United States General Accounting Office
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   GAO                 Report to the Honorable Jack Brooks,
                       Chairman, Committee on the Judiciary
                       House of Representatives

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   November 1993       COMMUNICATIONS PRIVACY

                       Federal Policy and Actions







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   GAO/OSI-94-2










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  GAO                    United States
                         General Accounting Office
                         Washington, D.C. 20548
                         -----------------------------------------------------
                         Office of Special Investigations

                         B-253647

                         November 4, 1993

                         The Honorable Jack Brooks
                         Chairman, Committee on the Judiciary
                         House of Representatives

                         Dear Mr. Chairman:

                         In April 1992, we testified before your Subcommittee
                         on Economic and Commercial Law about the threat of
                         "economic espionage"--the unauthorized acquisition of
                         U.S. proprietary or other information by a foreign
                         government to advance the economic position of that
                         country--against U.S. industry.  Subsequently, you
                         requested that we further examine whether federal
                         policies negatively affect U.S. corporations' ability
                         to protect themselves against economic espionage.

                         On the basis of your request, we focused on the
                         following issues:

                         --the need for information privacy in computer and 
                           communications systems--through such means as
                           encryption, or conversion of clear text to an
                           unreadable form--to mitigate the threat of economic
                           espionage to U.S. industry;

                         --federal agency authority to develop cryptographic 
                           standards for the protection of sensitive,
                           unclassified information and the actions and
                           policies of the National Security Agency (NSA),
                           Department of Defense, and of the National
                           Institute of Standards and Technology (NI ST),
                           Department of Commerce, regarding the selection of 
                           federal cryptographic standards;

                         --roles, actions, and policies of NSA and the 
                           Department of State related to export controls for
                           products with encryption capabilities and industry
                           rationale for requesting liberalization of such
                           controls; and

                         --the Federal Bureau of Investigation's (FBI) 
                           legislative proposal regarding telephone systems
                           that use digital communications technology.



             Page 1   GAO/OSI-94-2 Communications Privacy:  Policy and Actions




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  #####################-------------------------------------------------------
  BACKGROUND             In July 1990, you requested that we determine if
                         industrial espionage against U.S. industry by foreign
                         entities was a problem and, if so, the federal
                         government's response.  We found that with the end of
                         the Cold War and the resulting shift in focus from
                         military to economic power, there is evidence that
                         economic espionage has become a growing problem for
                         U.S. companies at home and abroad.  However, the
                         extent of the problem in the United States cannot be
                         quantified for a number of reasons:  First, U.S.
                         companies are reticent to disclose such information
                         to the public for fear of disclosing information to
                         competitors or of losing their stockholders'
                         confidence.  Also, once it is determined that a
                         company has been victimized, it is often difficult to
                         place an approximate value on the proprietary data
                         and trade secrets that have been lost.  Third,
                         foreign intelligence agencies often use sophisticated
                         techniques that may go undetected, making it
                         difficult for companies to prove theft or compromise.

                         In our April 29, 1992, testimony before your
                         Subcommittee,#1 we stated that economic espionage
                         hurts U.S. industry.  U.S. vendors of products with
                         encryption capabilities and telecommunications-
                         service providers also testified that U.S. government
                         policy hinders both the safekeeping of U.S.
                         industry's competitive secrets and international
                         competitiveness.  They further testified that because
                         products with commercial encryption technology are
                         available internationally, the U.S. government should
                         relax restrictions on the export of such products to
                         improve their ability to compete in the world
                         marketplace.

                         The growth in reliance upon computer and
                         communications technologies for commerce has led to
                         increased international attention to securing
                         information through cryptography.  Powerful
                         cryptographic techniques have been published for
                         years and are increasingly available in products
                         worldwide.  This increased availability is causing
                         concern for law enforcement and national security
                         entities worldwide, relative to the performance of
                         their missions.  For decades, governments around the
                         world have used statutory and regulatory powers to
                         restrict the use and dissemination of cryptographic

                                                                              
                         -----------------------------------------------------
                         1 Economic Espionage:  The Threat to U.S. Industry
                         (GAO/T-OSI-92-6).

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                         technologies.  However, these restrictions are
                         generally not published or available for study.

                         U.S. vendors expressed concern about policies
                         regarding (1) federal cryptographic standards for
                         communications privacy of sensitive, unclassified
                         information and (2) the FBI's digital telephony
                         legislative proposal and public comments on
                         encryption.  They stated that to be consistent with
                         prevailing standards, the U.S. industry has made
                         substantial investment in secure technology products
                         that might not be compatible with evolving federal
                         standards.  The lack of industry input in the
                         evolving standards, representatives believed, would
                         cause the industry to follow two sets of standards in
                         its technology development:  one set to protect
                         against unauthorized access and to compete in the
                         international marketplace; the other to interact with
                         the federal sector.  Further, U.S. vendors were
                         concerned that restrictions would be placed on the
                         development and the use of communications and
                         encryption technologies to meet law enforcement
                         requirements and national security concerns, thus
                         hampering their ability to compete in the global
                         marketplace.  The FBI and NSA, on the other hand,
                         were concerned that such technologies might interfere
                         with the performance of their missions, causing
                         serious law enforcement and national security
                         problems.  (See app. I.)

  #####################-------------------------------------------------------
  RESULTS IN BRIEF       Increased use of computer and communications
                         networks, computer literacy, and dependence on
                         information technology heighten U.S. industry's risk
                         of losing proprietary information to economic
                         espionage.  In part to reduce the risk, industry is
                         more frequently using hardware and software with
                         encryption capabilities.  However, federal policies
                         and actions stemming from national security and law
                         enforcement concerns hinder the use and the export of
                         U.S. commercial encryption technology and may hinder
                         its development.#2

                         NIST and NSA have invested several years of effort in
                         developing certain federal cryptographic policies and
                         federal standards relating to communications privacy
                         for sensitive, unclassified information.  These
                         policy issues are formulated and announced to the
                                                                              
                         -----------------------------------------------------
                         2 We did not evaluate the validity of the law
                         enforcement or national security concerns relative to
                         federal cryptographic policy or export control.

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                         public, however, with very little input from directly
                         affected business interests, academia, and others. 
                         Although the Computer Security Act of 1987 reaffirmed
                         NIST's responsibility for developing federal
                         information-processing standards for the security of
                         sensitive, unclassified information, NIST follows
                         NSA's lead in developing certain cryptographic
                         standards.

                         Although the Departments of State and Commerce are
                         responsible for the U.S. export control system, NSA
                         plays a major role in determining rules for exporting
                         U.S. products with encryption capabilities.  NSA
                         affects such decisions as (1) whether individual
                         products are placed on the more restrictive State-
                         controlled "munitions list" or the less restrictive
                         Commerce-controlled list and (2) whether particular
                         products on the munitions list can be licensed for
                         export.  Industry representatives stated that
                         stringent export controls restrict U.S. industry's
                         ability to compete for market share in international
                         markets for products with encryption capabilities.

                         The export controls (for products with encryption) of
                         many countries may be similar in stringency to those
                         of the United States.  However, industry
                         representatives cited examples of products exported
                         from other countries that would be restricted for
                         export from the United States.  Thus, it appears that
                         the controls of several countries are less stringent
                         than are U.S. controls.

                         The FBI, in 1992, proposed legislation designed to
                         ensure wiretapping capabilities in the face of
                         emerging digital telecommunications technology.  The
                         proposal was to compel telecommunications service
                         providers and private branch exchange operators to
                         ensure that wiretapping needs could be met.  It
                         sought to prohibit the use of any technology by these
                         entities that would impede the government's ability
                         to intercept electronic communications when
                         authorized by law.  In early 1993, the FBI informed
                         us that it was reevaluating its position on this
                         proposal.

                         Thus, national security, law enforcement, and
                         business concerns--plus the effectiveness of U.S.
                         export controls--are all factors to be considered in
                         determining what U.S. policies should be.





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  #####################-------------------------------------------------------
  USE OF ENCRYPTION 
  TO PROTECT AGAINST 
  ECONOMIC ESPIONAGE     During your Subcommittee's spring 1992 hearings, the
                         Director, Central Intelligence Agency (CIA),
                         testified that the communications and computer
                         systems of U.S. industry were attractive targets for
                         sophisticated foreign intelligence attacks.  While it
                         is well recognized that industry is increasingly
                         using encryption to protect proprietary information,
                         U.S. industry's development of products with
                         encryption capabilities--as well as their use and
                         export--is hindered by federal policy responding to
                         national security and law enforcement concerns.  (See
                         app. I.)

  #####################-------------------------------------------------------
  NIST AND NSA ACTIONS 
  REGARDING DEVELOPMENT 
  OF CRYPTOGRAPHIC 
  STANDARDS              Over the past decade, hardware and software industry
                         representatives, cryptographers outside NSA,
                         academia, and others have had little opportunity to
                         participate in or contribute to the selection or the
                         development of cryptographic algorithms, or
                         mathematical procedures, for proposed federal
                         standards related to cryptography.  One type of
                         cryptographic standard would support the privacy of
                         communications and provide for both the verification
                         of a sender's identity and the integrity of the
                         message.  It is referred to as a public-key
                         cryptographic#3 standard, in which the word "key"
                         relates to the code for unlocking encrypted messages. 
                         NSA and NIST discuss the development or the selection
                         of cryptographic algorithms for the development of
                         these standards primarily in classified meetings,
                         such as those of the Technical Working Group.#4  As
                         a result, federal agencies invest years in developing
                         proposed cryptographic standards for sensitive,
                         unclassified information before public input is
                         solicited.  (See app. II.)

                         The Computer Security Act of 1987 reaffirmed NIST as
                         the responsible federal agency for developing federal
                                                                              
                         -----------------------------------------------------
                         3 Public-key cryptography uses two matched keys--a 
                         shared public key and a private key.  See glossary.

