Student names, Social Insurance Numbers, dates of birth, contact information and the loan balances of Canada Student Loan borrowers were stored in the lost device, along with personal contact information of 250 government employees. No banking or medical information was included on the portable hard drive.

"While there is no evidence at this time that any of the information has been accessed or used for fraudulent purposes, this incident is being taken very seriously and the Office of the Minister has engaged the Royal Canadian Mounted Police," the Canadian government said in a statement. "Extensive and thorough search efforts have been undertaken and continue."

Solution: Secure USB Devices

Lawrence Reusing, general manager for Imation's Global Mobile Security business, told us large-scale data losses such as this are disastrous but avoidable.

"In this case, for example, had the data on the USB device been properly encrypted, the data contained thereupon would have been completely undecipherable and useless to anyone finding it. USB devices are more and more vital today, given the mobile nature of the workforce ," Reusing said.

"Companies and government offices need to provide secure USB devices with strong encryption, and solutions exist today that allow for that encryption to be applied without interfering with use of those devices. Beyond providing peace of mind and protecting sensitive information, this helps address related regulation since many regulations and laws regarding close control of data do not apply to encrypted information."

Who's to Blame?

Diane Finly, minister of Human Resources and Skills Development (HRSD), the agency responsible for safeguarding the data, said she has requested that HRSD employees across Canada receive comprehensive communications on the seriousness of these recent incidents and that they participate in mandatory training on a new security policy to ensure that similar situations do not occur again.

"Further, I have instructed that the new policy contain disciplinary measures that will be implemented for staff, up to and including termination, should the strict codes of privacy and security not be followed," she said.

Sophos security analyst Paul Ducklin said he could not help but notice a touch of "beatings will continue until morale improves" in this comment. Although he admitted Finley might not mean it that way, it sounded to him like employees would be in the firing line if a hard disk was stolen from their desks.

"I'm all in favor of employees living up to their responsibilities, but what if your own organization makes that difficult by not providing an environment in which computer security is easy to do properly?" Ducklin asked in a blog post. "For example, should it even be possible for you, or any of your colleagues, to make a backup copy of that much data onto a removable drive without encryption?"

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