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2 June 1999
Source: Three-page fax from Office of General Counsel, US Sentencing Commission. Thanks to MC.

UNITED STATES SENTENCING COMMISSION
ONE COLUMBUS CIRCLE, NE
SUITE 2-500, SOUTH LOBBY
WASHINGTON, DC 20002-8002
(202) 502-4500
FAX (202) 502-4699

March 26, 1999

The Honorable J. Dennis Hastert
Speaker of the House of Representatives
H-326 United States Capitol
Washington, D.C. 20515

Re: Encryption Offenses

Dear Mr. Speaker,

The Economic Espionage Act of 1996 (Pub. L. No. 104-294, Oct. 11, 1996. 110 Sect. 3488, 18 U.S.C. §§ 1821-1839) requires the Administrative Office of the United States Courts to monitor the use of encryption or scrambling technology by federal offenders. Specifically, the "use of encryption or scrambling technology that would be relevant to an enhancement under U.S.S.G. §3C1.1 or to offense conduct under the sentencing guidelines" was to be incorporated into the presentence report. This legislation also instructed the United States Sentencing Commission to compile and analyze this information and submit an annual report of its findings.

The Administrative Office of the United States Courts informed chief probation officers in each federal district court of this requirement and instructed probation officers to "concisely describe any use of encryption or scrambling technology in the offense conduct section of the presentence report and the relevance of the defendant's use of this technology to impede the investigation, prosecution, or sentencing of the case, if any." In June, 1997, the Commissioner's Office of Monitoring created variables in its dataset to collect information on these cases identified by federal probation officers.

No cases sentenced during fiscal year 1997 using encryption technology and receiving sentencing enhancement under U.S.S.C. §3C1.1 have been identified in the U.S.S.C. monitoring datafile. In an effort to validate this finding, staff in the Commission's Office of General Counsel searched the Lexis-Nexis and Westlaw federal case law datasets for judicial opinions in which the word "encryption" was used in the published decision. This search resulted in a small number of cases, none of which were sentenced during fiscal year 1997. Secondly, the two agents of the Federal Bureau of Investigation who authored the attached document "Encryption: The Impact on Law Enforcement" [PDF 141K] were contacted. Neither were able to identify a specific case sentenced in 1997 involving encryption.

The finding of zero cases at this early stage is not unexpected. The use of computer encryption to obstruct justice involves application of an emerging technology, and as such, is likely still very rare. Also, because of significant time lag that often occurs between arrest and sentencing, cases sentenced during 1997 involved conduct from one or more years prior. This lag is generally longer for more sophisticated offenses such as those involving the obstruction of justice by use of computer-encrypted information. Given these factors, it is not unexpected that these cases may not have reached the sentencing phase during the time period covered by this report.

The consistency of the findings from each of these sources (i.e., the Commission's 1997 dataset, Lexis-Nexis and Westlaw federal case law datasets, and the F.B.I.) provides confidence of the finding of zero cases during fiscal 1997. The Commission will shortly complete its work on its fiscal 1998 dataset and provide its findings on this issue to Congress this summer [see below].

In closing, I also feel obliged to point out what may have been an erroneous assumption underlying the drafting of the applicable language in section 501 of the Economic Espionage Act of 1996. The relevant language in section 501(b) directs the Commission to analyze and report "the nature and extent of the use of encryption or scrambling technology to facilitate or conceal criminal conduct" [emphasis added]. In comparison, the preceding language in section 501(a) directs the Administrative Office of the United States Courts to take steps to ensure that presentence reports identify and described "any use of encryption or scrambling technology that would be relevant to an enhancement under" the sentencing guidelines for obstructing the administration of justice. It may have been assumed that the set of cases involving the use of such technology "to facilitate or conceal criminal conduct" would substantially coincide with the set of cases receiving an obstruction enhancement under the sentencing guidelines based upon the use of scrambling technology. In fact, this is not necessarily the case because the guidelines for obstruction enhancement encompasses only "back end" conduct designed "to obstruct or impede the administration of justice during the investigation, prosecution, or sentencing" of the offense. Thus, it is entirely possible that an offense may have been facilitated or concealed in respect to its basic design or execution by the use of scrambling technology without a resulting, later action to willfully obstruct the law enforcement investigation, prosecution, or sentencing of that offense through such means.

That is not to say, however, that such "front-end" conduct would receive no enhancement under the guidelines. Indeed, a 1998 amendment to the fraud guideline clearly encompasses that kind of "sophisticated means" and more. Because of the recency of this amendment, however, it will have no impact on this report and may not impact on immediate subsequent reports.

The Commission recognizes the growing concern about the potential use of encryption technology to facilitate criminal activity and thwart law enforcement efforts. To better assist Congress and the criminal justice community, we will attempt to assess more broadly the use of encryption scrambling technology as it may relate to this and possibly other relevant guideline enhancements in future reports.

Should you have any questions or concerns, please contact the Commission for additional information.

> Sincerely,

> [Signature]

> Timothy B. McGrath
> Interim Staff Director

Attachment [Not provided; see link above]

JYA Note: The report for 1998 appears to be completed and sent to the U.S. Senate though not available today with the 1997 report above:

    [Congressional Record: May 26, 1999 (Senate)]
    From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

                       EXECUTIVE AND OTHER COMMUNICATIONS

      The following communications were laid before the Senate, together
    with accompanying papers, reports, and documents, which were referred
    as indicated:

           EC-3344. A communication from the Interim Staff Director,
         United States Sentencing Commission, transmitting, pursuant
         to law, a report relative to the use of encryption or
         scrambling technology by Federal offenders; to the Committee
         on the Judiciary.