                         4 A Technical Working Group was established pursuant
                         to the 1989 Memorandum of Understanding between NIST
                         and NSA to coordinate NIST's cryptographic efforts.

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                         cryptographic information-processing standards for
                         the security of sensitive, unclassified information. 
                         However, NIST has followed NSA's lead when developing
                         certain cryptographic standards for communications
                         privacy.  For example, in 1982, NIST began developing
                         a public-key cryptographic standard.  NIST terminated
                         the project at NSA's request.  Then, in 1989, in
                         accordance with a 1989 NIST/NSA Memorandum of
                         Understanding, NIST requested NSA assistance in
                         another effort to develop such a standard.  This
                         standard was to provide for verification of
                         signature--the sender's identity; provide for
                         integrity of the message; and support communications
                         privacy using one algorithm.  In 1991, NIST proposed
                         the Digital Signature Standard (DSS), a standard
                         based on an algorithm developed by NSA that, because
                         of NSA and FBI concerns, provides for verification of
                         the sender's identity and the integrity of the
                         message but does not support communications privacy. 
                         When public input was solicited in 1991, industry
                         representatives stated that a federal public-key
                         standard was needed that (1) supported privacy in
                         communications and (2) was compatible with other U.S.
                         and international standards.  They stated that delay
                         in developing such a federal standard has hindered
                         industry's development of products with encryption
                         capabilities.

                         In April 1993, the administration announced its
                         telecommunications privacy initiative and plan to
                         develop a comprehensive policy on encryption.  The
                         President directed the Secretary of Commerce, in
                         consultation with other federal agencies, to develop
                         an encryption standard based on a key-escrow
                         system.#5  This standard, proposed by NIST in July
                         1993, is to facilitate the use of a chip#6 that
                         incorporates a classified encryption algorithm.  Use
                         of the chip will allow legally authorized government
                         officials to have access to the clear (plain) text of
                         encrypted communications.  The Attorney General is
                         tasked to establish two cooperating third parties to
                                                                              
                         -----------------------------------------------------
                         5 A key-escrow system involves third-party
                         organizations that, together, have the means for
                         decoding communications and the responsibility for
                         maintaining the privacy of encrypted communications,
                         except when interception of electronic communications
                         is legally authorized.  See glossary.

                         6 The administration previously referred to this
                         computer chip as Clipper Chip.  It was developed on
                         the basis of NSA technology.

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                         maintain computer databases that will enable
                         government officials to access the clear text of
                         encrypted communications.  According to a Justice
                         Department official in September 1993, key-escrow
                         candidates were to be discussed with Members of
                         Congress prior to being publicly announced.  This
                         official confirmed that NIST and a nonlaw-enforcement
                         agency of the Treasury Department were among those
                         agencies considered.  As of October 28, 1993, the
                         key-escrow agents had not been publicly announced. 
                         Although NSA began developing this key-escrow system
                         over 3 years ago, public input was not requested
                         until June 1993.  (See app. II.)

  #####################-------------------------------------------------------
  FEDERAL POLICY 
  REGARDING EXPORT 
  CONTROL OF PRODUCTS 
  WITH ENCRYPTION 
  CAPABILITIES           The U.S. export control system is divided into two
                         regimes: the Department of State controls a list of
                         munitions items under the authority of the Arms
                         Export Control Act, and the Department of Commerce
                         controls a list of dual-use items, i.e., items having
                         both military and civilian applications, under the
                         Export Administration Act.#7  Controls on munitions
                         items are generally more restrictive than those on
                         dual-use items.  Therefore, industry generally
                         prefers to have products on the dual-use list
                         controlled by Commerce.

                         NSA plays a major role in determining rules for
                         exporting U.S. products with encryption capabilities. 
                         The scope of NSA's review is generally limited to
                         those products and technologies whose export could
                         affect the performance of NSA missions.  The review
                         affects such decisions as (1) whether individual
                         products are placed on the more restrictive State-
                         controlled "munitions list" or the less restrictive
                         Commerce-controlled dual-use list and (2) whether
                         particular products on the munitions list may be
                         licensed for export.

                         State is required to periodically review the
                         munitions list to see if certain items can be
                         transferred to Commerce's jurisdiction.  Any changes
                         to the munitions list, however, must have the
                         concurrence of the Department of Defense.  NSA plays
                                                                              
                         -----------------------------------------------------
                         7 Export Controls:  Issues in Removing Militarily
                         Sensitive Items From the Munitions List (GAO/NSIAD-
                         93-67, Mar. 31, 1993).

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                         an extensive role in this concurrence when encryption
                         products are being considered for removal from the
                         munitions list.  Responding to a 1990 executive
                         order, State led an interagency review of the
                         munitions list to identify items that could be
                         transferred to Commerce's jurisdiction.  Mass-market
                         software with encryption capabilities was one item
                         reviewed.

                         The software industry pressed for the transfer of
                         mass-market software with encryption capabilities
                         from State to Commerce, claiming that export controls
                         reduced U.S. international sales of products with
                         encryption capabilities and might hinder the pace at
                         which these products were developed.  State proposed
                         to transfer export-control jurisdiction of mass-
                         market software to Commerce on the condition that
                         Commerce impose foreign policy controls on the
                         licensing of such products.  One reason for the
                         request is that State believed that it would be
                         impossible to control the export of mass-market
                         software because the products were widely available. 
                         NSA successfully argued against the proposal on
                         national security grounds.

                         To allay industry's concern that such software
                         continues to be controlled on the munitions list,
                         State amended its regulation in July 1992.  It
                         established a procedure to expeditiously transfer to
                         the Commerce list those mass-market software products
                         with encryption capabilities that met certain
                         criteria.  Industry representatives continue to press
                         for the transfer of additional mass-market software
                         and other products with encryption capabilities to
                         the Commerce list to improve the possibility and the
                         predictability of export approval.  (See app. III.)

                         Although the extent is not possible to quantify, U.S.
                         industry representatives stated that stringent U.S.
                         export control of products with encryption
                         capabilities reduced their international sales.#8 
                         An example of a product type for which export
                         controls affect U.S. global competitiveness is
                         software with encryption capabilities used in
                         international commercial networks.  As an example of
                                                                              
                         -----------------------------------------------------
                         8 The Software Publishers Association has estimated
                         that (1) the foreign market for mass-market software
                         with encryption capabilities is growing at least 20
                         percent each year and (2) the potential U.S. share of
                         the foreign market could total $3-5 billion annually
                         by 1997.

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                         less stringent foreign controls, a German company
                         contracts with a Japanese company to manufacture a
                         high-speed encryption chip for export to Germany.  In
                         contrast, U.S. export controls prevent U.S. companies
                         from exporting such a chip to the German company. 
                         Although the United States may not export such chips
                         to this German company, U.S. companies may purchase
                         secure products that contain these chips.

  #####################-------------------------------------------------------
  FBI-PROPOSED DIGITAL 
  TELEPHONY LEGISLATION 
  AND COMMENTS ON 
  ENCRYPTION             In 1992, the FBI proposed legislation to ensure its
                         wiretapping capabilities in a digital communications
                         environment.  The proposed legislation would have
                         required electronic communications service
                         providers--such as local telephone companies and
                         cellular service providers--to ensure the ability of
                         government agencies to implement lawful orders or
                         authorizations to intercept communications. 
                         Communications providers would have been prohibited
                         from employing communications technology that would
                         bar the government's ability to intercept electronic
                         communications when authorized by law.  However,
                         according to FBI representatives in early 1993, the
                         FBI was reevaluating its position on the proposal. 
                         In the meantime, industry has been working with the
                         FBI to improve the capability of intercepting
                         telephone traffic when legally authorized.

                         Additionally, in April 1993, the administration
                         announced that a comprehensive policy on encryption
                         would be developed.  The FBI publicly announced that
                         it supported the administration's key-escrow system,
                         which would allow government officials, when legally
                         authorized, access to the clear text of encrypted
                         communications.  (See app. IV.)

  ----------------------------------------------------------------------------
                         A dilemma exists between the growing need for
                         communications privacy in today's global competitive
                         environment and the need for access to communications
                         by our law enforcement and national security
                         agencies.  Extensive debate has occurred during the
                         past several decades over how to meet these competing
                         needs and whether a civilian organization or a
                         military intelligence agency should control the
                         development of federal information-processing
                         standards for sensitive, unclassified information.

                         The Computer Security Act of 1987 reaffirmed the role
                         in favor of a civilian organization--NIST, Department

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                         of Commerce--albeit in consultation with NSA. 
                         Because national security and law enforcement
                         concerns have been driving significant NIST decisions
                         related to these standards and because the demand for
                         encryption is increasing, the debate endures.

  ----------------------------------------------------------------------------
                         Between November 1992 and June 1993, we reviewed
                         federal actions and policies that affect technologies
                         related to privacy of electronic communications.  We
                         relied on our prior work for much of the information
                         on economic espionage, the proposed DSS, digital
                         telephony, and export control.  We gathered other
                         information largely from interviews and
                         correspondence with officials of the Departments of
                         Commerce and State, NIST, and NSA, as well as
                         representatives of industry and academia.  The FBI
                         declined to provide briefings on economic espionage,
                         digital telephony, and encryption issues for our 1992
                         testimony and for this report.  As requested, we did
                         not obtain official agency comments on a draft of
                         this report.

                         For the reader's convenience, we have included a
                         glossary of communications, cryptographic, and
                         related terms used in the report.

                         As arranged with your office, unless you publicly
                         release its contents earlier, we will not make this
                         report available to others until 10 days after the
                         date of this letter.  At that time, we will send
                         copies of the report to the appropriate congressional
                         committees and interested parties.  We will also make
                         copies available to others on request.

