said, literally 
billions of dollars in value associated with stolen 
intellectual property.
    All of these losses directly contribute to job losses, 
missed business opportunities, and American companies at a 
competitive disadvantage on the world stage. The question then 
becomes: How do we respond to this?
    First, we must ensure that our Federal agencies have 
defined roles and are coordinating with each other and the 
private sector to share threat information. We must also crack 
down on the perpetrators of these attacks by arresting 
malicious hackers and pressuring other countries to do the 
same. It is especially true in China and Eastern Europe, where 
these companies' spies and criminals hide.
    The indictments of the Chinese military hackers and the 
arrest of over 100 hackers linked to the malicious software 
called Blackshades are a good start, but there is more work to 
do. Importantly, we in Congress need to continue to study this 
threat and to understand who the adversaries are, what they 
want, where they live, and what they are capable of doing.
    I want to thank each of the members of this panel who are 
before us today for their work in this area, and we look 
forward to your testimony both in here and in the closed 
hearings to better understand and to better continue to educate 
not only our colleagues, but the American people on this very, 
very important and challenging issue. I thank Chairman King for 
the opportunity to share it with him.
    I yield back.
    Mr. King. Thank you, Chairman Meehan.
    Other Members of the committee are reminded that opening 
statements may be submitted for the record.
    [The statement of Mr. Thompson follows:]
             Statement of Ranking Member Bennie G. Thompson
                              May 21, 2014
    This hearing is timed only days after the Department of Justice 
announced indictments against five Chinese military officials for 
conducting cyber espionage against U.S. industries related to nuclear 
power and solar and metal products. I understand the investigative role 
of the FBI in this investigation and that our judicial process limits 
the information which can be shared at such a critical point in this 
process. Therefore, I look forward to working with all of our witnesses 
to discuss and review this case at the appropriate time.
    During this Congress and in previous Congresses, I have maintained 
and expanded this committee's cybersecurity jurisdiction by conducting 
effective oversight and offering both responsive and responsible 
legislation. I continue to be encouraged as DHS assumes its role as the 
primary agency charged with securing Federal Government systems from 
cyber attacks, while working with other agencies to collect 
information, analyze threats, and respond accordingly.
    It is important for DHS to continue to make progress in addressing 
one of the greatest homeland security challenges of our day--how to 
help Government agencies and private-sector infrastructure owners and 
operators protect critical infrastructure from cyber threats.
    Too often when we discuss cyber threats or cybersecurity, we group 
all bad actors into the same category. Today, our witnesses should 
explain not only the on-going threats, but also distinguish the threat 
actors. Specifically, I am interested in hearing about the organized 
crime groups and their efforts to target financial service sectors, 
terrorist groups' use of on-line networks to recruit and organize 
attack efforts, and foreign governments with an interest in obtaining 
data and information from Government agencies and major manufacturers, 
including those with defense contracts.
    I would also like to hear how the witnesses and their agencies 
manage and analyze the volumes of open-source information and postings 
that can be found on various social networking websites.
    I have gone on record several times to emphasize social media as an 
integral tool in recognizing and preventing emerging threats, but 
warning that a balance must be created to manage this information. We 
must still heed that warning and make our Federal security regime as 
effective as possible.

    Mr. King. Now I am pleased to introduce the distinguished 
panel that we have here today.
    Mr. Glenn Lemons is the senior intelligence officer for the 
Cyber Intelligence Analysis Division in Homeland Security's 
Office of Intelligence and Analysis. His responsibilities 
include providing all-source cyber intelligence support for DHS 
senior personnel and owners and operators of critical 
infrastructure. Additionally, he manages and leads a diverse 
cyber workforce that, in coordination with the National 
Protection and Programs Directorate, provides operational 
intelligence support to our Nation's 16 critical infrastructure 
partners and all applicable State, local, territorial, Tribal, 
and private-sector entities.
    Mr. Joseph Demarest is the assistant director of the Cyber 
Division at the Federal Bureau of Investigation. The FBI helps 
lead the National effort to investigate high-tech crimes, 
including cyber-based terrorism, espionage, computer 
intrusions, and cyber fraud. Joe Demarest has been with the FBI 
for more than a quarter of a century, and I had the personal 
privilege of seeing him operate first-hand when he headed the 
Joint Terrorism Task Force in New York and later as the 
assistant director in charge, where he did a truly outstanding 
job in coordinating efforts against terrorism in the New York 
City, Long Island, New York area.
    So, Joe Demarest, it is great to see you here today. Thank 
you.
    Larry Zelvin is the director of National Cybersecurity and 
Communications Integration Center at the Department of Homeland 
Security--easier to say NCCIC. It is comprised of several 
components, including the U.S. Computer Emergency Readiness 
Team, the National Coordination Center for Telecommunications, 
the Industrial Control Systems Cyber Emergency Response Team, 
and a 24/7 operations center. Mr. Zelvin is a retired U.S. Navy 
captain and naval aviator with 26 years of active service.
    I want to thank all of you for appearing here today, and 
let you know that your written testimony is being submitted for 
the record. I will now recognize Mr. Lemons for 5 minutes for 
his testimony.
    Mr. Lemons.

 STATEMENT OF GLENN LEMONS, SENIOR INTELLIGENCE OFFICER, CYBER 
  INTELLIGENCE ANALYSIS DIVISION, OFFICE OF INTELLIGENCE AND 
         ANALYSIS, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Lemons. Thank you, sir.
    Chairman King, Chairman Meehan, Ranking Member Higgins, and 
distinguished Members of the committee, I am pleased to be here 
today to discuss the continued threat to the homeland from 
malicious cyber actors and the Office of Intelligence and 
Analysis role in assessing these threats.
    Cyber intrusions into critical infrastructure and 
Government networks are increasing in sophistication and 
seriousness. Although the persistent cyber threat to the 
homeland remains theft of data and espionage, the complexity of 
emerging threat capabilities, the inextricable link between 
physical and cyber domains, and a diversity of cyber actors 
present challenges to DHS and all of our customers.
    With the private sector owning and operating over 85 
percent of our Nation's critical infrastructure, information 
sharing becomes especially important between public and private 
sector. Malicious cyber actors who target the homeland include 
nation-states, cyber criminals, criminal hackers, asymmetric 
actors, to include terrorists, with the insidious and/or 
unwitting insider presenting unique cybersecurity concerns that 
can magnify any threat.
    Nation-states aggressively target and gain persistent 
access to public and private-sector networks to exploit and 
steal massive quantities of data. Given the increasing world 
view of cyber space as a domain of warfare, we cannot discount 
that adversaries currently support planning for contingencies 
by mapping and evaluating U.S. networks and infrastructure. 
Cyber criminals are largely motivated by profit and are 
extremely capable, representing a long-term global and common 
threat. We see sophisticated financial criminals in many 
countries throughout the world.
    Criminal hackers are politically or ideologically motivated 
and target for publicity, which can result in high-profile 
operations in both, but often with limited effectiveness. The 
May 2000 Middle East and North Africa-based hacker campaign 
known as OpUSA showed the group's desire for media attention, 
despite its lack of capability to disrupt websites of U.S. 
Government, financial, and commercial entities.
    Asymmetrical actors, to include terrorists, primarily use 
the internet for on-line recruitment, communication, 
propaganda, and research. While limited by persistent 
counterterrorism pressures and difficulty in recruiting 
experts, we believe they will continue to seek cyber targets of 
opportunity. Therefore, despite the low probability of a 
destructive terrorist cyber attack occurring, such an event may 
have a high-profile impact, even if unsuccessful. Success in 
this case may be determined by press coverage by its 
destructive network activity.
    The outlook of these threats is that malicious cyber 
activity targeting Government and private-sector networks can 
result in intentional and in some cases unintentional 
consequences which can threaten National and economic security, 
critical infrastructure, as well as public health and welfare. 
It is reasonable to assess both disruptive and possibly 
destructive cyber activity are the goals of malicious cyber 
actors who target our Nation's critical infrastructure in an 
effort to cause harm.
    I&A has an important role in supporting the Department in 
carrying out its cyber responsibilities by assessing these 
emerging threats and ensuring both public and private sector 
are made aware of them through robust information sharing. The 
I&A support for public and private-sector owners and operators 
is multidimensional. Since the implementation of Executive 
Order 13636, which charges the Department to increase the 
value, the quantity, and quality of Unclassified cyber threat 
reporting, DHS I&A has increased Unclassified cyber outreach by 
382 percent from fiscal year 2012 to 2013, and for 2014 we are 
on a trajectory to bypass last year's numbers. These activities 
are in addition to our regularly scheduled Unclassified and 
Classified production, and weekly, monthly, and quarterly 
security engagements.
    Additionally, we are partnering with State and local fusion 
centers to deconflict production, solicit requirements, and 
participate in joint production opportunities. These are just 
some of our efforts to increase threat awareness, decrease 
duplicative reporting, and align priorities.
    Thank you for providing me the opportunity to speak with 
you today about these important issues. I look forward to your 
questions both here and in the follow-on Classified session.
    Mr. King. Thank you for your testimony, Mr. Lemons.
    Now I am pleased to recognize Mr. Demarest.

