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It seems that this story is being blown out of all proportions - the Government has confirmed that the data stick was encrypted, meaning there is no data loss. Whoever was responsible for ensuring the USB stick was encrypted should be congratulated.
The suggestion made by a opposition member of parliament that removable media should be banned is somewhat out of kilter with business requirements. The main issue is for organisations to have control over which employees or contractors can use USB sticks, whether or not the data is sensitive and to ensure that all sensitive data is encrypted. And of course, that controls are in place as to who and where it can be decrypted.
Data loss can be eliminated if Government departments take control of removable devices and govern the flow of inbound and outbound data to and from mobile devices, ensuring data is encrypted during transmission.