                         If you have questions concerning this report, please
                         contact me or Assistant Director Donald G. Fulwider
                         of my staff on (202) 512-6722.  Major contributors to
                         this report are listed in appendix V.

                         Sincerely yours,


                         [Signed]

                         Richard C. Stiener
                         Director







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  ----------------------------------------------------------------------------
  CONTENTS

  #####################-------------------------------------------------------
  Letter                                                                     1

  #####################-------------------------------------------------------
  Appendix I                                                                13
  Background and 
  Methodology
                         Need for Privacy of Information in Computer/       13
                           Communications Systems--The Threat of
                           Economic Espionage Against U.S. Industry
                         Encryption as a Security Measure                   14
                         Scope and Methodology                              15

  #####################-------------------------------------------------------
  Appendix II                                                               17
  Federal Agency 
  Authority and 
  Actions Concerning 
  Cryptographic 
  Standards
                         Conflict over Federal Agency Authority for         17
                           Cryptographic Standards to Protect Sensitive,
                           Unclassified Information
                         NIST, NSA, and Administration Actions Related      19
                           to Standards for Communications Privacy and
                           for Digital Signature

  #####################-------------------------------------------------------
  Appendix III                                                              27
  Actions and Policy 
  Regarding the Export 
  of Products With 
  Privacy Capability
                         Background                                         27
                         Defense Refusal to Remove Mass-Market Software     27
                           With Encryption Capabilities From the U.S.
                           Munitions List
                         NSA and State Department Export Control Roles      28

  #####################-------------------------------------------------------
  Appendix IV                                                               33
  FBI-Proposed Digital 
  Telephony Legislation
  and Comments on
  Encryption
                         1992 Digital Telephony Proposals                   33
                         FBI Comments on Encryption                         34

  #####################-------------------------------------------------------
  Appendix V                                                                36
  Major Contributors 
  to This Report
                         Office of Special Investigations, Washington D.C.  36
                         Accounting and Information Management Division,    36

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                         Contents
  ----------------------------------------------------------------------------

                           Washington, D.C.
                         Office of the General Counsel, Washington D.C.     36

  #####################-------------------------------------------------------
  Glossary                                                                  37



                         -----------------------------------------------------
                         Abbreviations

                         CIA                    Central Intelligence Agency
                         COCOM                  Coordinating Committee for
                                                Multilateral Export Controls
                         DES                    Data Encryption Standard
                         DSS                    Digital Signature Standard
                         FBI                    Federal Bureau of
                                                Investigation
                         GAO                    U.S. General Accounting Office
                         IBM                    International Business
                                                Machines, Inc.
                         IMTEC                  Information Management and
                                                Technology Division, GAO
                         NIST                   National Institute of
                                                Standards and Technology
                         NSA                    National Security Agency
                         NSDD                   National Security Decision
                                                Directive
                         NSIAD                  National Security and
                                                International Affairs
                                                Division, GAO
                         OSI                    Office of Special
                                                Investigations, GAO
                         RC2                    Rivest Cipher 2
                         RC4                    Rivest Cipher 4
                         RSA                    Rivest, Shamir, and Adleman



















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  Appendix I
  ----------------------------------------------------------------------------
  BACKGROUND AND METHODOLOGY
  ----------------------------------------------------------------------------

  #####################-------------------------------------------------------
  NEED FOR PRIVACY OF 
  INFORMATION IN 
  COMPUTER/COMMUNICATIONS 
  SYSTEMS--THE THREAT OF 
  ECONOMIC ESPIONAGE 
  AGAINST U.S. INDUSTRY  The federal government has historically recognized
                         and addressed the international nature of military
                         and intelligence threats.  The government is
                         beginning to recognize that a broader international
                         threat to U.S. information resources is emerging with
                         the proliferation of international computer
                         networking and a shift from conventional military
                         conflict to economic competition.  During an April
                         1992 hearing on economic espionage conducted by the
                         Subcommittee on Economic and Commercial Law, House
                         Committee on the Judiciary, the Director of the FBI
                         stated, "Now and in the future, the collection
                         strategies of adversaries and allies alike will not
                         only focus on defense related information, but also
                         include scientific, technological, political and
                         economic information."  The Director of the CIA
                         similarly testified that U.S. industry computer and
                         communications systems were attractive targets for
                         sophisticated foreign intelligence attacks.

                         Increasingly serious threats in the global
                         marketplace require the commercial sector to
                         effectively secure its information resources,
                         according to an Information Systems Security
                         Association paper presented to the Computer System
                         Security and Privacy Advisory Board.  While
                         nonelectronic proprietary information can be
                         compromised through the theft of marketing reports or
                         photos of prototypes, the theft of electronic
                         proprietary information can be accomplished through
                         breaking into a computer system--or computer
                         hacking--and message and voice monitoring during data
                         and voice transmission.  Individuals can compromise
                         information, for example, by guessing passwords or
                         exploiting operating-system weaknesses. 
                         Additionally, message and voice monitoring during
                         data and voice transmission can occur at a number of
                         locations throughout the communications flow, such as
                         where the message recipient is located.

                         The increased use of computer and communications
                         systems by industry has increased the risk of theft
                         of proprietary information.  A 1986 National
                         Telecommunications and Information Systems Security




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  ----------------------------------------------------------------------------
                         APPENDIX I
                         Objectives and Methodology
  ----------------------------------------------------------------------------

                         Committee#9 report assessed the security posture of
                         the U.S. government and
                         telecommunications/information systems that process
                         classified or sensitive, unclassified information. 
                         The report stated, "Hostile government intelligence
                         collection agencies, terrorist organizations, and
                         criminal elements are undoubtedly exploiting this
                         lack of security to the detriment of U.S. national
                         interests."  Although these threats may require a
                         variety of countermeasures, encryption is a primary
                         method of protecting valuable electronic information.

  ----------------------------------------------------------------------------
  ENCRYPTION AS A 
  SECURITY MEASURE       Encryption--the conversion of clear text into an
                         unreadable form--is a tool that can be used to
                         protect valuable information and perform other
                         functions.  Encryption can be used to (1) encrypt and
                         decrypt data, (2) send or exchange secret coding and
                         decoding keys securely and electronically without
                         sharing them with a third party, and (3) digitally
                         sign a document.  The first two functions provide for
                         privacy and security of messages.  The third
                         function, "digital signature," is used to verify both
                         the sender of a message and that a message has not
                         been tampered with.

                         Encryption requires an algorithm, or a mathematical
                         procedure, which is used in conjunction with at least
                         one key--a long string of bits--to encrypt and
                         decrypt messages.  In this report, we discuss six
                         encryption algorithms--Skipjack, the Data Encryption
                         Standard (DES), RC2, RC4, RSA,#10 and the algorithm
                         in the proposed DSS.  Skipjack, DES, RC2, and RC4
                         encrypt and decrypt information but require an
                         additional method for transporting secret keys to
                         other parties.  The method can be (1) a courier, (2)
                         an additional algorithm that transports or exchanges
                         secret keys securely and electronically between two
                         parties, or (3) an electronic method requiring a
                         third party with whom the secret keys have been
                         shared.  DSS supports digital signature only.  RSA
                                                                              
                         -----------------------------------------------------
                         9 The Committee was established by National Security
                         Decision Directive 145 to help manage federal
                         information systems security issues.  This directive
                         was partially replaced in 1990.
                                                                              
                         10 The "RC" in RC2 and RC4 is an abbreviation for
                         Rivest Cipher.  RSA's name is based on the last
                         initials of its three inventors:  Ronald L. Rivest,
                         Adi Shamir, and Leonard M. Adleman.  

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                         Objectives and Methodology
  ----------------------------------------------------------------------------

                         supports digital signature, message encryption, and
                         key management--the ability to securely send secret
                         keys electronically without sharing the secret keys.

                         Key management/exchange--sending or exchanging secret
                         keys securely and electronically without having to
                         share them with a third party--is an important aspect
                         of providing communications privacy for international
                         commerce.  Sharing secret keys with a third party can
                         represent added risk and cost.

                         Encryption algorithms can be compared to locks. 
                         Strong encryption algorithms, like strong locks,
                         require more time and effort to break.  The design of
                         the algorithm and the length of its keys are two
                         factors that contribute to its strength.  In general,
                         the longer an algorithm's keys are, the stronger the
                         security or privacy provided by that algorithm.  Keys
                         must be known or guessed to forge a digital signature
                         or read an encrypted message.

  #####################-------------------------------------------------------
  SCOPE AND 
  METHODOLOGY            To respond to the request, we reviewed information
                         collected for our April 1992 testimony (GAO/T-OSI-92-
                         6, Apr. 29, 1992).  We also reviewed federal laws,
                         regulations, policies, White House correspondence, a
                         Memorandum of Understanding, hearing records,
                         memorandums of NIST/NSA Technical Working Group
                         meetings, and GAO testimony#11 to understand the
                         history of authority over cryptographic standards, as
                         well as how they are developed.

                         We reviewed information developed for our report
                         entitled Export Controls: Issues in Removing
                         Militarily Sensitive Items From the Munitions List
                         (GAO/NSIAD-93-67, Mar. 31, 1993).  We also
                         interviewed cryptographers working for industry and
                         representatives of NIST and the Bureau of Export
                         Control of the Department of Commerce; NSA; the
                         Department of State; hardware and software
                                                                              
                         -----------------------------------------------------
                         11 The Potential Impact of National Security Decision
                         Directive (NSDD) 145 on Civil Agencies, statement by
                         Warren G. Reed, GAO, before the U.S. House of
                         Representatives, Subcommittee on Transportation,
                         Aviation and Materials, Committee on Science and
                         Technology (June 27, 1985).  National Institute of
                         Standards and Technology and the National Security
                         Agency's Memorandum of Understanding on Implementing
                         the Computer Security Act of 1987 (GAO/T-IMTEC-89-7,
                         May 4, 1989).