    STATEMENT OF JOSEPH DEMAREST, ASSISTANT DIRECTOR, CYBER 
           DIVISION, FEDERAL BUREAU OF INVESTIGATION

    Mr. Demarest. Good morning, Chairmen King, Meehan, and 
Ranking Member Higgins, and distinguished Members. I am pleased 
to appear before you today to discuss the cyber threats facing 
our Nation and how the FBI and our partners, most importantly 
DHS and a broadband of others domestically and abroad, what we 
are doing together to protect the United States.
    Today's FBI is a threat-focused, intelligence-driven 
organization. Just as our adversaries continue to evolve, so, 
too, must the FBI. We live in a time of acute and persistent 
terrorist, state-sponsored, and criminal threats to our 
National security, our economy, and our communities. These 
diverse threats facing our Nation and our neighborhoods 
underscore the complexity and breadth of the FBI's mission 
today.
    The United States faces cyber threats from state-sponsored 
hackers, hackers for hire, global cyber criminal syndicates, 
and terrorists. They seek our trade and state secrets, our 
technology, our personal and financial information, and our 
ideas, all of which are of incredible value to us here in the 
United States. Given the scope of the cyber threat, agencies 
across the Federal Government are making cybersecurity 
obviously a top priority. Within the FBI we are prioritizing 
high-level intrusions. The biggest and most dangerous botnets, 
criminal forums, state-sponsored hackers, and global cyber 
criminal syndicates are our priorities. We want to predict and 
prevent attacks and get to the position where we can, rather 
than simply react to after the fact.
    FBI agents, analysts, and computer scientists are using 
technological capabilities and traditional investigative 
techniques to fight cyber crime today. We are working side-by-
side with our Federal, State, and local partners on cyber task 
forces in each of our 56 field offices and through the National 
Cyber Investigative Joint Task Force in Chantilly, Virginia. 
Through our 24/7 cyber command center, CyWatch, we combine the 
resources of the FBI and the NCIJTF, allowing us to provide 
connectivity to the other Federal cyber centers, NCCIC being 
chief among them, Government agencies, FBI field offices, legal 
attaches, and the private sector in the event of a cyber event.
    As the committee is well aware, the frequency and impact of 
cyber attacks on our Nation's private sector and Government 
networks have increased dramatically in the past decade and are 
expected to grow exponentially. The FBI and our partners have 
had multiple recent investigative successes against the threat 
and we are continuing to push ourselves to respond more rapidly 
to prevent attacks before they occur.
    On Monday the Western District of Pennsylvania unsealed an 
indictment naming five members of the People's Liberation Army 
of the People's Republic of China on 31 counts, including 
conspiring to commit computer fraud, accessing a computer 
without authorization for the purpose of commercial advantage 
and private financial gain, damaging computers through the 
transmission of code and commands, aggravated identity theft, 
economic espionage, and theft of trade secrets. Each of the 
defendants provided his individual expertise to a conspiracy to 
penetrate the computer networks of six U.S. companies while 
those companies were engaged in negotiations or joint ventures 
with or were pursuing legal action against state-owned 
enterprises in China. This marks the first time criminal 
charges have been filed against known state actors for hacking.
    Also on Monday the FBI announced a world-wide operation 
against those individuals who created and purchased malware 
known as Blackshades. This operation involved 18 countries. 
More than 90 arrests have been made so far, and more than 300 
searches have been conducted around the world in support of the 
operation. Blackshades products were offered on their website. 
Their products include Blackshades Remote Access Tool and 
Blackshades Password Recovery, to name just a few.
    The most popular product was the Blackshades Remote Access 
Tool. The tool contained a key logger feature that allowed 
users to record each key the victim typed on their computer 
keyboards. To help users steal a victim's password and other 
log-on credentials, the tool also had a form-grabber feature 
which automatically captured log-on information that victims 
entered into the forms on their infected computers. The tool 
also provided its users with complete access to all the files 
contained on a victim's computer. A tool user could use this 
access to view or download photographs, documents, or other 
files on the victim's computer. Further, the tool enabled users 
to encrypt or lock a victim's files and demand ransom payment 
to unlock them, much like ransomware. The tool even came with a 
prepared script to demand such a ransom. As you can imagine, 
this tool alone poses a significant threat to individual 
victims across the United States and certainly around the 
world.
    These successes are just the beginning. The FBI has 
redoubled its efforts to strengthen our cyber capabilities 
internally. The FBI's Next Generation Cyber Initiative, which 
we launched in 2012, included a wide range of developments, 
like establishing the cyber task forces throughout each of our 
field offices; also focusing on cyber intrusion or intrusion 
investigations. We have also hired additional computer 
scientists to assist in the technical investigations in the 
field and at headquarters; and then certainly expanded our 
partnerships to enhance collaboration through the NCIJTF and 
within the U.S. Government.
    The NCIJTF, which serves as a coordination, integration, 
and information-sharing center among 19 U.S. agencies and our 
Five Eyes partners for cyber threat investigations has provided 
unprecedented coordination. This coordination involves senior 
personnel at key agencies. NCIJTF, which is led by the FBI, has 
deputy directors from the NSA, DHS, CIA, U.S. Secret Service, 
and U.S. Cyber Command.
    In addition to strengthening our partnerships in Government 
and law enforcement, we recognize that to effectively combat 
the cyber threat we must significantly enhance our cooperation 
with the private sector, which we are doing through our 
InfraGard program; our DSAC program as well. We recognize that 
understanding the cyber threat is critical to effectively 
combatting that, and the private sector is a key ingredient. As 
part of our enhanced private-sector outreach, we have begun to 
provide industry partners with Classified threat briefings and 
indicators in advance of attacks that we are knowledgeable of.
    In conclusion, sir, to counter the threats we face today, 
we are engaging in an unprecedented level of collaboration 
within the U.S. Government, with the private sector, and with 
our international partners. We are grateful for the committee's 
continued support and look forward to working with you and 
expanding our partnerships as we determine a successful course 
forward for this Nation to defeat the cyber adversaries we face 
today. Thank you again, sir.
    [The prepared statement of Mr. Demarest follows:]
                 Prepared Statement of Joseph Demarest
                              May 21, 2014
    Good morning Chairmen Meehan and King and Ranking Members Clarke 
and Higgins. I'm pleased to appear before you today to discuss the 
cyber threats facing our Nation and how the FBI and our partners are 
working together to protect the United States Government and private-
sector networks.
    Today's FBI is a threat-focused, intelligence-driven organization. 
Each employee of the FBI understands the key threats facing our Nation 
and we must constantly strive to be more efficient and more effective. 
Just as our adversaries continue to evolve, so, too, must the FBI. We 
live in a time of acute and persistent terrorist, state-sponsored, and 
criminal threats to our National security, our economy, and our 
communities. These diverse threats facing our Nation and our 
neighborhoods underscore the complexity and breadth of the FBI's 
mission.
    We remain focused on defending the United States against terrorism, 
foreign intelligence, and cyber threats; upholding and enforcing the 
criminal laws of the United States; protecting civil rights and civil 
liberties; and providing leadership and criminal justice services to 
Federal, State, local, and international agencies and partners.
                    the cyber threat & fbi response
    The United States faces cyber threats from state-sponsored hackers, 
hackers for hire, global cyber syndicates, and terrorists. They seek 
our state secrets, our trade secrets, our technology, our personal and 
financial information, and our ideas, all of which are of incredible 
value to all of us. They may seek to strike our critical infrastructure 
and our economy.
    Given the scope of the cyber threat, agencies across the Federal 
Government are making cybersecurity a top priority. Within the FBI, we 
are prioritizing high-level intrusions--the biggest and most dangerous 
botnets, state-sponsored hackers, and global cyber syndicates. We want 
to predict and prevent attacks, rather than simply react after the 
fact.
    FBI agents, analysts, and computer scientists are using technical 
capabilities and traditional investigative techniques, such as sources 
and communication intercepts, as well as forensics, to fight cyber 
crime. We are working side-by-side with our Federal, State, and local 
partners on Cyber Task Forces in each of our 56 field offices and 
through the National Cyber Investigative Joint Task Force (NCIJTF). 
Through our 24/7 cyber command center, CyWatch, we combine the 
resources of the FBI and NCIJTF, allowing us to provide connectivity to 
Federal cyber centers, Government agencies, FBI field offices and legal 
attaches, and the private sector in the event of a cyber intrusion.
    We also work with the private sector through partnerships such as 
the Domestic Security Alliance Council, InfraGard, and the National 
Cyber Forensics and Training Alliance. The FBI is training our State 
and local counterparts to triage local cyber matters, so that we can 
focus on the most pressing issues with National impact.
    In addition, our Legal Attache offices overseas work to coordinate 
cyber investigations and address jurisdictional hurdles and differences 
in the law from country to country. We are supporting partners at 
Interpol and The Hague as they work to establish international cyber 
crime centers. We continue to assess other locations to ensure that our 
cyber personnel are in the most appropriate locations across the globe.
    We know that to be successful in the fight against cyber crime, we 
must continue to recruit, develop, and retain a highly-skilled 
workforce. To that end, we have developed a number of creative staffing 
programs and collaborative partnerships with private industry to ensure 
that over the long term we remain focused on our most vital resource, 
our people.
    As the committee is well aware, the frequency and impact of cyber 
attacks on our Nation's private sector and Government networks have 
increased dramatically in the past decade and are expected to continue 
to grow.
