The Encrypting File System –

By Roberta Bragg

An Overview of the Encrypting File SystemWhat EFS IsBasic How-tosPlanning for and Recovering Encrypted Files: Recovery PolicyHow EFS WorksKey Differences Between EFS on Windows 2000, Windows XP, and Windows Server 2003Misuse and Abuse of EFS and How to Avoid Data Loss or ExposureRemote Storage of Encrypted Files Using SMB File Shares and WebDAVBest Practices for SOHO and Small BusinessesEnterprise How-tosTroubleshootingRadical EFS: Using EFS to Encrypt Databases and Using EFS with Other Microsoft ProductsDisaster RecoveryOverviews and Larger ArticlesSummary

The Encrypting File System (EFS) is a component of the NTFS file system on Windows 2000, Windows XP Professional, and Windows Server 2003. (Windows XP Home doesn’t include EFS.) EFS enables transparent encryption and decryption of files by using advanced, standard cryptographic algorithms. Any individual or program that doesn’t possess the appropriate cryptographic key cannot read the encrypted data. Encrypted files can be protected even from those who gain physical possession of the computer that the files reside on. Even persons who are authorized to access the computer and its file system cannot view the data. While other defensive strategies should be used, and encryption isn’t the correct countermeasure for every threat, encryption is a powerful addition to any defensive strategy. EFS is the built-in file encryption tool for Windows file systems.

However, every defensive weapon, if used incorrectly, carries the potential for harm. EFS must be understood, implemented appropriately, and managed effectively to ensure that your experience, the experience of those to whom you provide support, and the data you wish to protect aren’t harmed. This document will

Provide an overview and pointers to resources on EFS.

Point to implementation strategies and best practices.

Name the dangers and counsel mitigation and prevention from harm.

Many online and published resources on EFS exist. The major sources of information are the Microsoft resource kits, product documentation, white papers, and Knowledge Base articles. This paper provides a brief overview of major EFS issues. Wherever possible, it doesn’t rework existing documentation; rather, it provides links to the best resources. In short, it maps the list of desired knowledge and instruction to the actual documents where they can be found. In addition, the paper catalogs the key elements of large documents so that you’ll be able to find the information you need without having to work your way through hundreds of pages of information each time you have a new question.

The paper discusses the following key EFS knowledge areas:

What EFS is

Basic how-tos, such as how to encrypt and decrypt files, recover encrypted files, archive keys, manage certificates, and back up files, and how to disable EFS

How EFS works and EFS architecture and algorithms

Key differences between EFS on Windows 2000, Windows XP, and Windows Server 2003

Misuse and abuse of EFS and how to avoid data loss or exposure

Remote storage of encrypted files using SMB file shares and WebDAV

Best practices for SOHO and small businesses

Enterprise how-tos: how to implement data recovery strategies with PKI and how to implement key recovery with PKI


Radical EFS: using EFS to encrypt databases and using EFS with other Microsoft products

Disaster recovery

Where to download EFS-specific tools

Using EFS requires only a few simple bits of knowledge. However, using EFS without knowledge of best practices and without understanding recovery processes can give you a mistaken sense of security, as your files might not be encrypted when you think they are, or you might enable unauthorized access by having a weak password or having made the password available to others. It might also result in a loss of data, if proper recovery steps aren’t taken. Therefore, before using EFS you should read the information links in the section “Misuse and Abuse of EFS and How to Avoid Data Loss or Exposure.” The knowledge in this section warns you where lack of proper recovery operations or misunderstanding can cause your data to be unnecessarily exposed. To implement a secure and recoverable EFS policy, you should have a more comprehensive understanding of EFS.

You can use EFS to encrypt files stored in the file system of Windows 2000, Windows XP Professional, and Windows Server 2003 computers. EFS isn’t designed to protect data while it’s transferred from one system to another. EFS uses symmetric (one key is used to encrypt the files) and asymmetric (two keys are used to protect the encryption key) cryptography. An excellent primer on cryptography is available in the Windows 2000 Resource Kit as is an introduction to Certificate Services. Understanding both of these topics will assist you in understanding EFS.

A solid overview of EFS and a comprehensive collection of information on EFS in Windows 2000 are published in the Distributed Systems Guide of the Windows 2000 Server Resource Kit. This information, most of which resides in Chapter 15 of that guide, is published online at (On this site’s page, use the TOC to go to the Distributed Systems Guide, Distributed Security, Encrypting File System.)