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                         manufacturers; and industry associations--e.g., the
                         Information Technology Association of America, the
                         Industry Coalition on Technology Transfer,#12 the
                         Software Publishers Association, and the Computer
                         Business Equipment Manufacturing Association.

                         Our previous report--FBI:  Advanced Communications
                         Technologies Pose Wiretapping Challenges (GAO/IMTEC-
                         92-68BR, July 17, 1992)--provided much of the
                         information regarding the FBI's legislative
                         proposals.  The FBI declined to provide briefings on
                         economic espionage, digital telephony, and encryption
                         issues for our 1992 testimony and for this report.

                         Our work was performed primarily between November
                         1992 and June 1993 in Washington, D.C.
































                                                                              
                         -----------------------------------------------------
                         12 The coalition represents 10 information technology
                         associations, such as the Computer and Business
                         Equipment Manufacturers Association.

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  CONCERNING CRYPTOGRAPHIC STANDARDS
  ----------------------------------------------------------------------------

  #####################-------------------------------------------------------
  CONFLICT OVER FEDERAL 
  AGENCY AUTHORITY FOR 
  CRYPTOGRAPHIC 
  STANDARDS TO PROTECT 
  SENSITIVE, 
  UNCLASSIFIED 
  INFORMATION            An information-processing standard is a set of
                         detailed technical guidelines used to support
                         specific functions and/or interoperability in
                         hardware, software, or telecommunications
                         development, testing, and/or operation.  Federal
                         information-processing standards often significantly
                         affect the widespread adoption of technology and can
                         result in lower unit costs to the user.  Although
                         federal agencies are required to comply with federal
                         information-processing standards, industry
                         voluntarily has adopted many of these standards.

                         One of the missions given to NIST#13 when
                         established by the Congress was to help industry
                         develop technology and to facilitate rapid
                         commercialization of products.  NIST became
                         responsible for federal standards for information
                         systems, including the security of unclassified
                         information in 1965, when the Brooks Act (P.L. 89-
                         306) was enacted.

                         In 1984, the President signed National Security
                         Decision Directive 145#14--developed by the
                         Department of Defense--that authorized the Director
                         of NSA to review and approve all security-related
                         standards for information systems, including those
                         set by NIST.  We testified in 1985 that this
                         directive could significantly affect the management
                         of systems by civil agencies and commercial
                         interests#15 because it established a new category
                         of "sensitive, unclassified government or government-
                         derived information, the loss of which could
                         adversely affect the national security interest . . .

                                                                              
                         -----------------------------------------------------
                         13 NIST was formerly the National Bureau of Standards.

                         14 In 1990, National Security Directive 42 replaced
                         National Security Decision Directive (NSDD) 145,
                         except for ongoing telecommunications protection
                         activities mandated by NSDD 145 and Presidential
                         Directive 24.

                         15 Reed, GAO, June 27, 1985.

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                         " without clearly defining the types of information
                         in this category.

                         During hearings in the mid-1980s, the Congress raised
                         the issue about having NSA or NIST--a military or a
                         civilian agency--control federal information-
                         processing standards to protect sensitive,
                         unclassified information.  One concern that was
                         raised related to the appropriateness of giving NSA a
                         role in developing or approving standards for the
                         privacy of sensitive, unclassified information
                         because of its national security role with respect to
                         cryptography.  The Computer Security Act of 1987 was
                         enacted, in part, to address this concern.  The act
                         reaffirmed NIST's responsibility for developing
                         standards to help government agencies protect
                         sensitive, unclassified information.  The act
                         authorized NIST to draw upon the technical advice and
                         assistance of NSA, when appropriate, to avoid
                         unnecessary and costly duplication of effort and
                         ensure that standards for protecting sensitive,
                         unclassified information were consistent and
                         compatible, to the maximum extent feasible, with
                         standards for classified systems.  The act required
                         that NIST draw upon NSA guidelines to the extent that
                         NIST determined that such guidelines were consistent
                         with requirements to protect sensitive, unclassified
                         information in federal computer systems.

                         In March 1989, NSA and NIST signed a Memorandum of
                         Understanding that is still in effect.  The
                         memorandum requires that NIST request NSA's
                         assistance on all matters related to cryptographic
                         algorithms, not solely NIST-selected cryptographic
                         matters.#16  If NIST and NSA disagree on an issue,
                         the memorandum states that the matter may be appealed
                         to the Secretaries of Commerce and Defense. 
                         Unresolved matters may be referred through the
                         National Security Council to the President.  At a
                         number of Technical Working Group meetings, NIST and
                         NSA representatives have disagreed over whether to
                         develop a public-key standard for key
                         management/exchange.  NSA and NIST have not elevated
                         any issues of disagreement to their Secretaries, as
                                                                              
                         -----------------------------------------------------
                         16 According to the Memorandum of Understanding, both
                         agencies are to share project updates quarterly, as
                         well as project reviews upon request.  The memorandum
                         also established a Technical Working Group of three
                         NIST and three NSA representatives to review and
                         analyze technical issues of mutual interest.  

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                         allowed by the process outlined in the Memorandum of
                         Understanding.

                         We testified#17 in 1989 that this Memorandum of
                         Understanding made NSA appear to be more influential
                         in NIST's standard-setting processes relative to
                         cryptographic systems than was intended by the
                         Congress in the Computer Security Act of 1987.  We
                         further testified, "The [memorandum] appears to
                         increase the burden of leadership which the Secretary
                         of Commerce must exercise in implementing the
                         Computer Security Act of 1987. . . ."

  #####################-------------------------------------------------------
  NIST, NSA, AND 
  ADMINISTRATION ACTIONS 
  RELATED TO STANDARDS 
  FOR COMMUNICATIONS 
  PRIVACY AND FOR 
  DIGITAL SIGNATURE      NSA, because of its expertise and national security
                         concerns, has significantly participated in NIST's
                         development of federal cryptographic standards.  NIST
                         has insufficient resources to develop and evaluate
                         cryptographic algorithms for federal standards
                         without assistance, according to a NIST
                         representative.  Further, national security and law
                         enforcement concerns have hindered the development of
                         standards related to (1) a specific secret-key
                         encryption standard--DES--and (2) public-key
                         encryption.

                         Secret-key cryptography uses an algorithm and the
                         same secret key for encrypting and decrypting data. 
                         Public-key cryptography uses an algorithm and two
                         matched keys--a public key and a private key--and can
                         perform (1) digital signature, (2) secure
                         transmission or exchange of secret keys, and/or (3)
                         encryption and decryption.

                         We did not evaluate the validity of law enforcement
                         or national security concerns related to national
                         cryptographic policy.

  ---------------------------------------------------------------------------
  The Data Encryption 
  Standard and 
  Communications 
  Privacy                DES, published in 1977 after extensive NSA
                         involvement, is the most widely known modern
                                                                              
                         -----------------------------------------------------
                         17 GAO/T-IMTEC-89-7, May 4, 1989.

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                         encryption algorithm.  The U.S. and international
                         financial communities and others use DES to provide
                         communications security.  For example, Fedwire and
                         the Clearing House Interbank Payment System, which
                         process over 350,000 messages daily valued at $1-2
                         trillion, use DES to protect messages from
                         unauthorized modification.  DES has withstood the
                         test of publicly known attempts to break it. 
                         However, DES has been the subject of controversy
                         since its inception.

  Initial Controversy 
  and 1983 
  Reaffirmation          In May 1973, NIST issued a solicitation through the
                         Federal Register for interested parties to submit
                         cryptographic algorithms for possible consideration
                         as a data encryption standard.  NIST requested NSA's
                         assistance in evaluating the few cryptographic
                         algorithms received, and NSA reported that no
                         suitable algorithms had been submitted.

                         NIST solicited for algorithms again in August 1974. 
                         At NSA's suggestion, IBM (International Business
                         Machines, Inc.) submitted one of its algorithms to
                         NIST.  On the basis of NSA advice, IBM shortened the
                         key length and, at NSA's request, did not publicly
                         disclose all the design criteria used in creating its
                         candidate algorithm.

                         The lack of public disclosure of design criteria and
                         the shortened key length became the subjects of
                         controversy.  NIST held two workshops prior to
                         publishing the DES algorithm, which was based on the
                         IBM-submitted algorithm.  One workshop was related to
                         the design of the algorithm and focused on whether a
                         "trapdoor"--a secret entry point to DES through which
                         a developer or other entity could bypass security
                         controls and decrypt messages--existed.  The other
                         workshop focused on the economic and security trade-
                         offs of modifying the implementation of the algorithm
                         to increase its key length.  In 1977, NIST adopted
                         DES as a federal standard, with the provision that
                         NIST review it every 5 years.

                         Because of several allegations by cryptographers in
                         industry and academia, including one that NSA had
                         been improperly involved in the development of DES,
                         the Senate Select Committee on Intelligence conducted
                         an investigation.  In 1978, the staff report
                         concluded that NSA had acted properly and that the
                         agreed-upon key size was more than adequate for


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                         commercial applications.  NIST reaffirmed DES in
                         1983.

  Renewed Controversy 
  and 1988 
  Reaffirmation          In 1985, NSA announced that it would not endorse new
                         products with DES implementations after 1987. 
                         Although there were no publicly known security
                         problems or risks related to DES use and about 20
                         vendors had produced numerous products implementing
                         the DES algorithm, NSA planned to endorse a new
                         classified algorithm, which it would control, for
                         industry's use with sensitive, unclassified
                         information.  The major reason that NSA cited for
                         wanting industry to use a nonpublic algorithm was
                         that it would be more secure if it was not published
                         and available to the public.  However, a
                         representative of the American Bankers Association
                         testified in 1987 before the Legislation and National
                         Security Subcommittee, House Committee on Government
                         Operations regarding bankers' concerns.  These
                         included that (1) NSA might control the encryption
                         keys, (2) financial institutions would bear
                         considerable cost in switching algorithms, (3) DES
                         was still considered secure, and (4) the classified
                         algorithm could not be used internationally.