                            recent successes
    While the FBI and our partners have had multiple recent 
investigative successes against the threat, we are continuing to push 
ourselves to respond more rapidly and prevent attacks before they 
occur.
    One area in which we recently have had great success with our 
overseas partners is in targeting infrastructure we believe has been 
used in Distributed Denial of Service (DDOS) attacks, and preventing 
that infrastructure from being used for future attacks. A DDOS attack 
is an attack on a computer system or network that causes a loss of 
service to users, typically the loss of network connectivity and 
services by consuming the bandwidth of the victim network. Since 
October 2012, the FBI and the Department of Homeland Security (DHS) 
have released nearly 168,000 Internet Protocol addresses of computers 
that were believed to be infected with DDOS malware. We have released 
this information through Joint Indicator Bulletins (JIBs) to more than 
130 countries via DHS's National Cybersecurity and Communications 
Integration Center (NCCIC), where our liaison officers provide expert 
and technical advice for increased coordination and collaboration, as 
well as our Legal Attaches overseas.
    These actions have enabled our foreign partners to take action and 
reduced the effectiveness of the botnets and the DDOS attacks. We are 
continuing to target botnets through this strategy and others.
    In April 2013, the FBI Cyber Division initiated an aggressive 
approach to disrupt and dismantle the most significant botnets 
threatening the economy and National security of the United States. 
This initiative, named Operation Clean Slate, was implemented to 
appropriately address the threat neutralization actions through 
collaboration with the private sector, Department of Homeland Security 
and other United States Government partners, and our foreign partners. 
This includes law enforcement action against those responsible for the 
creation and use of the illegal botnets, mitigation of the botnet 
itself, assistance to victims, public-service announcements, and long-
term efforts to improve awareness of the botnet threat through 
community outreach. Although each botnet is unique, Operation Clean 
Slate's strategic approach to this significant threat ensures a 
comprehensive neutralization strategy, incorporating a unified public/
private response and a whole-of-Government approach to protect U.S. 
interests.
    The impact of botnets has been significant. Botnets have caused 
over $113 billion in losses globally, with approximately 378 million 
computers infected each year, equaling more than 1 million victims per 
day, translating to 12 victims per second.
    To date, Operation Clean Slate has resulted in several successes. 
Working with our partners, we disrupted the Citadel Botnet. This botnet 
was designed to facilitate unauthorized access to computers of 
individuals and financial institutions to steal on-line banking 
credentials, credit card information, and other personally identifiable 
information. Citadel was responsible for the loss of over a half 
billion dollars. As a result of our actions, over 1,000 Citadel domains 
were seized, accounting for more than 11 million victim computers 
world-wide. In addition, working with foreign law enforcement, we 
arrested a major user of the malware.
    Building on the success of the disruption of Citadel, in December 
2013, the FBI and Europol, together with Microsoft and other industry 
partners, disrupted the ZeroAccess Botnet. ZeroAccess was responsible 
for infecting more than 2 million computers, specifically targeting 
search results on Google, Bing, and Yahoo search engines, and is 
estimated to have cost on-line advertisers $2.7 million each month.
    In January 2014, Aleksandry Andreevich Panin, a Russian national, 
pled guilty to conspiracy to commit wire and bank fraud for his role as 
the primary developer and distributer of the malicious software known 
as ``Spyeye'' which infected over 1.4 million computers in the United 
States and abroad. Based on information received from the financial 
services industry, over 10,000 bank accounts were compromised by Spyeye 
infections in 2013 alone. Panin's co-conspirator, Hamza Bendelladj, an 
Algerian national who helped Panin develop and distribute the malware, 
was also arrested in January 2013 in Bangkok, Thailand.
                    next generation cyber initiative
    The need to prevent attacks is a key reason the FBI has redoubled 
our efforts to strengthen our cyber capabilities while protecting 
privacy, confidentiality, and civil liberties. The FBI's Next 
Generation Cyber Initiative, which we launched in 2012, entails a wide 
range of measures, including focusing the FBI Cyber Division on 
intrusions into computers and networks, as opposed to crimes committed 
with a computer as a modality. The Cyber Division established Cyber 
Task Forces in each of our 56 field offices to conduct cyber intrusion 
investigations and respond to significant cyber incidents. The Cyber 
Division has also hired additional computer scientists to assist with 
technical investigations in the field and expanded partnerships to 
enhance collaboration with the NCIJTF.
    The NCIJTF, which serves as a coordination, integration, and 
information-sharing center among 19 U.S. agencies and our Five Eyes 
partners for cyber threat investigations has resulted in unprecedented 
coordination. This coordination involves senior personnel at key 
agencies. NCIJTF, which is led by the FBI, now has deputy directors 
from the NSA, DHS, the Central Intelligence Agency, U.S. Secret 
Service, and U.S. Cyber Command. In the past year, we have had our Five 
Eyes partners join us at the NCIJTF. Australia embedded a liaison 
officer in May 2013, the United Kingdom in July 2013, and Canada in 
January 2014. By developing partnerships with these and other nations, 
NCIJTF is working to become the international leader in synchronizing 
and maximizing investigations of cyber adversaries.
    While we are primarily focused with our Federal partners on cyber 
intrusions, we are also working with our State and local law 
enforcement partners to identify and address gaps in the investigation 
and prosecution of internet fraud crimes.
    Currently, the FBI's Internet Crime Complaint Center (IC3) collects 
reports from private industry and citizens about on-line fraud schemes, 
identifies emerging trends, and produces reports about them. The FBI 
investigates fraud schemes that are appropriate for Federal prosecution 
(based on such factors as the amount of loss). Others are packaged 
together and referred to State and local law enforcement.
    The FBI is also working to develop the Wellspring program in 
collaboration with the International Association of Chiefs of Police, 
the Major Cities Chiefs Association, and the National Sheriffs' 
Association to enhance the internet fraud targeting packages IC3 
provides to State and local law enforcement for investigation and 
potential prosecution. During the first phase of this program's 
development, IC3 worked with the Utah Department of Public Safety to 
develop better investigative leads for direct dissemination to State 
and local agencies.
    Through IC3, Operation Wellspring provided Utah police 22 referral 
packages involving over 800 victims, from which the FBI opened 14 
investigations. Additionally, another 9 investigations were opened and 
developed from the information provided.
    The following are reported loss totals:
   IC3-referred investigations=$2,135,264.
   Cyber Task Force initiated investigations=$385,630.
   Operation Wellspring/Utah Total=$2,520,894.
    The FBI is also partnering closely with DOJ's Bureau of Justice 
Assistance to support efforts of the International Association of 
Chiefs of Police to develop a National Cyber Center designed 
specifically to identify and share resources from across Government to 
assist local, State, and Tribal law enforcement agencies better address 
their cyber crime needs.
    The FBI's newly-established Guardian for Cyber application, being 
developed for Cyber use by the Guardian Victim Analysis Unit (GVAU), 
provides a comprehensive platform that tracks U.S. Government 
coordination and efforts to notify victims or targets of malicious 
cyber activity.
    The FBI is working toward the full utilization of Guardian for 
Cyber across FBI, other Government agencies, State, local, Tribal, and 
territorial (SLTT) governments, as well as industry partners, in order 
to provide forward understanding of cyber-related threats, increase 
awareness of victim actions to mitigate those threats, and facilitate a 
coordinated overall cyber incident response by the U.S. Government.
                        private sector outreach
    In addition to strengthening our partnerships in Government and law 
enforcement, we recognize that to effectively combat the cyber threat, 
we must significantly enhance our collaboration with the private 
sector. Our Nation's companies are the primary victims of cyber 
intrusions and their networks contain the evidence of countless 
attacks. In the past, industry has provided us information about 
attacks that have occurred, and we have investigated the attacks, but 
we have not always provided information back.
    The FBI's newly-established Key Partnership Engagement Unit (KPEU) 
manages a targeted outreach program focused on building relationships 
with senior executives of key private-sector corporations. Through a 
tiered approach the FBI is able to prioritize our efforts to better 
correlate potential National security threat levels with specific 
critical infrastructure sectors.
    The KPEU team promotes the FBI's Government and industry 
collaborative approach to cybersecurity and investigations by 
developing a robust information exchange platform with its corporate 
partners.
    Through the FBI's InfraGard program, the FBI develops partnerships 
and working relationships with private sector, academic, and other 
public/private entity subject-matter experts. Primarily geared toward 
the protection of critical, National infrastructure, InfraGard promotes 
on-going dialogue and timely communication between a current active 
membership base of 25,863 (as of April 2014).
    InfraGard members are encouraged to share information with 
Government that better allows Government to prevent and address 
criminal and National security issues. One of the resources available 
to members is the Guardian for Cyber program, which facilitates real-
time incident reports to the FBI. InfraGard members also benefit from 
access to robust on- and off-line learning resources, connectivity with 
other members and special interest groups, and relevant Government 
intelligence and information updates that enable them to broaden threat 
awareness and protect their assets.