There are differences between EFS in Windows 2000, Windows XP Professional, and Windows Server 2003. The Windows XP Professional Resource Kit explains the differences between Windows 2000 and Windows XP Professionals implementation of EFS, and the document “Encrypting File System in Windows XP and Windows Server 2003” ( details Windows XP and Windows Server 2003 modifications. The section below, “Key Differences between EFS on Windows 2000, Windows XP, and Windows Server 2003,” summarizes these differences.

The following are important basic facts about EFS:

EFS encryption doesn’t occur at the application level but rather at the file-system level; therefore, the encryption and decryption process is transparent to the user and to the application. If a folder is marked for encryption, every file created in or moved to the folder will be encrypted. Applications don’t have to understand EFS or manage EFS-encrypted files any differently than unencrypted files. If a user attempts to open a file and possesses the key to do so, the file opens without additional effort on the user’s part. If the user doesn’t possess the key, they receive an “Access denied” error message.

File encryption uses a symmetric key, which is then itself encrypted with the public key of a public key encryption pair. The related private key must be available in order for the file to be decrypted. This key pair is bound to a user identity and made available to the user who has possession of the user ID and password. If the private key is damaged or missing, even the user that encrypted the file cannot decrypt it. If a recovery agent exists, then the file may be recoverable. If key archival has been implemented, then the key may be recovered, and the file decrypted. If not, the file may be lost. EFS is an excellent file encryption systemthere is no “back door.”

File encryption keys can be archived (e.g. exported to a floppy disk) and kept in a safe place to ensure recovery should keys become damaged.

EFS keys are protected by the user’s password. Any user who can obtain the user ID and password can log on as that user and decrypt that user’s files. Therefore, a strong password policy as well as strong user education must be a component of each organization’s security practices to ensure the protection of EFS-encrypted files.

EFS-encrypted files don’t remain encrypted during transport if saved to or opened from a folder on a remote server. The file is decrypted, traverses the network in plaintext, and, if saved to a folder on the local drive that’s marked for encryption, is encrypted locally. EFS-encrypted files can remain encrypted while traversing the network if they’re being saved to a Web folder using WebDAV. This method of remote storage isn’t available for Windows 2000.

EFS uses FIPS 140-evaluated Microsoft Cryptographic Service Providers (CSPcomponents which contain encryption algorithms for Microsoft products).

EFS functionality is straightforward, and you can find step-by-step instructions in many documents online. Links to specific articles for each possible EFS function, as well as some documents which summarize multiple functionality, follow. If the document is a Knowledge Base article, the Knowledge Base number appears in parentheses after the article title.

Encrypting and Decrypting

The process of encrypting and decrypting files is very straightforward, but its important to decide what to encrypt and to note differences in EFS based on the operating system.

Sharing Encrypted Files

The GUI for sharing encrypted files is available only in Windows XP and Windows Server 2003.

A recovery policy can be an organization’s security policy instituted to plan for proper recovery of encrypted files. It’s also the policy enforced by Local Security Policy Public Key Policy or Group Policy Public Key Policy. In the latter, the recovery policy specifies how encrypted files may be recovered should the user private key be damaged or lost and the encrypted file unharmed. Recovery certificate(s) are specified in the policy. Recovery can be either data recovery (Windows 2000, Windows XP Professional, and Windows Server 2003) or key recovery (Windows Server 2003 with Certificate Services). Windows 2000 EFS requires the presence of a recovery agent (no recovery agent, no file encryption), but Windows XP and Windows Server 2003 don’t. By default, Windows 2000 and Windows Server 2003 have default recovery agents assigned. Windows XP Professional doesn’t.