                         In 1987, NSA recommended to NIST that DES be used to
                         protect only electronic financial transactions, not
                         other electronic information.  NSA stated that
                         reducing DES use would also reduce the potential
                         attractiveness of DES as an intelligence target.  NSA
                         offered to work with DES chip manufacturers and
                         develop pin-for-pin replaceable circuits employing
                         the NSA-developed cryptography.  However, none
                         expressed interest.  After much discussion, NIST
                         reaffirmed DES--without limiting its use to financial
                         transactions--in 1988.

  1989 NIST Request for 
  NSA Assistance in 
  Developing Key-
  Generation Standard    In 1989, NIST requested NSA assistance in developing
                         a federal information-processing standard for
                         generating pseudorandom (good) cryptographic keys for
                         DES and began to discuss this issue at the NSA/NIST
                         Technical Working Group meetings.  NIST did not
                         develop this standard because NSA disapproved of the
                         effort and did not provide the requested assistance. 
                         This standard was intended to help users select DES
                         keys that could not be easily compromised.  NIST
                         stated that the system should be able to (1) generate

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                         pseudorandom keys for DES and (2) verify that a
                         generated key could not be predicted by examining any
                         sequence of previously generated keys.

                         According to a NIST issue paper, commercial
                         organizations do not want to use cryptographic keys
                         generated by the federal government.  The paper
                         stated that to maximize security, each agency should
                         generate its own keys.  NSA did not believe that NIST
                         had the responsibility to publish a standard on key
                         generation, according to a NIST memorandum.  The
                         memorandum further recorded that NSA had stated it
                         was prepared to generate DES keys for federal
                         agencies and provide private sector DES users that
                         had government sponsors with keying material. 
                         Finally, the memorandum stated that NSA's chief
                         concerns with this standards effort were that it
                         would help the private sector develop stronger key-
                         management systems and hence they would have better
                         security.

  1993 Review and 
  Possible 
  Reaffirmation          In September 1992, NIST requested comments, through
                         the Federal Register, for NIST's review of DES.  NIST
                         requested comments on three alternatives:  (1)
                         reaffirm DES, (2) withdraw DES and possibly issue
                         another standard, and (3) revise the applicability
                         and/or implementation of DES.  All 38 respondents
                         favored DES reaffirmation; about two-thirds
                         recommended reaffirmation and revision.  Six
                         government and six industry respondents proposed that
                         the standard be revised to allow DES implementation
                         in software--currently DES is limited to hardware
                         implementation, and federal agencies are required to
                         get a waiver to implement DES in software.  DES
                         continues to be a strong algorithm, according to
                         NIST.  NIST plans to submit its proposal to the
                         Secretary of Commerce in 1993 to reaffirm DES with
                         the above-mentioned revision.  NIST will consider DES
                         alternatives over the next 5 years.

  Public-Key 
  Management/Exchange 
  and Digital 
  Signature Standards    NIST has not proposed a key-management/exchange
                         standard based on public-key cryptography--to support
                         the secure transmission, or the exchange, of secret
                         keys electronically without sharing them with a third
                         party--because of NSA and FBI concerns.  Such a
                         standard would support communications privacy.


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  Early 1980s            In 1982, NIST solicited, through a Federal Register                         notice, for  public-key algorithms--the basis of
                         public-key cryptography, which can provide message
                         encryption, key management/exchange, and digital
                         signature.  RSA Data Security, Inc., was willing to
                         negotiate the rights to use RSA--the most widely
                         accepted public-key algorithm--as a federal standard,
                         according to a NIST representative.  NSA and NIST
                         representatives met several times to discuss NSA
                         concerns regarding the 1982 solicitation.  However,
                         NIST terminated the public-key cryptographic project
                         because of an NSA request, according to a 1987 NIST
                         memorandum.  The 1982 NIST solicitation was the last
                         formal opportunity provided for industry, academia,
                         and others to offer public-key algorithms for a
                         federal standard and to participate in the
                         development of a federal public-key standard that
                         could support key management/exchange.

  Late 1980s             In 1989, NIST requested that NSA assist it in
                         evaluating NIST-proposed candidate algorithms for a
                         set of public-key encryption standards.  NIST stated
                         that the selected algorithm must be public, 
                         unclassified, and implementable in both hardware and
                         software.  NIST preferred one algorithm to perform 
                         both digital signature and key distribution 
                         (management/exchange), which is the ability to send 
                         secret keys securely and electronically without 
                         sharing them with a third party.  According to NIST 
                         memorandums, the NIST members of the Technical 
                         Working Group preferred RSA because it performed 
                         both functions.  NSA and NIST met frequently to 
                         discuss these standards.

                         NSA briefed NIST on its work regarding the public-key
                         encryption algorithms 7 months after NIST's first
                         request for assistance in 1989.  NIST representatives
                         noted that NSA had excluded RSA as a candidate
                         algorithm.  For the proposed DSS, NSA developed an
                         algorithm that performs digital signature but not key
                         management/exchange, which supports communications
                         privacy.

  Early 1990s--The 
  Proposed Digital 
  Signature Standard     In an August 1991 Federal Register, NIST announced a
                         proposed federal DSS.  Impact on national security
                         and law enforcement were factors considered in
                         selecting the proposed DSS, as cited in the Federal
                         Register notice.  The majority of private sector
                         comments on the proposed DSS were negative, according
                         to a NIST representative.  Responding to one industry

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                         security concern, NIST agreed to provide the
                         capability for longer keys.  However, other concerns,
                         including the following, have yet to be resolved:

                         --Many large U.S. software producers and other 
                           companies (e.g., IBM, Apple, Lotus, and Microsoft)
                           had already obtained licenses to use RSA, commonly
                           referred to as the de facto, international standard
                           for digital signature.  (RSA is the most well-known
                           algorithm that complies with the international
                           standard for digital signature.)  Several of these
                           companies have produced, or are in the process of
                           evaluating or producing, mass-market software with
                           encryption capabilities--such as Lotus Notes--that
                           uses RSA for digital signature and/or public-key
                           management support of message privacy.

                         --A number of industry representatives stated that 
                           most of their customers will want to use RSA for
                           digital signature to support international
                           commerce.  Thus, industry may be required to
                           develop and support two different versions of
                           products to support digital signature--one for
                           government users (DSS) and one for nongovernment
                           and international users (RSA).

                         --For a broad range of digital signature 
                           applications, it appears that DSS, as proposed, may
                           be less efficient than RSA.  According to a number
                           of industry representatives and cryptographers,
                           this is because RSA can verify signatures faster. 
                           Signature verification, in general, is the most
                           frequent, and thus most time-consuming, operation
                           in the digital signature process.  One example of
                           the frequency of signature verification versus that
                           of signature is check processing.  Although a check
                           is signed once, the signature may be verified
                           numerous times while the check is being processed.

  Early 1990s--No 
  Proposal for a Key-
  Management/Exchange 
  Standard               NIST has not yet proposed a key-management/exchange
                         standard based on public-key cryptography because of
                         NSA requests.  Although in May 1990 NSA proposed a
                         key-management/exchange technique to NIST, the
                         technique did not meet two of NIST's requirements--
                         that the algorithm be made public and be capable of
                         implementation in software.

                         In December 1991, the Computer System Security and
                         Privacy Advisory Board--composed of representatives

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                         from the computer and telecommunications industry,
                         independent experts in telecommunications, and
                         federal employees and established by the Computer
                         Security Act of 1987--voted to inform the NIST
                         Director that DSS had grave problems.  Board members
                         stated that DSS was a drain on NIST's resources,
                         inconsistent with international standards, and
                         technically inadequate without a key-management
                         functionality.  In 1992, they also resolved that the
                         Secretary of Commerce should approve DSS only on
                         conclusion of a national review--to include the
                         national security, law enforcement, "government
                         sensitive unclassified," and commercial communities--
                         to discuss the widespread use of cryptography.

                         In a statement before your Subcommittee on May 7,
                         1992, the NIST Director stated that a key-
                         distribution (management/exchange) technique was
                         needed.  He further stated that public-key
                         cryptography, if implemented properly, better
                         satisfied this need, although law enforcement and
                         national security concerns were to be considered. 
                         NIST plans to submit DSS to the Secretary of Commerce
                         for approval as a Federal Information Processing
                         Standard in 1993, although the Board's concerns have
                         not been resolved.

  ---------------------------------------------------------------------------
  Announcement of a 
  Proposed Standard 
  for Encryption With a 
  Key-Escrow System 
  Based on NSA-Developed 
  Technology             In July 1993, NIST proposed a cryptographic Federal
                         Information Processing Standard--the key-escrow
                         system#18--that would enable decryption of lawfully
                         intercepted telecommunications.  This system would
                         allow legally authorized government officials to
                         access the plain text of encrypted communications. 
                         NSA proposed this technique to NIST in 1990. 
                         However, NIST rejected the technique because NIST
                         required that the algorithm be made public and
                         capable of being implemented in software.  In April
                         1993, the President directed NIST, in consultation
                         with other federal agencies, to begin writing
                         standards to facilitate the procurement and the use
                                                                              
                         -----------------------------------------------------
                         18 A key-escrow system is an electronic means of
                         reconstructing a secret key (for secret-key
                         encryption) or a private key (for public-key
                         encryption) for the purpose of decrypting a message.

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                         of the key-escrow technique in federal communications
                         systems.