    The FBI's Cyber Initiative & Resource Fusion Unit (CIRFU) maximizes 
and develops intelligence and analytical resources received from law 
enforcement, academia, international, and critical corporate private-
sector subject-matter experts to identify and combat significant actors 
involved in current and emerging cyber-related criminal and National 
security threats. CIRFU's core capabilities include a partnership with 
the National Cyber Forensics and Training Alliance (NCFTA) in 
Pittsburgh, Pennsylvania, where the unit is collocated. NCFTA acts as a 
neutral platform through which the unit develops and maintains liaison 
with hundreds of formal and informal working partners who share real-
time threat information and best practices, and who collaborate on 
initiatives to target and mitigate cyber threats domestically and 
abroad. In addition, the FBI, Small Business Administration, and the 
National Institute of Standards and Technology (NIST) partner together 
to provide cybersecurity training and awareness to small business as 
well as citizens leveraging the FBI InfraGard program.
    The FBI recognizes that understanding the cyber threat is critical 
to effectively combating it. As part of our enhanced private-sector 
outreach, we have begun to provide industry partners with Classified 
threat briefings and other information and tools to better help them 
repel intruders. Earlier this year, in coordination with the Treasury 
Department, we provided a Classified briefing on threats to the 
financial services industry to executives of more than 40 banks who 
participated via secure video teleconference in FBI field offices. We 
provided another Classified briefing on threats to the financial 
services industry in April 2014, with 100 banks participating. Another 
illustration of the FBI's commitment to private-sector outreach is our 
increase in production of our external use products such as the FBI 
Liaison Alert System (FLASH) reports and Private Industry Notifications 
(PINs).
                               conclusion
    In conclusion, to counter the threats we face, we are engaging in 
an unprecedented level of collaboration within the U.S. Government, 
with the private sector, and with international law enforcement.
    We are grateful for the committee's continued support and look 
forward to working with you and expanding our partnerships as we 
determine a successful course forward for the Nation to defeat our 
cyber adversaries.

    Mr. King. Thank you, Mr. Demarest.
    Now Mr. Zelvin.

STATEMENT OF LARRY ZELVIN, DIRECTOR, NATIONAL CYBERSECURITY AND 
  COMMUNICATIONS INTEGRATION CENTER, NATIONAL PROTECTION AND 
   PROGRAMS DIRECTORATE, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Zelvin. Chairman King, Chairman Meehan, Ranking Members 
Higgins, Ranking Member Clarke, distinguished Members of the 
committee, thank you for the opportunity to appear before you 
today.
    As you well know, the Nation's economic vitality and 
National security depend on a secure cyber space where 
reasonable risk decisions can be made and the flow of digital 
goods, transactions, and on-line interactions can occur safely 
and reliably. In order to meet this objective, the technical 
characteristics of malicious cyber activity must be shared in a 
timely fashion so cyber defenders can discover, address, and 
mitigate a variety of threats and vulnerabilities.
    In carrying out our particular responsibilities, the NCCIC 
promotes and implements a unified approach to cybersecurity 
which enables the rapid sharing of cybersecurity information in 
a manner that ensures the protection of individuals' privacy, 
civil liberties, and rights.
    The NCCIC is a civilian organization that provides an 
around-the-clock center where Government, private sector, and 
international partners can work together in both physical and 
virtual environments. As mentioned, the NCCIC is comprised of 
four branches, US-CERT, ICS-CERT, NCC, and an ops and 
integration component.
    From October 1, 2013, to May 20, 2014, the NCCIC has 
received over 350,000 cyber incident reports from Government 
partners, critical infrastructure organizations, and 
international partners, a significant increase from the nearly 
230,000 reports received in all of fiscal year 2013. These 
reports included incidents such as distributed denial of 
service attacks, phishing campaigns, and intrusions into a 
variety of technology information systems.
    In response to these incidents, the NCCIC regularly 
publishes technical and nontechnical information products, 
often co-authoring with the FBI, analyzing the characteristics 
of malicious cyber activity, improving the ability of the 
organizations, their ability to reduce risk. Additionally, when 
appropriate, all NCCIC components have on-site incident 
response teams that can assist asset owners and operators and 
their facilities, in close cooperation with our Government 
partners.
    US-CERT's global partnerships with more than 200 other 
CERTs world-wide are particularly useful as our team works to 
develop analysis across international borders to develop a 
comprehensive picture of malicious cyber activity. Data from 
the NCCIC and US-CERT can also be shared in machine-readable 
formats called a Structured Threat Information eXpression 
language, also known as STIX, which is currently being 
implemented and utilized.
    When looking at cyber threats, one of our greatest 
challenges in cybersecurity is, is our information technology 
systems are not nearly as secure as they could or should be. 
While there are a number of cases I could use to highlight my 
statement, I would like to use my remaining time to talk about 
how we in DHS aided Federal departments and agencies respond to 
and mitigate to the Heartbleed vulnerability across the dot-gov 
domain.
    On April 17, 2014, the NCCIC learned of a vulnerability in 
the widely-used Secure Sockets Layer encryption software dubbed 
Heartbleed. On April 8, US-CERT issued a public alert on the 
Heartbleed vulnerability and deployed signatures into our 
EINSTEIN 2 intrusion detection system to enable the detection 
of possible exploitation of the Heartbleed in the dot-gov 
domain. On April 10, mitigation guidance was distributed to our 
national world-wide partners, and then the NCCIC's National 
Cybersecurity Assessment & Technical Services team collaborated 
with well over 100 Federal agencies, receiving their 
authorization to scan for the Heartbleed vulnerability, 
identify their public IP space, schedule times to conduct the 
scanning, and then deliver individualized reports and results 
to each agency for their mitigation.
    To date, the NCATS team has scanned Federal IP space of 
approximately 15.5 million IPs on 11 different occasions and 
assisted reducing the number of Federal Heartbleed 
vulnerability occurrences from 270 to about 2 in less than 3 
weeks. More than half of these vulnerabilities were identified 
and mitigated in the first 6 days of scanning.
    The Industrial Control System CERT, in partnership with 
private-sector research groups, conducted two webinars 
regarding Heartbleed, one with the Industrial Control System 
vendor community on April 16 and one with 16 critical 
infrastructure sectors directly impacted by the vulnerability 
on April 25. Approximately 140 vendors attended the first 
session and nearly 500 critical infrastructure asset and owner-
operators, as well as representatives from sector-specific 
agencies and information-sharing and analysis centers, attended 
the second.
    Fortunately, due to the hard work throughout the Federal 
Government, the impact of the Heartbleed on the dot-gov domain 
has been minimal. I am very proud of how the team responded and 
continues to counter this significant vulnerability as it 
serves as yet another example of how we collaborate with and 
serve a large community of stakeholders. We still can do 
better, and we are asking for the help of the committee to 
clarify DHS' authorities so it can better mitigate threats to 
the dot-gov and our dot-com domains closer to the time in which 
they occur.
    In conclusion, I would like to again thank the committee 
for the ability to appear today and highlight that we in DHS 
and across the NCCIC strive every day to enhance the security 
and resilience across cyber space and the information 
technology enterprise. We accomplish our mission using 
voluntary means and ever-mindful of the need to respect 
privacy, civil liberties, and the law. I truly appreciate the 
opportunity to speak with you today and look forward to your 
questions.
    [The prepared statement of Mr. Zelvin follows:]
                   Prepared Statement of Larry Zelvin
                              May 21, 2014
                              introduction
    Chairman King, Chairman Meehan, Ranking Member Higgins, Ranking 
Member Clarke, and distinguished Members of the committee, I am pleased 
to appear today to discuss the Department of Homeland Security (DHS) 
National Protection and Programs Directorate (NPPD) and the National 
Cybersecurity and Communications Integration Center (NCCIC) efforts to 
assess persistent and emerging cyber threats to the U.S. homeland.
    On February 12, 2013, the President signed Executive Order (E.O.) 
13636, Improving Critical Infrastructure Cybersecurity and Presidential 
Policy Directive (PPD) 21, Critical Infrastructure Security and 
Resilience, which set out steps to strengthen the security and 
resilience of the Nation's critical infrastructure, and reflect the 
increasing importance of integrating cybersecurity efforts with 
traditional critical infrastructure protection. The President also 
highlighted that it is important for Government to encourage 
efficiency, innovation, and economic prosperity while promoting safety, 
security, business confidentiality, privacy, and civil liberties. DHS 
partners closely with critical infrastructure owners and operators to 
improve cybersecurity information sharing and encourage risk-based 
implementation of standards and guidelines in order to strengthen 
critical infrastructure security and resilience.
    In my testimony today, I would like to highlight how DHS helps 
secure cyber infrastructure and then discuss a few specific examples 
where we have prevented incidents and responded to a variety of 
cybersecurity challenges.
             enhancing the security of cyber infrastructure
    Based on our statutory authorities, and in response to policy 
requirements, DHS coordinates the National protection, prevention, 
mitigation of, and recovery from significant cyber and communications 
incidents; disseminates domestic cyber threat and vulnerability 
analysis across various sectors; and investigates cyber crimes under 
DHS's jurisdiction. DHS has a unique responsibility in securing Federal 
civilian systems against all threats and hazards. DHS components 
actively involved in cybersecurity include NPPD, the United States 
Secret Service, the U.S. Coast Guard, U.S. Customs and Border 
Protection, Immigration and Customs Enforcement, the DHS Office of the 
Chief Information Officer, and the DHS Office of Intelligence and 
Analysis (I&A), among others. In all of its activities, DHS coordinates 
all of its cybersecurity efforts with public, private-sector, and 
international partners.