The data recovery process is simple. The user account bound to the recovery agent certificate is used to decrypt the file. The file should then be delivered in a secure manner to the file owner, who may then encrypt the file. Recovery via automatically archived keys is available only with Windows Server 2003 Certificate Services. Additional configuration beyond the installation of Certificate Services is required. In either case, it’s most important that a written policy and procedures for recovery are in place. These procedures, if well written and if followed, can ensure that recovery keys and agents are available for use and that recovery is securely carried out. Keep in mind that there are two definitions for “recovery policy.” The first definition refers to a written recovery policy and procedures that describe the who, what, where, and when of recovery, as well as what steps should be taken to ensure recovery components are available. The second definition, which is often referred to in the documents below, is the Public Key Policy that’s part of the Local Security Policy on stand-alone systems, or Group Policy in a domain. It can specify which certificates are used for recovery, as well as other aspects of Public Key Policies in the domain. You can find more information in the following documents:

Disabling or Preventing Encryption

You may decide that you don’t wish users to have the ability to encrypt files. By default, they do. You may decide that specific folders shouldn’t contain encrypted files. You may also decide to disable EFS until you can implement a sound EFS policy and train users in proper procedures. There are different ways of disabling EFS depending on the operating system and the desired effect:

System folders cannot be marked for encryption. EFS keys aren’t available during the boot process; thus, if system files were encrypted, the system file couldn’t boot. To prevent other folders being marked for encryption, you can mark them as system folders. If this isn’t possible, then a method to prevent encryption within a folder is defined in “Encrypting File System.”

NT 4.0 doesn’t have the ability to use EFS. If you need to disable EFS for Windows 2000 computers joined to a Windows NT 4.0 domain, see “Need to Turn Off EFS on a Windows 2000-Based Computer in Windows NT 4.0-Based Domain” (288579). The registry key mentioned can also be used to disable EFS in Window XP Professional and Windows Server 2003.

Disabling EFS for Windows XP Professional can also be done by clearing the checkbox for the property page of the Local Security Policy Public Key Policy. EFS can be disabled in XP and Windows Server 2003 computers joined in a Windows Server 2003 domain by clearing the checkbox for the property pages of the domain or organizational unit (OU) Group Policy Public Key Policy.

“HOW TO: Disable/Enable EFS on a Stand-Alone Windows 2000-Based Computer” (243035) details how to save the recovery agent’s certificate and keys when disabling EFS so that you can enable EFS at a future date.

“HOW TO: Disable EFS for All Computers in a Windows 2000-Based Domain” (222022) provides the best instruction set and clearly defines the difference between deleted domain policy (an OU-based policy or Local Security Policy can exist) versus Initialize Empty Policy (no Windows 2000 EFS encryption is possible throughout the domain).

Special Operations

Let enough people look at anything, and you’ll find there are questions that are just not answered by existing documentation or options. A number of these issues, third-party considerations, and post introduction issues can be resolved by reviewing the following articles.

Specifications for the use of a third-party Certification Authority (CA) can be found at “Third-Party Certification Authority Support for Encrypting File System” (273856). If you wish to use third-party CA certificates for EFS, you should also investigate certificate revocation processing. Windows 2000 EFS certificates aren’t checked for revocation. Windows XP and Windows Server 2003 EFS certificates are checked for revocation in some cases, and third-party certificates may be rejected. Information about certificate revocation handling in EFS can be found in the white paper “Encrypting File System in Windows XP and Windows Server 2003”.

When an existing plaintext file is marked for encryption, it’s first copied to a temporary file. When the process is complete, the temporary file is marked for deletion, which means portions of the original file may remain on the disk and could potentially be accessible via a disk editor. These bits of data, referred to as data shreds or remanence, may be permanently removed by using a revised version of the cipher.exe tool. The tool is part of Service Pack 3 (SP3) for Windows 2000 and is included in Windows Server 2003. Instructions for using the tool, along with the location of a downloadable version, can be found in “HOW TO: Use Cipher.exe to Overwrite Deleted Data in Windows” (315672) and in “Cipher.exe Security Tool for the Encrypting File System” (298009).

How to make encrypted files display in green in Windows Explorer is explained in “HOW TO: Identify Encrypted Files in Windows XP” (320166).

“How to Enable the Encryption Command on the Shortcut Menu” (241121) provides a registry key to modify for this purpose.

You may wish to protect printer spool files or hard copies of encrypted files while they’re printing. Encryption is transparent to the printing process. If you have the right (possess the key) to decrypt the file and a method exists for printing files, the file will print. However, two issues should concern you. First, if the file is sensitive enough to encrypt, how will you protect the printed copy? Second, the spool file resides in the system32SpoolPrinters folder. How can you protect it while its there? You could encrypt that folder, but that would slow printing enormously. The Windows 2000 Resource Kit proposes a separate printer for the printing of these files and how to best secure that printer in the Distributed Systems, Distributed Security, Encrypting Files System, Printing EFS Files section.