                         The purpose of the currently proposed standard is to
                         promote the use of an NSA-developed classified
                         encryption algorithm, known as Skipjack, as part of a
                         key-escrow system on an NSA-developed chip.#19  The
                         administration also seeks with this same technology
                         to help companies protect proprietary information,
                         protect the privacy of telephone conversations, and
                         prevent unauthorized access to electronically
                         transmitted data.

                         Under the current proposal, the keys would be secured
                         and controlled as follows:  Two databases will be
                         established to hold the two components of each key
                         produced for each chip.  These two components are
                         necessary to decrypt the message.  According to a
                         Justice Department official in September 1993, key-
                         escrow candidates were to be discussed with Members
                         of Congress prior to being publicly announced.  This
                         official confirmed that NIST and a nonlaw-enforcement
                         agency of the Treasury Department were among those
                         being considered.  As of October 28, 1993, the key-
                         escrow agents had not been publicly announced.  The
                         FBI has publicly announced that it supports the
                         administration's key-escrow proposal.





















                                                                              
                         -----------------------------------------------------
                         19 The current Administration previously referred to
                         this chip as Clipper Chip.

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  Appendix III
  ----------------------------------------------------------------------------
  ACTIONS AND POLICY REGARDING THE EXPORT OF PRODUCTS
  WITH PRIVACY CAPABILITY
  ----------------------------------------------------------------------------

  #####################-------------------------------------------------------
  BACKGROUND             The U.S. export control system is divided into two
                         parts--munitions items and dual-use items, or items
                         having both civilian and military uses.  The
                         Department of State controls the export of munitions
                         items under the Arms Export Control Act and is
                         required to have Department of Defense concurrence
                         when adding items to or deleting items from the U.S.
                         Munitions List.#20  The Department of Commerce, on
                         the other hand, controls the export of dual-use items
                         under the Export Administration Act and establishes
                         the Commerce Control List.  In general, munitions
                         controls are more stringent than Commerce's dual-use
                         controls.

  #####################-------------------------------------------------------
  DEFENSE REFUSAL TO 
  REMOVE MASS-MARKET 
  SOFTWARE WITH 
  ENCRYPTION CAPABILITIES 
  FROM THE U.S. 
  MUNITIONS LIST         Over the years, the two lists began to overlap and
                         included, among other items, mass-market software#21
                         with encryption capabilities.  In November 1990, the
                         President ordered the removal of Coordinating
                         Committee for Multilateral Export Controls
                         (COCOM)#22 dual-use items from the U.S. Munitions
                         List and its licensing controls unless significant
                         national security interests would be jeopardized. 
                         Pursuant to the November 1990 executive order, the
                         Department of State led an interagency review--
                         including State, Commerce, and Defense--to identify
                         overlapping items and determine which could be
                         removed from the munitions list and transferred to
                         Commerce's jurisdiction.


                                                                              
                         -----------------------------------------------------
                         20 GAO/NSIAD-93-67, Mar. 31, 1993.

                         21 Mass-market software is software that is (1)
                         generally available to the public by sale, without
                         restriction, from stock at retail selling points
                         through over-the-counter, telephone, and mail
                         transactions and (2) designed for user installation
                         without substantial supplier support.  

                         22 COCOM is an informal international organization
                         that cooperatively restricts strategic exports to
                         controlled countries.

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                         We reviewed the export control jurisdiction decisions
                         the Departments of State and Defense had made
                         regarding certain militarily sensitive items.#23 
                         That review focused primarily on items other than
                         encryption items.  However, as a result of the
                         President's order, one dual-use item in the
                         interagency review was mass-market software with
                         cryptographic capabilities.  U.S. software exporters
                         pressed the federal government to liberalize U.S.
                         export controls to enhance the international
                         competitiveness of their products.

                         Nevertheless, in April 1991, the Departments of State
                         and Defense agreed to retain software with
                         cryptographic capabilities on the U.S. Munitions List
                         so that NSA could review all new software with
                         cryptographic capabilities to determine if the
                         products should be controlled on the munitions list
                         or the Commerce list.  Additional reasons for
                         maintaining this item on the munitions list are
                         classified.

                         In January 1992, State reversed its position and
                         proposed moving such software to the Commerce list,
                         along with other items.  State believed that
                         controlling mass-market software with cryptographic
                         capabilities would be impossible because the products
                         were widely available.  However, Defense refused to
                         include such software in any compromise with
                         Commerce, citing the inadequacy of Commerce's control
                         system even with added foreign policy controls. 
                         Defense further cited the administration's opposition
                         to the provision in a bill to reauthorize and amend
                         the Export Administration Act as another reason that
                         jurisdiction over this software should not be
                         transferred.  NSA's appeal to the Under Secretary of
                         State for International Security Affairs prevailed,
                         according to a State Department representative, and
                         mass-market software with cryptographic capabilities
                         was retained on the munitions list.  NSA also
                         presented its case to the President's Assistant for
                         National Security Affairs, according to State
                         Department representatives.

  #####################-------------------------------------------------------
  NSA AND STATE 
  DEPARTMENT EXPORT 
  CONTROL ROLES          NSA performs the technical review that determines,
                         for national security reasons, (1) if a product with
                                                                              
                         -----------------------------------------------------
                         23 GAO/NSIAD-93-67, Mar. 31, 1993.

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  ----------------------------------------------------------------------------
                         Appendix III
                         ACTIONS AND POLICY REGARDING THE EXPORT OF PRODUCTS
                         WITH PRIVACY CAPABILITY
  ----------------------------------------------------------------------------

                         encryption capabilities is a munitions item or a
                         Commerce list item and (2) which munitions items with
                         encryption capabilities may be exported.  The
                         Department of State examines the NSA determination
                         for consistency with prior NSA determinations and may
                         add export restrictions for foreign policy reasons--
                         e.g., all exports to certain countries may be banned
                         for a time period.

                         Neither NSA, the Department of State, nor the
                         Department of Commerce has provided industry with the
                         detailed criteria for determining whether an item is
                         a munitions item or a Commerce list item.  The
                         detailed criteria for these decisions are generally
                         classified.  However, vendors exporting these items
                         can learn some of the general criteria through prior
                         export approvals or denials that they have received. 
                         NSA representatives also advise companies regarding
                         whether products they are planning would likely be
                         munitions items and whether they would be exportable,
                         according to State Department representatives.

  ----------------------------------------------------------------------------
  Industry Raises 
  Concern About 
  Export License 
  Process                Products with certain algorithms, such as DES, for
                         message encryption require a munitions license and
                         are generally nonexportable to foreign commercial
                         users, except foreign subsidiaries of U.S. firms and
                         international banking concerns.  Other algorithms are
                         permitted for export for privacy purposes at
                         restricted key lengths.  (DES and other algorithms--
                         for nonprivacy purposes, such as password access
                         control--are exported under  control of the Commerce
                         list.)

                         The Software Publishers Association sought to have
                         export control jurisdiction of mass-market software
                         with encryption capabilities transferred to Commerce. 
                         NSA and National Security Council representatives met
                         with representatives of the Association, which
                         specifically sought change regarding controls on DES.

  ----------------------------------------------------------------------------
  State Establishes a 
  Procedure Expediting 
  Product Reviews for 
  Determining 




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  ----------------------------------------------------------------------------
                         Appendix III
                         ACTIONS AND POLICY REGARDING THE EXPORT OF PRODUCTS
                         WITH PRIVACY CAPABILITY
  ----------------------------------------------------------------------------

  Munitions Items        The Department of State amended#24 the regulations
                         for implementing the Arms Export Control Act.  The
                         new regulation established a procedure that permits
                         an expedited review--to determine whether the product
                         is a munitions or a Commerce-controlled item--for
                         certain mass-market software with encryption
                         capabilities.#25

                         According to a procedure outlined by the President's
                         Assistant for National Security Affairs, a
                         representative of the National Security Council will
                         host a meeting with software industry representatives
                         twice a year to enable the industry representatives
                         to present their concerns, including whether keys
                         should be lengthened to counteract the threat of
                         increased computer power.

  ----------------------------------------------------------------------------
  U.S. Export Controls 
                             for Products With 
  Encryption Capabilities, 
  in Some Cases, 
  Apparently More 
  Stringent Than Those 
  of Other Countries     U.S. export controls for products with encryption
                         capabilities--in at least some cases--appear more
                         stringent than those of other countries.  U.S. and
                         foreign companies and an association provided three
                         examples of such cases.

                         First, some member countries of COCOM, such as the
                         United Kingdom, permit the export of mass-market
                         software with encryption capabilities.  In 1991, the
                         COCOM countries agreed to exclude mass-market
                         software with encryption capabilities or software in
                         the public domain from one of the COCOM embargo lists

                                                                             
                         -----------------------------------------------------
                         24 The U.S. Munitions List, 22 C.F.R. section 121.1,
                         Category XIII, note (1993).

                         25 The procedure can be applied for products with RSA,
                         RC2, or RC4 when RSA key lengths are limited to 512
                         bits and RC2 and RC4 key lengths are limited to 40
                         bits.  Key lengths affect the degree of message
                         privacy.  For example, an algorithm with a 56-bit key
                         is over 65,000 times stronger against a certain kind
                         of attack than the same algorithm with a 40-bit key. 
                         Different algorithms with the same key length are not
                         necessarily equally strong because other factors
                         contribute to strength.

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  ----------------------------------------------------------------------------
                         Appendix III
                         ACTIONS AND POLICY REGARDING THE EXPORT OF PRODUCTS
                         WITH PRIVACY CAPABILITY
  ----------------------------------------------------------------------------

                         used for export control.  However, the United States
                         maintains export control over this software.

                         Second, foreign companies may export products with
                         encryption algorithms for message privacy, such as
                         DES, to user groups and countries that U.S. companies
                         and their foreign subsidiaries may not.  According to
                         an industry official, a German company contracts with
                         a Japanese company to manufacture a high-speed
                         encryption chip for export to Germany because U.S.
                         companies are prevented by U.S. export rules from
                         exporting to the German company.