    The DHS National Cybersecurity & Communications Integration Center 
(NCCIC) is a 24x7 cyber situational awareness and incident response and 
management center that serves as a centralized location where 
operational elements involved in cybersecurity and communications 
reliance coordinate and integrate cybersecurity efforts. NCCIC partners 
include all Federal departments and agencies; State, local, Tribal, and 
territorial governments (SLTT); the private sector; and international 
entities. NCCIC's activities include providing greater understanding of 
cybersecurity and communications vulnerabilities, intrusions, 
incidents, mitigation, and recovery actions. The NCCIC is composed of 
the United States Computer Emergency Readiness Team (US-CERT), the 
Industrial Control System Cyber Emergency Response Team (ICS-CERT), the 
National Coordination Center for Communications (NCC), and an 
Operations and Integration Team. NCCIC operations are currently 
conducted from three States--Virginia, Idaho, and Florida. During the 
first 7 months of fiscal year 2014, the NCCIC has received 31,593 
reports of incidents, detected over 28,000 vulnerabilities, issued over 
4,006 actionable cyber alerts, and had over 252,523 partners subscribe 
to our cyber threat warning sharing initiative.
    The NCCIC actively collaborates with public and private-sector 
partners every day, including responding to and mitigating the impacts 
of attempted disruptions to the Nation's critical cyber and 
communications networks. In fiscal year 2014 so far, the Industrial 
Control Systems Cyber Emergency Response Team (ICS-CERT) has provided 
over 161 alerts, bulletins, and other products to the ICS community 
warning of various threats and vulnerabilities impacting control 
systems, tracked 85 unique vulnerabilities affecting ICS products, 
conducted 41 assessments across critical infrastructure sectors, and 
deployed the Cyber Security Evaluation Tool to 2,412 critical 
infrastructure owners and operators to assist in performing their own 
cybersecurity self-assessments against known control systems standards.
    DHS also directly supports Federal civilian departments and 
agencies in developing capabilities that will improve their own 
cybersecurity posture. Through the Continuous Diagnostics and 
Mitigation (CDM) program, led by the NPPD Federal Network Resilience 
Branch, DHS enables Federal agencies to more readily identify network 
security issues, including unauthorized and unmanaged hardware and 
software, known vulnerabilities, weak configuration settings, and 
potential insider attacks. Agencies can then prioritize mitigation 
actions for these issues based on potential consequences or likelihood 
of exploitation by adversaries. The CDM program provides diagnostic 
sensors, tools, and dashboards that provide situational awareness to 
individual agencies, as well as general situational awareness at the 
Federal level. Memoranda of Agreement with the CDM program encompass 
over 97 percent of all Federal civilian personnel.
    Complementing these efforts, the National Cybersecurity Protection 
System (NCPS), a key component of which is referred to as EINSTEIN, is 
an integrated intrusion detection, analysis, information sharing, and 
intrusion-prevention system, utilizing hardware, software, and other 
components to support DHS's mandate to protect Federal civilian agency 
networks. In fiscal year 2014 and beyond, the program will expand 
intrusion prevention, information sharing, and cyber analytic 
capabilities at Federal agencies. EINSTEIN 3 Accelerated (E3A) 
currently provides Domain Name System and/or email protection services 
to a total of seven departments and agencies, and we are working with 
our service providers to bring coverage to the rest of the Executive 
branch. However, this process has been significantly delayed by the 
lack of clear authorities for DHS. E3A gives DHS an active role in 
defending .gov network traffic and significantly reduces the threat 
vectors available to malicious actors seeking to harm Federal networks.
  securing the homeland against persistent and emerging cyber threats
    Cyber intrusions into critical infrastructure and Government 
networks are serious and sophisticated threats. The complexity of 
emerging threat capabilities, the inextricable link between the 
physical and cyber domains, and the diversity of cyber actors present 
challenges to DHS and all of our customers. Because the private sector 
owns and operates a significant percentage of the Nation's critical 
infrastructure, information sharing becomes especially critical between 
the public and private sectors.
Heartbleed
    The Department recently learned of a serious vulnerability, known 
as ``Heartbleed,'' a weakness in the widely-used OpenSSL encryption 
software that protects the electronic traffic across two-thirds of the 
internet and in scores of electronic devices. Although new computer 
``bugs'' and malware crop up almost daily, this vulnerability is 
unusual in how widespread it is, the potentially damaging information 
it allows malicious actors to obtain, and the length of time before it 
was discovered.
    NCCIC learned of the of the Heartbleed vulnerability on April 7, 
2014. Less than 24 hours later, NCCIC released alert and mitigation 
information on the US-CERT website. In close coordination with the 
Departments of Defense and Justice, as well as private-sector partners, 
the NCCIC then created a number of compromise detection signatures for 
the EINSTEIN system that were also shared with additional critical 
infrastructure partners. DHS worked with civilian agencies to scan 
their .gov websites and networks for Heartbleed vulnerabilities, and 
provided technical assistance for issues of concern identified through 
this process. The NCCIC and its components also began a highly active 
outreach to cyber researchers, critical infrastructure owners, 
operators, and vendors, Federal, and SLTT entities, and international 
partners to discuss measures to mitigate the vulnerability and 
determine if there had been active exploits.
    Once in place, DHS began notifying agencies that EINSTEIN 
signatures had detected possible activity, and immediately provided 
mitigation guidance and technical assistance.
    The administration's May 2011 Cybersecurity Legislative Proposal 
called for Congress to provide DHS with clear statutory authority to 
carry out this operational mission, while reinforcing the fundamental 
responsibilities of individual agencies to secure their networks, and 
preserving the policy and budgetary coordination oversight of the 
Office of Management and Budget and the Executive Office of the 
President. While there was rapid and coordinated Federal Government 
response to Heartbleed, the lack of clear and updated laws reflecting 
the roles and responsibilities of civilian network security caused 
unnecessary delays in the incident response.
Point-of-Sale Compromises
    On December 19, 2013, a major retailer publically announced it had 
experienced unauthorized access to payment card data from the 
retailer's U.S. stores. The information involved in this incident 
included customer names, credit and debit card numbers, and the cards' 
expiration dates and card verification value security codes (i.e., the 
three- or four-digit numbers that are usually on the back of the card). 
Separately, another retailer reported a malware incident involving its 
Point-of-Sale (POS) system on January 11, 2014, that resulted in the 
apparent compromise of credit card and payment information.
    In response to this activity, NCCIC/US-CERT analyzed the malware 
identified by the Secret Service as well as other relevant technical 
data and used those findings, in part, to create two information-
sharing products. The first product, which is publically available and 
can be found on US-CERT's website, provides a non-technical overview of 
risks to POS systems, along with recommendations for how businesses and 
individuals can better protect themselves and mitigate their losses in 
the event an incident has already occurred. The second product provides 
more detailed technical analysis and mitigation recommendations, and 
has been shared through non-public, secure channels with industry 
partners to enable their protection efforts. When possible, NCCIC's 
goal is always to share information broadly, including by producing 
products tailored to specific audiences.
    These efforts ensured that actionable details associated with a 
major cyber incident were shared quickly and accurately with the 
private-sector partners who needed the information in order to protect 
themselves and their customers, while also providing individuals with 
practical recommendations for mitigating the risk associated with the 
compromise of their personal information. NCCIC especially benefited 
from close coordination with the private-sector Financial Services 
Information Sharing and Analysis Center (FS-ISAC) during this response.
Energy Sector
    In March 2012, DHS identified a campaign of cyber intrusions 
targeting natural gas pipeline sector companies with spear-phishing e-
mails that dated back to December 2011. The attacks were highly-
targeted, tightly-focused, and well-crafted.
    ICS-CERT kicked off an ``Action Campaign'' in partnership with the 
Federal Bureau of Investigation, Department of Energy (DOE), 
Electricity Sector-Information Sharing and Analysis Centers, 
Transportation Security Administration, and others to provide 
Classified briefings to private-sector critical infrastructure 
organizations across the country. In May and June 2012, DHS deployed 
on-site assistance to two of the organizations targeted in this 
campaign: An energy company that operates a gas pipeline in the United 
States and a manufacturing company that specializes in producing 
materials for pipeline construction. ICS-CERT and the Federal Bureau of 
Investigation (FBI) provided 14 briefings in major cities throughout 
the United States to over 750 personnel involved in the protection of 
energy assets and critical infrastructure.
    ICS-CERT, in coordination with DOE and the Federal Energy 
Regulatory Commission (FERC), has also started an initiative dubbed 
``SAFEGUARD'' to assess the cybersecurity of major energy sector asset 
owners (e.g., electric and gas utilities, petroleum companies) to 
proactively understand the state of security. Customized services 
include cybersecurity assessments, network architecture reviews, 
network scanning to look for static indicators and indicators of 
adversary persistence and anomalies, and control systems network 
traffic visualization.
    Our I&A colleagues have increased outreach to the Energy Sector, 
providing expertise on malicious capabilities and intentions of 
emerging cyber threat actors targeting the sector, including in 
Unclassified forums. I&A leveraged partnerships with DHS and other 
Federal experts, including colleagues at DOE, to provide threat 
briefings to CEOs, CIOs, CISOs, and other private and public-sector 
leaders. These included engagements with the leadership and members of 
the American Petroleum Institute, alongside NPPD partners and National 
Security Staff colleagues, and a joint briefing with the FBI to the 
Federal Energy Regulatory Commission.
