Govt. Launches New Cyber Fraud Initiative.

• Author: Cassidy, Susan
• Position: Government Contracting Insights

Last year, the Department of Justice warned that cybersecurity fraud could see enhanced enforcement under the False Claims Act. On Oct. 6, Deputy Attorney General Lisa Monaco announced that the department would be following through on that warning with the launch of its Civil Cyber-Fraud Initiative.

The key component of the initiative is the use of the False Claims Act against government contractors that fail to comply with cybersecurity requirements--including information security standards and cyber incident reporting obligations--imposed by contract, statute, or regulation.

Defense contracts often include numerous stringent cybersecurity obligations, and defense contractors will therefore be at risk of an FCA suit if they are unable to meet them. Under the act, the government can recover treble damages and penalties from federal contractors and subcontractors that knowingly submit false claims for payment. The act incentivizes private citizens (relators), including contractor employees, to file qui tam suits on behalf of the government by guaranteeing them between 15 and 30 percent of the recovery.

The Justice Department stated that it intended to work with federal agencies, subject matter experts and law enforcement partners on the Civil Cyber-Fraud Initiative. Recently, Acting Assistant Attorney General Brian Boynton confirmed that this initiative was also intended to incentivize relators and the aggressive relators' bar to focus their attention on potential cybersecurity noncompliance as the basis for qui tam actions.

The announcement identified several types of actions for which the department intends to hold individuals and entities accountable, including knowingly providing deficient cybersecurity products or services, knowingly misrepresenting their cybersecurity practices or protocols, and knowingly violating obligations to report cybersecurity incidents and breaches.

Compounding the risk to contractors is the fact that the initiative follows numerous other recent efforts to increase cybersecurity requirements within the government and its supply chain. For example, on May 12, the Biden administration issued an "Executive Order on Improving the Nation's Cybersecurity," which intended to strengthen the government's ability to respond to and prevent cybersecurity threats, including by modernizing federal networks, enhancing the government's software supply chain security, implementing enhanced cybersecurity practices and procedures...