                         Further, a U.S. subsidiary of a leading British
                         vendor of encryption products uses these chips in a
                         network security system.  This U.S. subsidiary may
                         market these products to any user in the United
                         States.  In contrast, foreign subsidiaries of U.S.
                         companies are often limited by U.S. export rules to
                         selling such products to designated user groups--the
                         financial industry and foreign subsidiaries of U.S.
                         companies--in countries where they are based,
                         according to a representative of the Computer and
                         Business Equipment Manufacturers Association.

  ----------------------------------------------------------------------------
  Industry Cites Reasons 
  for Relaxing Export 
  Controls for Products 
  With Encryption 
  Capabilities           A number of industry representatives stated that the
                         international availability of hardware and software
                         with encryption capabilities could not be effectively
                         suppressed because sophisticated, foreign-made
                         encryption products were becoming more available
                         worldwide.  Although U.S. firms are restricted in the
                         international sale of these products, vendors in the
                         United Kingdom, Switzerland, Israel, Belgium, and the
                         Commonwealth of Independent States offer a wide
                         variety of secure products that use DES, RSA, and
                         other algorithms, according to a statement by the
                         Computer and Business Equipment Manufacturers
                         Association and the Information Technology
                         Association of America.  They stated that about 16
                         companies in these 5 countries and Holland sold
                         hardware and software products with cryptographic
                         capabilities in their own and/or other countries,
                         including the United States, Germany, Australia,
                         Cyprus, Ireland, Israel, Singapore, and Sweden.  As
                         an example of the international availability of RSA
                         and DES in software, ASKRI, a company in the
                         Commonwealth of Independent States, sells an

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  ----------------------------------------------------------------------------
                         Appendix III
                         ACTIONS AND POLICY REGARDING THE EXPORT OF PRODUCTS
                         WITH PRIVACY CAPABILITY
  ----------------------------------------------------------------------------

                         encryption product that implements both RSA and DES,
                         according to its user's manual.

                         Although the extent is not possible to quantify, U.S.
                         industry representatives stated that stringent U.S.
                         export control of products with encryption
                         capabilities reduced their international sales. 
                         International markets are important sources of
                         revenue for U.S. industries.#26  According to a
                         number of industry representatives, export controls
                         also hinder the pace at which these products are
                         developed in the United States.  Industry
                         representatives state that because of the cost of
                         development, they are reticent to develop products
                         with encryption capabilities that may not be
                         exported.




























                                                                              
                         -----------------------------------------------------
                         26 The Software Publishers Association has estimated
                         that (1) the foreign market for mass-market software
                         with encryption capabilities is growing at least 20
                         percent each year and (2) the potential U.S. share of
                         the foreign market could total $3-5 billion annually
                         by 1997.

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  Appendix IV
  ----------------------------------------------------------------------------
  FBI-PROPOSED DIGITAL TELEPHONY LEGISLATION
  AND COMMENTS ON ENCRYPTION
  ----------------------------------------------------------------------------

                         Since 1986, the FBI has become increasingly aware of
                         the potential loss of wiretapping capability due to
                         the rapid deployment of new technologies, such as
                         cellular and integrated voice and data services.  In
                         1991, the FBI commented on a Senate bill concerning
                         encryption.  In 1992, the FBI developed several
                         legislative proposals concerning wiretapping.  Both
                         encryption and wiretapping affect the FBI's methods
                         and ability to collect evidence.  In early 1993, the
                         FBI told us that it is reevaluating its positions
                         regarding digital telephony legislation and
                         encryption issues until it has discussed these topics
                         with officials in the new administration.

  #####################-------------------------------------------------------
  1992 DIGITAL 
  TELEPHONY PROPOSALS    In 1992, the FBI developed a legislative proposal to
                         facilitate law enforcement agency wiretapping
                         operations in a digital telephone network.  (The
                         proposal was not introduced as a bill in the
                         Congress.)  A law consistent with the proposal would
                         have required compliance by telecommunications
                         service providers and private branch exchanges with
                         Federal Communications Commission regulations within
                         a specified time period and would have prohibited the
                         use of nonconforming equipment.  However, according
                         to our July 1992 report,#27 the FBI did not define
                         its wiretapping needs in its original proposal.

                         The second version of the FBI proposal generally
                         addressed the FBI's needs but did not provide the
                         specifics necessary for the telecommunications
                         industry to determine what would constitute full
                         compliance with the proposal.  For example, the
                         version did not specify the time allowed to install a
                         wiretap after receipt of a court order.  Further, the
                         second version did not address who should pay the
                         cost of changes to the systems that would ensure the
                         FBI's access.  The FBI's third version in 1992 was
                         similar to the second.

                         Collecting evidence by wiretapping is becoming
                         difficult because of four growing technologies:  (1)
                         the integrated services digital network--an emerging
                         communications system to integrate voice and data;
                         (2) extended cellular telephone communications; (3)
                         encryption; and (4) personal communication networks--
                         advanced cellular telephone communications that will
                                                                              
                         -----------------------------------------------------
                         27 GAO/IMTEC-92-68BR, July 17, 1992.

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  ----------------------------------------------------------------------------
                         Appendix IV
                         FBI-PROPOSED DIGITAL TELEPHONY LEGISLATION
                         AND COMMENTS ON ENCRYPTION
  ----------------------------------------------------------------------------

                         offer new communications services via very small,
                         portable handsets.

                         In the summer of 1990, the FBI began technical
                         discussions with industry experts on wiretapping
                         solutions.  The FBI had previously conducted its own
                         research on wiretapping but had not coordinated its
                         research with industry research and development.

                         In May 1992, the FBI formed a technical committee
                         composed of representatives from the FBI and the
                         telecommunications industry.  The purpose of this
                         committee was to identify and select the
                         technological alternatives that best met the FBI's
                         needs.  According to our July 1992 report, neither
                         the FBI nor the telecommunications industry had a
                         comprehensive analysis of the technological
                         alternatives for wiretapping current and emerging
                         technologies.

                         The General Services Administration expressed its
                         views on the first and second versions of the FBI-
                         proposed legislation in response to the Office of
                         Management and Budget.  The General Services
                         Administration stated, in part, "there would be
                         unknown associated costs to implement the proposed
                         new technological procedures and equipment."

                         In addition, the Electronic Frontier Foundation--in
                         coalition with communications services providers,
                         computer hardware and software companies, and other
                         groups--published a September 1992 report concerning
                         the proposal.#28  The report expressed concern that
                         a law based on the FBI's legislative proposal would
                         impose new engineering standards with substantial
                         costs.

  #####################-------------------------------------------------------
  FBI COMMENTS ON 
  ENCRYPTION             In January 1991, the Senate Committee on the
                         Judiciary proposed S. 266, the Comprehensive Counter-
                         Terrorism Act of 1991, which addressed government
                         access to "plain text," or decrypted, communications. 
                         The FBI supported the bill.  However, representatives
                         of industry and academia expressed concern that such
                         a proposal would undermine the security, reliability,
                         and privacy of computer-based communications.
                                                                              
                         -----------------------------------------------------
                         28 Electronic Frontier Foundation, et al., "An
                         Analysis of the FBI Digital Telephony Proposal"
                         (Sept. 18, 1992). 

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  ----------------------------------------------------------------------------
                         Appendix IV
                         FBI-PROPOSED DIGITAL TELEPHONY LEGISLATION
                         AND COMMENTS ON ENCRYPTION
  ----------------------------------------------------------------------------

                         Section 2201 of the bill, "Cooperation of
                         Telecommunications Providers With Law Enforcement,"
                         read in part:

                           "It is the sense of Congress that providers of
                           electronic communications services and
                           manufacturers of electronic communications
                           service equipment shall ensure that
                           communications systems permit the government to
                           obtain the plain text contents of voice, data,
                           and other communications when appropriately
                           authorized by law."

                         On April 26, 1991, the FBI issued a press response
                         expressing its support of section 2201 of S. 266,
                         stating that the bill "seeks to place on the
                         telecommunications industry a sense of duty to design
                         its new digital telecommunications systems so that
                         law enforcement continues to receive only those
                         communications specifically authorized by court
                         order."  The press response further stated,
                         "[a]ffording a criminal subject the means, through
                         encryption, of securely communicating in furtherance
                         of an illicit activity is tantamount to providing a
                         sanctuary immune from judicially authorized
                         collection of evidence."

                         S. 266 was not enacted.  Section 2201 of the bill was
                         later included in S. 618, the proposed Violent Crime
                         Control Act of 1991.  Neither S. 618 nor its
                         companion bill in the House of Representatives
                         passed.

                         On April 19, 1993, representatives from the FBI
                         announced support for the administration's key-escrow
                         system.  This system would allow legally authorized
                         government officials to obtain access to the plain
                         text of encrypted communications.















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  Appendix V
  ----------------------------------------------------------------------------
  MAJOR CONTRIBUTORS TO THIS REPORT

  #####################-------------------------------------------------------
  OFFICE OF SPECIAL 
  INVESTIGATIONS, 
  WASHINGTON, D.C.       Donald G. Fulwider, Assistant Director for Financial
                           and Economic Crimes
                         Robyn D. Stewart-Murray, Special Agent
                         Shelia A. James, Report Reviewer
                         M. Jane Hunt, Special Assistant for Investigative
                         Plans
                           and Reports

  #####################-------------------------------------------------------
  ACCOUNTING AND 
  INFORMATION 
  MANAGEMENT 
  DIVISION, 
  WASHINGTON, D.C.       Dr. Harold J. Podell, Assistant Director
                         Beverly A. Peterson, Senior Evaluator

  #####################-------------------------------------------------------
  OFFICE OF THE GENERAL 
  COUNSEL, 
  WASHINGTON, D.C.       James M. Lager, Senior Attorney Adviser
































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  ----------------------------------------------------------------------------
  GLOSSARY
  ----------------------------------------------------------------------------
  Algorithm              A mathematical procedure that can usually be
                         explicitly encoded in a set of computer language
                         instructions that manipulate data.  Cryptographic
                         algorithms are mathematical procedures used for such
                         purposes as encrypting and decrypting messages and
                         signing documents digitally.