Financial Sector Distributed Denial of Service (DDoS) Attacks
    The continued stability of the U.S. financial sector is often 
discussed as an area of concern, as U.S. banks are consistent targets 
of cyber attacks. DDoS incidents impacting leading U.S. banking 
institutions in 2012 and 2013 and periodically in 2014 have gotten more 
powerful as the DDoS campaign has persisted. US-CERT has a distinct 
role in responding to a DDoS: To disseminate victim notifications to 
United States Federal Agencies, Critical Infrastructure Partners, 
International CERTs, and U.S.-based Internet Service Providers.
    US-CERT has provided technical data and assistance, including 
identifying 600,000 DDoS-related IP addresses and supporting contextual 
information in order to help financial institutions and their 
information technology security service providers improve their 
defensive capabilities. In addition to sharing with the relevant 
private-sector entities, US-CERT has provided this information to over 
120 international partners, many of whom have contributed to our 
mitigation efforts. US-CERT, along with the FBI and other interagency 
partners, has also deployed on-site technical assistance to provide in-
person support. US-CERT works with Federal civilian agencies to ensure 
that no U.S. Government systems are infected with botnet software that 
launches DDoS attacks and to increase the U.S. Government's domestic 
and international sharing and coordination efforts with public and 
private-sector partners.
    During these attacks, our I&A partners bolstered long-term and 
consistent threat engagements with the Department of Treasury and 
private-sector partners throughout the Financial Services Sector. I&A 
analysts presented numerous sector-specific Unclassified briefings on 
the relevant threat intelligence, including at the annual FS-ISAC 
conference, alongside the Office of the National Counterintelligence 
Executive and the U.S. Secret Service. Additionally, at the request of 
the Treasury and the Financial and Banking Information Infrastructure 
Committee (FBIIC), I&A analysts provided Classified briefings on the 
malicious cyber threat actors to cleared individuals and groups from 
several financial regulators, including the Federal Deposit Insurance 
Corporation (FDIC), Securities and Exchange Commission (SEC), and the 
Federal Reserve Board (FRB).
                               conclusion
    DHS is committed to creating a safe, secure, and resilient cyber 
environment while promoting cybersecurity knowledge and innovation and 
protecting confidentiality, privacy, and civil liberties in 
collaboration with our public, private, and international partners. We 
work around the clock to ensure that the peace and security of the 
American way of life will not be interrupted by opportunist enemies or 
terrorist actors. Each incarnation of threat has some unique traits. 
Mitigation requires agility and adaptation. Cybersecurity is not an 
end-state, but a continuous process of risk management.
    We continue to believe that carefully-crafted information-sharing 
provisions, as part of a comprehensive suite of cybersecurity 
legislation, are essential to improving the Nation's cybersecurity, and 
we will continue to work with Congress and the White House to achieve 
this objective. We continue to seek legislation that clarifies and 
strengthens DHS responsibilities and allows us to respond quickly to 
vulnerabilities like Heartbleed. We continue to seek legislation that 
incorporates privacy, civil liberties, and confidentiality safeguards 
into all aspects of cybersecurity; strengthens our critical 
infrastructure's cybersecurity by further increasing information 
sharing and promoting the adoption of cybersecurity standards and 
guidelines; gives law enforcement additional tools to fight crime in 
the digital age; and creates a National Data Breach Reporting 
requirement.
    DHS plays an integral role in promoting National cybersecurity: We 
are building a foundation of voluntary partnerships with private owners 
of critical infrastructure and Government partners working together to 
safeguard stability. We form a crucial underpinning for ensuring the 
on-going continuation of services. We work through information sharing, 
threat and indicator technical tools, sector-specific outreach, on-site 
technical assistance, education and awareness campaigns, and other 
mechanisms--in other words, we use a multi-dimensional approach that 
provides layered security. We look forward to continuing the 
conversation and continuing to serve the American goals of peace and 
stability, and we hope for your continued support.

    Mr. King. Thank you, Mr. Zelvin.
    Now I would recognize Ms. Clarke for opening remarks.
    Ms. Clarke. I thank you, Mr. Chairman, and I thank Chairman 
Meehan and Ranking Member Higgins, for holding this hearing 
this morning.
    As we have just heard and are keenly aware, threats to 
systems supporting U.S. critical infrastructure and Federal and 
corporate information systems are evolving and growing. 
Advanced persistent threats where adversaries possess 
sophisticated levels of expertise and significance pose 
increasing threats.
    Soon after his election in 2008, President Obama declared 
the cyber threat to be one of the most serious economic and 
National security challenges we face as a Nation and stated 
America's economic prosperity in the 21st Century will depend 
on cybersecurity. The Director of National Intelligence has 
also warned us of the increasing globalization of cyber 
attacks, including those carried out by foreign militaries or 
organized international crime.
    As has been mentioned already this morning, on Monday we 
saw the Department of Justice indict members of a foreign 
military involved in economic espionage cyber crime, most 
likely espionage in support of its state-owned companies. It 
appears that the Department of Justice has been working on this 
indictment for more than a year. Prosecutors in the DOJ's 
National Security Division had to show there was strong 
specific evidence, and there had to be companies that were 
willing to go public against China.
    The evolving array of cyber-based threats facing the Nation 
pose threats to National security, commerce, and intellectual 
property, as well as individuals. International threats include 
both targeted and untargeted attacks from a variety of sources. 
These sources include business competitors, criminal groups, 
hackers, and foreign nations engaged in espionage and 
information warfare.
    These sources of cybersecurity threats make use of various 
techniques to compromise information or adversely affect 
computers, software, a network or organization's operation and 
industry, or the internet itself. Such threat sources vary in 
terms of the types and capabilities of the actors, their 
willingness to act, and their motives. Adversarial 
cybersecurity threats can range from, as I like to say, from 
botnets to business competitors.
    Addressing international cybersecurity threats involves 
many Government and private entities, including internet 
service providers, security vendors, software developers, and 
computer forensic specialists. Their focus is on developing and 
implementing technology systems to protect against computer 
intrusions, internet fraud and spam, and if a crime does occur, 
detecting it and helping to gather evidence for an 
investigation. Also, because cyber crime threats cross National 
and State borders, law enforcement organizations have to deal 
with multiple jurisdictions with their own laws and legal 
procedures, a situation that complicates and hobbles 
investigations.
    Law enforcement's challenge in investigating and 
prosecuting malicious 21st Century cyber criminals is this: 
Modern criminals can readily leverage technology to victimize 
targets across borders, and the criminals themselves need not 
cross a single border to do so. This creates a unique test in 
identifying and locating the criminals and in apprehending and 
prosecuting them.
    The United States has extradition treaties and mutual legal 
assistance agreements with some, but not all countries, and 
even with these agreements in place, the process may be slow. 
We must continue to search for ways that Congress can help 
enhance international law enforcement capabilities and to get 
criminals off the streets or, shall we say, out of cyberspace, 
and thus protect U.S. critical infrastructure, Government 
systems, and consumers.
    I appreciate hearing the informed testimony of our 
witnesses this morning. It is reassuring to know that our 
Nation benefits from your diligence, knowledge, and expertise.
    With that, Mr. Chairman, I yield back.
    [The statement of Ms. Clarke follows:]
              Statement of Ranking Member Yvette D. Clarke
                              May 21, 2014
    We all know that threats to systems supporting U.S. critical 
infrastructure, and Federal and corporate information systems are 
evolving and growing. Advanced persistent threats--where adversaries 
possess sophisticated levels of expertise and significant--pose 
increasing risks.
    Soon after his election in 2008, President Obama declared the cyber 
threat to be ``one of the most serious economic and National security 
challenges we face as a Nation'' and stated ``America's economic 
prosperity in the 21st Century will depend on cybersecurity.'' The 
Director of National Intelligence has also warned of the increasing 
globalization of cyber attacks, including those carried out by foreign 
militaries or organized international crime.
    On Monday, we saw the Department of Justice indict members of a 
foreign military involved in economic espionage cyber crime, most 
likely espionage in support of its state-owned companies. It appears 
that the Department of Justice has been working on this indictment for 
more than a year. Prosecutors in the DOJ's National Security Division 
had to show there was strong, specific evidence, and there had to be 
companies that were willing to go public against China.
    The evolving array of cyber-based threats facing the Nation poses 
threats to National security, commerce and intellectual property, and 
individuals. Intentional threats include both targeted and untargeted 
attacks from a variety of sources. These sources include business 
competitors, criminal groups, hackers, and foreign nations engaged in 
espionage and information warfare.
    These sources of cybersecurity threats make use of various 
techniques to compromise information or adversely affect computers, 
software, a network, an organization's operation, an industry, or the 
internet itself. Such threat sources vary in terms of the types and 
capabilities of the actors, their willingness to act, and their 
motives. Adversarial cybersecurity threats can range from, as I like to 
say, ``From Botnets to Business Competitors''.
    Addressing international cyber crime threats involves many 
Government and private entities--including internet service providers, 
security vendors, software developers, and computer forensics 
specialists. Their focus is on developing and implementing technology 
systems to protect against computer intrusions, internet fraud, and 
spam and, if a crime does occur, detecting it and helping to gather 
evidence for an investigation.
    Also, because cyber crime threats cross National and State borders, 
law enforcement organizations have to deal with multiple jurisdictions 
with their own laws and legal procedures, a situation that complicates 
and hobbles investigations. Law enforcement's challenge in 
investigating and prosecuting malicious, 21st Century cybercriminals is 
this--modern criminals can readily leverage technology to victimize 
targets across borders, and the criminals themselves need not cross a 
single border to do so.
    This creates a unique test in identifying and locating the 
criminals, and in apprehending and prosecuting them. The United States 
has extradition treaties and mutual legal assistance agreements with 
some, but not all countries. Even with these agreements in place, the 
process may be slow.
    We must continue to search for ways that Congress can help enhance 
international law enforcement capabilities and to get criminals off the 
streets, or shall we say, out of cyberspace, and thus protect U.S. 
critical infrastructure, Government systems, companies, and consumers.

    Mr. King. I thank Ranking Member Clarke.
    Now we will open up the hearing for a few questions. I just 
want to remind Members, however, that we are going to be moving 
to a closed session where these questions can be better 
addressed. But, again, if we can keep it to a few questions, I 
think it will be to everyone's benefit because there is much to 
be learned in closed session.
    I just basically have one question, and I would ask it to 
the panel. Are terrorist organizations actively targeting the 
United States and have you seen cases of terror groups 
coordinating with criminal organizations to carry out attacks 
or to gain capability? Again we are in an open session, so you 
can tailor your answer accordingly.
    Mr. Demarest. Yes, Chairman. So for this session, sir, yes, 
we are seeing that, but it is focused against the websites that 
are hosted in the United States, and they tend to be low-level 
attacks, website defacements and the like, maybe some DDoS 
activity. There are three principal groups that have the 
capabilities or are developing the capabilities today or are 
looking for the capabilities today to do something more I will 
say in the physical realm.
    As far as your second part of the question about joining 
with criminal organizations, we have not seen that yet, though 
we do actively watch for terrorist organizations crossing over 
to the criminal forums that are on-line today to acquire a 
skill or talent or tools to perpetrate some greater crime.
    Mr. King. Do you believe that we have the defense 
capability? I know you said you want to head them off, but also 
do we have the defense capability against these type attacks?
    Mr. Demarest. I think it is sector by sector, Chairman. I 
think in the dot-gov space we are fairly well-prepared, along 
with the dot-mil, but once you get into the dot-com space it is 
varying degrees of preparedness I would say, and I would 
probably defer to Larry on that, or Mr. Zelvin, as far as the 
sectors and how well they are prepared. But we see finance in 
particular doing a stellar job. They have invested heavily. 
Transportation and some of the others, energy. Then as you get 
down lower on the priority scale, less so.
    Mr. King. Mr. Lemons, Mr. Zelvin, any comment?
    Mr. Lemons. I would say I concur with Mr. Demarest at this 
point.
    Mr. Zelvin. Mr. Chairman, the only thing I think I would 
add is just that obviously law enforcement intelligence is 
doing their collection. Where we see this is reporting from 
victims, and then we turn it over to the FBI and other law 
enforcement both at the State and local level.
    You know, most of the terrorist groups, especially 
domestic, are going after faith-based groups, so that has been 
mostly trying to influence and having an impact with those 
groups. We are working with them. Many of these groups don't 
have very sophisticated cyber defenses. So we are working with 
them not only to understand what may be targeting them, but 
also what companies out there can assist, and then obviously we 
offer assistance as well. I can cover more in the closed 
session if you like.
    Mr. King. Thank you.
    Ranking Member Higgins.
    Mr. Higgins. Thank you, Mr. Chairman.
    It seems as though capability and desire are hard things to 
monitor and to detect, and it seems as though the cyber threat 
is coming from both state and non-state actors. So I would be 
interested in your assessment as to the terrorist threat from 
non-state actors like Hezbollah, Syria, and al-Qaeda. 
Terrorists second generation, post-9/11, are younger, more 
aggressive, and more technologically savvy. So I am just 
interested in your assessment of that relative to capability 
and desire to strike U.S. targets.
    Mr. Demarest. Ranking Member, I would say the desire is 
strong. I will say the capability is developing. What we have 
seen among the three groups you mentioned, Lebanese Hezbollah 
is certainly an organization that is looking to develop a 
significant capability in this arena. They focus primarily on 
regional enemies, I will say their enemies, but not so much 
against the United States.
    Mr. Zelvin. Sir, I would concur with Mr. Demarest.
    Mr. Lemons. Me also, sir.
    Mr. Higgins. What about the threat posed by state actors 
like Iran, China, and Russia? Is the level of activity 
increasing, and what are we doing to combat that?
    Mr. Demarest. I will say certainly more for the closed 
session, sir, but significantly increasing on all three. I 
would say Russia, China, and Iran are certainly developing 
significant capabilities.
    Mr. Lemons. I would also concur with Mr. Demarest. As we 
see these nations also increase in complexity, their 
information needs also increase. Part of those information 
needs are also developing a cyber program to meet those needs 
as they go forward. We will get into more detail in the closed 
session, sir.
    Mr. Higgins. I would just say in closing, the terrorist 
mentality is to target high-impact targets obviously, and 9/11, 
in addition to the death and destruction that was exacted on 
the United States, there was also a symbolic attack as well, 
which the cyber threat seems to confirm, and that is to disrupt 
our way of life. They attacked the Twin Towers because it was a 
sign of America's economic superiority. They attacked the 
Pentagon because it was a symbol of America's military 
superiority. Presumably a plane was headed for either the 
Capitol or the White House because of our democratic freedoms 
that we enjoy.
    So it would seem to me that the potential of cyber attacks 
and the motivation and desire of those who seek to hurt us and 
our way of lives is pretty imminent and pretty significant. So 
I will yield back.
    Mr. King. Chairman Meehan.
    Mr. Meehan. I thank you, Chairman King.
    I thank, again, the panel for your work in this area.
    We have looked at a variety of issues, and a lot of the 
focus continues to be, appropriately so, on the nation-state 
activity and the very sophisticated criminal gangs and the 
potential for them to do massive disruption, not only to our 
infrastructure, but also theft of intellectual property and 
things of that nature.
    But Special Agent Demarest, you used a term, and it struck 
me, because you talked about this kind of a threat affecting 
not just our nations, but also our neighborhoods. I often think 
about the average American thinking about us discussing these 
issues and believing that somehow it is very remote from them--
something might happen to some bank in New York, but it doesn't 
affect me. I praise law enforcement across the board, including 
the great work done by the Justice Department taking on 
sophisticated Chinese operations that have been sponsored, 
nation-sponsored activity, hacking into our most sophisticated 
systems.
    But in your testimony you also talked about this process 
Blackshades, and in effect this is a market that exists out 
there in the world, you touched 19 countries with this very 
important indictment. Effectively, Blackshades, for anywhere 
between $5 and $40, individuals can go into the black market 
and purchase malware that if they are sophisticated enough, 
effectively they could go into the home of any American and 
take over their computer. As I understand your testimony, it is 
not only the ability to use that malware if it is invited in, 
in some capacity to take over the operation of a computer, 
including tracking the key strokes and things of that nature, 
but in reading the publicly-available information. So I am not 
talking about anything that hasn't been spoken about publicly.
    Is it not accurate that in addition there was the capacity 
to be able to manipulate remotely the same kind of control 
functions that the individual would, including the use of 
cameras? So the reality is an individual could be sitting in 
their own home, they could be sitting in their own bedroom, and 
a remotely-controlled access would be able to not only have 
access to what is contained within their computer, but maybe 
actually in real time be actually viewing what is going on in 
that home. So we are inviting into our own homes, an average 
American, for as little as $5 some criminal in Eastern Europe 
or across the street would be able to have that access.
    So I don't think we talk enough about this. Could you 
explain to me just what is Remote Access Tool? How is it 
available? What can it do? What are we doing to be able to take 
steps to prevent its use?
    Mr. Demarest. Chairman Meehan, you are exactly right. You 
can imagine as a citizen sitting anywhere in the United States 
today, you could have an actor sitting in some remote region of 
the world actually viewing you through your own laptop or a 
computer at home through your camera.
    Basically Remote Access Tool provides access by an actor to 
your box or to your computer to take it over. They own your PC 
or laptop or device that you are using. It gives them access, 
as you mentioned, to the web cam or the camera, and they can 
turn it on and off at will. As I mentioned, ransomware, they 
can lock files, take photos, whether they be sensitive photos 
to the individual, the owner of the computer or not, they 
collect all this information, financial information, passwords 
and the like. So it is completely owned. Then the information 
is taken and either used by that particular actor or sold in 
different environments on-line in these criminal forums.
    So you are being exposed and exploited once, and then 
potentially multiple times by other actors who purchase the 
information on-line. Separately more, I guess, salt to the 
wound, they have the ability to send out chat messages to your 
contacts within your computer, so it looks like Chairman Meehan 
is sending Joe Demarest an email or chat and I respond to that. 
In that is a link that has the malware that is attached, so it 
then spreads the Blackshades now to my computer.