  ----------------------------------------------------------------------------
  Bit                    Short for binary digit--0 or 1.  Keys are strings of
                         bits.

  ----------------------------------------------------------------------------
  Cellular Transmission  Data transmission via interchangeable wireless
                         (radio) communications in a network of numerous small
                         geographic cells.  Most current technology is
                         analog--represented as electrical levels, not bits. 
                         However, the trend is toward digital cellular data
                         transmission.

  ----------------------------------------------------------------------------
  Clipper Chip           A microcircuit that contains a classified secret-key
                         encryption algorithm--"Skipjack."  Skipjack can be
                         used in place of DES, RC2, RC4, and other secret-key
                         algorithms to provide message privacy with a "key-
                         escrow" system.  (The administration initially
                         referred to the microcircuit as the Clipper Chip and
                         later discontinued using the term.)

  ----------------------------------------------------------------------------
  COCOM                  The Coordinating Committee for Multilateral Export
                         Controls--an informal organization that cooperatively
                         restricts strategic exports to controlled countries. 
                         COCOM consists of 17 countries that maintain three
                         export control lists:  (1) the International
                         Industrial List, (2) the International Munitions
                         List, and (3) the International Atomic Energy List. 
                         Members include the countries of the North Atlantic
                         Treaty Organization, except Iceland, with the
                         addition of Japan and Australia.

  ----------------------------------------------------------------------------
  Cryptography           The transformation of ordinary text, or "plain text,"
                         into coded form by encryption and the transformation
                         of coded text into plain text by decryption. 
                         Cryptography can be used to support digital
                         signature, key management or exchange, and
                         communications privacy.

  ----------------------------------------------------------------------------
  Data Encryption 
  Standard (DES)         A NIST Federal Information Processing Standard and a
                         commonly used secret-key cryptographic algorithm for
                         encrypting and decrypting data and performing other
                         functions.  For example, DES can be used to check


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  ----------------------------------------------------------------------------
                         Glossary
  ----------------------------------------------------------------------------

                         message integrity.  DES specifies a key length of 56
                         bits.

  ----------------------------------------------------------------------------
    Digital Signature    A cryptographic method, provided by public-key
                         cryptography, used by a message's recipient and any
                         third party to verify the identity of the message's
                         sender.  It can also be used to verify the
                         authenticity of the message.  A sender creates a
                         digital signature or a message by transforming the
                         message with his/her private key.  A recipient, using
                         the sender's public key, verifies the digital
                         signature by applying a corresponding transformation
                         to the message and the signature.

  ----------------------------------------------------------------------------
  Digital Signature 
  Standard (DSS)         A NIST-proposed Federal Information Processing
                         Standard that supports digital signature.

  ----------------------------------------------------------------------------
  Digital Telephony      Telephone systems that use digital communications
                         technology.

  ----------------------------------------------------------------------------
  Economic Espionage     The unauthorized acquisition of U.S. proprietary or
                         other information by a foreign government to advance
                         the economic position of that country.

  ----------------------------------------------------------------------------
  Encryption             The process of making information indecipherable to
                         protect it from unauthorized viewing or use,
                         especially during transmission or storage. 
                         Encryption is based on an algorithm and at least one
                         key.  Even if the algorithm is known, the information
                         cannot be decrypted without the key(s).

  ----------------------------------------------------------------------------
  Information-Processing 
  Standard               A set of detailed technical guidelines used to
                         establish uniformity to support specific functions
                         and/or interoperability in hardware, software, or
                         telecommunications development, testing, and/or
                         operation.

  ----------------------------------------------------------------------------
  Integrated Services 
  Digital Network        An emerging communications system enabling the
                         simultaneous transmission of data, facsimile, video,
                         and voice over a single communications link.





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  ----------------------------------------------------------------------------
                         Glossary
  ----------------------------------------------------------------------------

  ----------------------------------------------------------------------------
  Interoperability       The ability of computers to act upon information
                         received from one another.

  ----------------------------------------------------------------------------
  Key                    A long string of seemingly random bits used with
                         cryptographic algorithms to create/verify digital
                         signatures and encrypt/decrypt messages and
                         conversations.  The keys must be known or guessed to
                         forge a digital signature or decrypt an encrypted
                         message.

  ----------------------------------------------------------------------------
  Key-Escrow System      An electronic means of reconstructing a secret key
                         (for secret-key encryption) or a private key (for
                         public-key encryption).  The reconstructed key can
                         then be used in a process to decrypt a communication.

  ----------------------------------------------------------------------------
  Key Management/
  Exchange               A method of electronically transmitting, in a secure
                         fashion, a secret key for use with a secret-key
                         cryptographic system.  Key management can be used to
                         support communications privacy.  This method can be
                         accomplished most securely with public-key
                         cryptographic systems, which do not require the
                         sharing of secret keys with third parties.  Instead,
                         a secret key is encrypted with a recipient's public
                         key, and the recipient decrypts the result with
                         his/her private key to receive the secret key.  A
                         variation of key management that is based on key
                         exchange does not require encrypting the secret key.

  ----------------------------------------------------------------------------
  Mass-Market Software   Software that is (1) generally available to the
                         public by sale, without restriction, from stock at
                         retail selling points through over-the-counter,
                         telephone, and mail transactions and (2) designed for
                         user installation without substantial supplier
                         support.

  ----------------------------------------------------------------------------
  Personal Communications 
  Network                Advanced cellular telephone communications and the
                         interworking of both wired and wireless networks that
                         will offer new communications services via very
                         small, portable handsets.  The network will rely on
                         microcellular technology--many low-power, small-
                         coverage cells--and a common channel-signaling
                         technology, such as that used in the telephone
                         system, to provide a wide variety of features in
                         addition to the basic two-way calling service.



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  ----------------------------------------------------------------------------
                         Glossary
  ----------------------------------------------------------------------------

  ----------------------------------------------------------------------------
  Private Key            The undisclosed key in a matched key pair--private
                         key and public key--that each party safeguards for
                         public-key cryptography.

  ----------------------------------------------------------------------------
  Public Key             The key in a matched key pair--private key and public
                         key--that may be published, e.g., posted in a
                         directory, for public-key cryptography.

  ----------------------------------------------------------------------------
  Public-Key 
  Cryptography           Cryptography using two matched keys (or asymmetric
                         cryptography) in which a single private key is not
                         shared by a pair of users.  Instead, users have their
                         own key pairs.  Each key pair consists of a matched
                         private and public key.  Public-key cryptography can
                         perform (1) digital signature, (2) secure
                         transmission or exchange of secret keys, and/or (3)
                         encryption and decryption.  Examples of public-key
                         cryptography are DSS and RSA.

  ----------------------------------------------------------------------------
  RC2, RC4 (Rivest 
  Cipher 2 and Rivest 
  Cipher 4)              Two secret-key encryption systems that are
                         implemented in mass-market software.  These systems
                         are proprietary and are marketed by RSA Data
                         Security, Inc.  RC2 and RC4 can be used with various
                         key lengths, such as 40 bits or 56 bits.

  ----------------------------------------------------------------------------
  RSA                    A public-key algorithm invented by Ronald L. Rivest,
                         Adi Shamir, and Leonard M. Adleman.  RSA can be used
                         to generate digital signatures; encrypt messages; and
                         provide key management for DES, RC2, RC4, and other
                         secret-key algorithms.  RSA performs the key-
                         management process, in part, by encrypting a secret
                         key for an algorithm such as DES, RC2, or RC4 with
                         the recipient's public key for secure transmission to
                         the recipient.  This secret key can then be used to
                         support private communications.

  ----------------------------------------------------------------------------
  Secret Key             The key that two parties share and keep secret for
                         secret-key cryptography.  Given secret-key algorithms
                         of equal strength, the approximate difficulty of
                         decrypting encrypted messages by brute force search
                         can be measured by the number of possible keys.  For
                         example, a key length of 56 bits is over 65,000 times
                         stronger or more resistant to attack than a key
                         length of 40 bits.



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  ----------------------------------------------------------------------------
                         Glossary
  ----------------------------------------------------------------------------

  ----------------------------------------------------------------------------
  Secret-Key 
  Cryptography           Cryptography based on a single key (or symmetric
                         cryptography).  It uses the same secret key for
                         encryption and decryption.  Messages are encrypted
                         using a secret key and a secret-key cryptographic
                         algorithm, such as Skipjack, DES, RC2, and RC4.

  ----------------------------------------------------------------------------
  Skipjack               A classified 64-bit block encryption, or secret-key
                         encryption, algorithm.  The algorithm uses 80-bit
                         keys (compared with 56 for DES) and has 32
                         computational rounds or iterations (compared with 16
                         for DES).  Skipjack supports all DES modes of
                         operation.  Skipjack provides high-speed encryption
                         when implemented in a Clipper Chip (initial name).

  ----------------------------------------------------------------------------
  Trapdoor               A secret entry point to a cryptographic algorithm
                         through which the developer or another entity can
                         bypass security controls and decrypt messages.

  ----------------------------------------------------------------------------
  Wiretapping            The real-time collection of transmitted data, such as
                         dialed digits, and the sending of that data in real
                         time to a listening device.  ("Real time" is defined
                         as the actual time that something, such as the
                         communication of information, takes place.)



























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