    Mr. Meehan. So a friend could pick up what I think is a 
message to me that would just be in the normal course, I 
respond and send back a picture of our vacation that we took 
down to the Jersey shore, but because of that communication 
they now have access into my computer and now they can begin to 
do the same process, not only the taking over of the files and 
the key strokes, but potentially even manipulating the camera 
in my bedroom?
    Mr. Demarest. Friends and family. What it would require 
from me when you send or after sending that chat to me, for me 
to click on a link that you send me via the chat message.
    Mr. Meehan. How do we identify something like that in our 
system and what are we doing to be able to educate Americans to 
take steps to protect their most intimate and most private and 
most secure information, that which they do in the comfort of 
their own home?
    Mr. Demarest. Excellent question. So throughout the 
investigation and in the culmination of the enforcement is a 
significant technical aspect to it where we are seizing the 
infrastructure used by the actors. Specifically, administrative 
servers, which has most of the victim information on it. So 
then we work with the victim, I will say the internet service 
providers for the various countries, to identify the victims 
and to get information to them, the fact that they have been 
impacted, and tools made available for them to actually 
mitigate or remediate what is on their computer. That again is 
the relationship we have forged with DHS, as offering through 
the DHS portal, but either tools or instructions on how to 
actually eliminate a given malware.
    Mr. Meehan. Well, I will look forward to more communication 
with this as we go into private session and otherwise. But I 
thank all of you for your work. I think it is very important 
for the American people to recognize these issues and don't 
think of them always as just remotely affecting just big 
businesses or corporations, that everyday Americans, as you 
said, affecting not just our Nation, but our neighborhoods. I 
think this is part of our responsibility, is to open up an 
awareness and appreciation for the very scope and nature of 
this threat.
    Thank you for your testimony. Look forward to hearing more 
at a later time. Yield back.
    Mr. King. Thank you, Chairman Meehan.
    Ranking Member Clarke.
    Ms. Clarke. Thank you, Mr. Chairman.
    Monday's indictment of the five Chinese military hackers 
for computer hacking and economic espionage was the sort of 
legal action taken by the AG as a standard tactic in espionage. 
It sends a clear signal to the other side that their actions 
have become intolerable. But it is just the beginning of a long 
process. The indictment alleged that the defendants conspired 
to hack into American computer systems, maintain authorized 
access, stealing information to advantage economic competitors 
in China.
    As I understand, the Department of Homeland Security's role 
in these types of situations is usually led by US-CERT because 
it leads mitigation and forensic efforts in coordination with 
the FBI, Secret Service, and other Federal agencies. Would you 
describe the kind of interagency coordination that is in place 
for agencies as a collaborative model where DHS' involvement is 
stood up through US-CERT, and does the role go beyond that 
jurisdiction?
    Mr. Zelvin. Ranking Member, thank you for the question. So 
let me talk about it in broad terms, and we can get into more 
narrow as you like.
    When there is an incident now we have a ranking system as 
to the importance of it. There are certain things that are low 
threshold and certain things are high threshold. It is a high 
threshold if somebody is into a database system. If there is a 
compromise of personal identifiable information, if there is a 
disruption or a destruction event, those are obviously very 
high-scale events. Fortunately they don't happen often, but 
they do happen.
    On a given day we see between 150 and 200 incidents through 
our EINSTEIN system, which is monitoring the dot-gov through 
intrusion detection and intrusion prevention. At the high level 
we will make an outreach directly to the victim, and we will 
notify them of the event and making sure that they are 
tracking. Then we will offer assistance, if needed, to actually 
go and investigate on their servers and other information 
technology capabilities to determine how deep is the 
compromise.
    We will do this in full partnership with the FBI, which 
will be leading law enforcement and domestic intelligence 
collection, we will do this with our own intelligence community 
members so they can develop the tactics, techniques, and 
procedures to see where else. Then US-CERT will go across the 
Federal community and create that awareness.
    At the same time, we are creating signatures into the 
intrusion detection system to make sure that these events 
cannot be repeated, and then we are sharing it with the private 
and international partners through the Enhanced Cybersecurity 
Services or ECS, and also through our CISP program. So it is 
interagency, it is private sector, it is international, and 
even on the lower events we are still doing the notification. 
So I described the high end as more of an example. Then I would 
ask, see if Mr. Demarest wants to offer some thoughts as well.
    Mr. Demarest. Madam Clarke, so what is great about today is 
that what Mr. Zelvin and the NCCIC in DHS learns informs the 
investigation, and what we learn through the investigation or 
intelligence collection efforts inform the protectors or the 
defenders, DHS. This is a cycle that has developed mightily, I 
will say, over the past 2 years where it this effective 
transfer of knowledge and information that better safeguards 
the country, but then informs and helps us spearhead and focus, 
finely focus investigations.
    Ms. Clarke. Very well. That is a very robust and holistic 
approach, and I think that that will serve our Nation well.
    My next question is the debate around protecting U.S. 
networks is often focused on U.S. critical infrastructure. 
Currently the Department of Homeland Security from Presidential 
Policy Directive 21 lists 16 critical infrastructure sectors. 
Which of these sectors are targeted with probes and intrusions 
most frequently and what sectors are most at risk?
    Mr. Zelvin. Ranking Member, it really depends on the 
awareness. I will tell you, our energy sector, our finance 
sector, information technology, communications, transportation, 
we are seeing a lot of instances. There are other sectors that 
I haven't mentioned where we are not seeing it, but I wonder if 
that is because they are not being reported, and that is a huge 
challenge. When it comes to the critical infrastructure in the 
private sector, there is no requirement, it is all voluntary, 
so we know what we know, we don't know what we don't know, and 
I really worry about what we don't know.
    So I have talked to groups and other sectors, and they 
said, we really don't have a cybersecurity problem. I said, oh, 
my gosh, yes, you do, you just don't know about it.
    I will tell you my experience, and I think Mr. Lemons and 
Mr. Demarest will tell you the same thing. Adversaries are 
going after any vulnerability they can find. So it doesn't 
matter what State you are in, what city you are in, what 
critical infrastructure you are in, if there is an opening, 
there is an adversary that is going to see where they can go 
and what information they can steal.
    Mr. Demarest. I would agree with Mr. Zelvin. Depending on 
the actor sometimes alters the focus or the most threatened 
sector. We talked about our Middle East actor in recent DDoS 
activity against New York over the past year or so. But again I 
think it depends on them, but I think Larry has mentioned the 
priority sectors for us today are finance, transportation, 
energy, IT, or communications.
    Mr. Lemons. Ranking Member, I think to the point from Mr. 
Zelvin and Mr. Demarest also, as we increase our outreach 
efforts within the private sector and our State and local 
partners, we see an increased willingness of people to come 
forward and work with us. So I believe that number continues to 
go higher and higher as we work with public and private 
partners.
    Mr. King. Thank the Ranking Member.
    The gentleman from Georgia, Mr. Broun.
    Mr. Broun. Thank you, Mr. Chairman.
    When CISPA was passed--several times now--a lot of people 
that are concerned about privacy and civil liberties all across 
the Nation were very fearful of that act because of the 
potential sharing of their own personal private information 
with the Federal Government. Can you tell me how that kind of 
information is being protected or is there any protection on 
people's privacy or civil liberties under CISPA?
    Mr. Zelvin. Congressman, at the forefront of everything we 
do is the protection of people's identifiable information, 
privacy, and civil liberties. It is an hourly, daily focus for 
us. I will tell you, my folks are trained on a routine basis, 
we are audited not only internally but also externally as far 
as our processes and procedures on how are we protecting that 
data.
    We don't require that as cyber defenders, and that is what 
we do at DHS, at least in the NCCIC, we do not require 
information that is privacy, civil liberties in nature. The 
defense mechanisms are really those 1's and 0's from an 
attacking IT or malicious software.
    I will tell you there have been instances, although rare, 
and also small, where we will get something from something that 
we thought was completely secure, and then we stop everything 
we do, and we go through a process with attorneys, with privacy 
experts, with civil liberties experts and making sure that if 
there is an incursion that we are treating it properly, that 
there is an ability to mitigate and to make sure that the spill 
doesn't go beyond what we have already detected, and then, as I 
said, go through the process and procedures and see where we 
may have failed that may have led to that. But as I said, that 
is a very rare occasion.
    Mr. Broun. So there is no guarantee, though, that privacy 
information is not shared either direction, from the company to 
the Federal Government or the Federal Government to other 
entities?
    Mr. Zelvin. Congressman, despite our best efforts and every 
process and procedure we have, there will be occasions where I 
regret there may be times where there may be spills, where that 
goes over. I think what is important is that we have the right 
processes, procedures, and oversight to make sure that when 
those occasions occur that we do the right things in accordance 
with the law, policy, and directives.
    Mr. Broun. Mr. Chairman, I will wait until the closed 
session for further questions.
    Mr. King. Okay. In accordance with the unanimous consent 
request at the beginning of the hearing, we will now recess the 
hearing and reconvene in 10 minutes for closed session in HVC-
302. I would ask the audience if they would just wait and allow 
the witnesses to leave so we can take them to the location.
    We stand in recess.
    [Whereupon, at 11:00 a.m., the subcommittees proceeded in 
closed session and were subsequently adjourned at 12:18 p.m.]

                                 
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