To understand EFS, and therefore anticipate problems, envision potential attacks, and troubleshoot and protect EFS-encrypted files, you should understand the architecture of EFS and the basic encryption, decryption, and recovery algorithms. Much of this information is in the Windows 2000 Resource Kit Distributed Systems Guide, the Windows XP Professional Resource Kit, and the white paper, “Encrypting File System in Windows XP and Windows Server 2003.” Many of the algorithms are also described in product documentation. The examples that follow are from the Windows XP Professional Resource Kit:

A straightforward discussion of the components of EFS, including the EFS service, EFS driver, and the File System Run Time Library, is found in “Components of EFS,” a subsection of Chapter 17, “Encrypting File System” in the Windows XP Professional Resource Kit.

A description of the encryption, decryption, and recovery algorithms EFS uses is in the Resource Kit section “How Files Are Encrypted.” This section includes a discussion of the file encryption keys (FEKs) and file Data Recovery Fields and Data Decryption Fields used to hold FEKs encrypted by user and recovery agent public keys.

“Working with Encryption” includes how-to steps that define the effect of decisions made about changing the encryption properties of folders. The table defines what happens for each file (present, added later, or copied to the folder) for the choice “This folder only” or the option “This folder, subfolders and files.”

“Remote EFS Operations on File Shares and Web Folders” defines what happens to encrypted files and how to enable remote storage.

EFS was introduced in Windows 2000. However, there are differences when compared with Windows XP Professional EFS and Windows Server 2003 EFS, including the following:

You can authorize additional users to access encrypted files (see the section “Sharing Encrypted Files”, above). In Windows 2000, you can implement a programmatic solution for the sharing of encrypted files; however, no interface is available. Windows XP and Windows Server 2003 have this interface.

Offline files can be encrypted. See “HOW TO: Encrypt Offline Files to Secure Data in Windows XP.”

Data recovery agents are recommended but optional. XP doesn’t automatically include a default recovery agent. XP will take advantage of an existing Windows 2000 domain-level recovery agent if one is present, but the lack of a domain recovery agent wont prevent encryption of files on an XP system. A self-signed recovery agent certificate can be requested by using the cipher /R:filename command, where filename is the name that will be used to create a *.cer file to hold the certificate and a *.pfx file to hold the certificate and private key.

The Triple DES (3DES) encryption algorithm can be used to replace Data Encryption Standard X (DESX), and after XP SP1, Advanced Encryption Standard (AES) becomes the default encryption algorithm for EFS.

For Windows XP and Windows Server 2003 local accounts, a password reset disk can be used to safely reset a user’s password. (Domain passwords cannot be reset using the disk.) If an administrator uses the “reset password” option from the user’s account in the Computer Management console users container, EFS files won’t be accessible. If users change the password back to the previous password, they can regain access to encrypted files. To create a password reset disk and for instructions about how to use a password reset disk, see product documentation and/or the article “HOW TO: Create and Use a Password Reset Disk for a Computer That Is Not a Domain Member in Windows XP” (305478).

Encrypted files can be stored in Web folders. The Windows XP Professional Resource Kit section “Remote EFS Operations in a Web Folder Environment” explains how.

Windows Server 2003 incorporates the changes introduced in Windows XP Professional and adds the following:

A default domain Public Key recovery policy is created, and a recovery agent certificate is issued to the Administrator account.

Certificate Services include the ability for customization of certificate templates and key archival. With appropriate configuration, archival of user EFS keys can be instituted and recovery of EFS-encrypted files can be accomplished by recovering the user’s encryption keys instead of decrypting via a file recovery agent. A walk-through providing a step-by-step configuration of Certificate Services for key archival is available in “Certificate Services Example Implementation: Key Archival and Recovery.”

Windows Server 2003 enables users to back up their EFS key(s) directly from the command line and from the details property page by clicking a “Backup Keys” button.

Unauthorized persons may attempt to obtain the information encrypted by EFS. Sensitive data may also be inadvertently exposed. Two possible causes of data loss or exposure are misuse (improper use of EFS) or abuse (attacks mounted against EFS-encrypted files or systems where EFS-encrypted files exist).

Inadvertent Problems Due to Misuse

Several issues can cause problems when using EFS. First, when improperly used, sensitive files may be inadvertently exposed. In many cases this is due to improper or weak security policies and a failure to understand EFS. The problem is made all the worse because users think their data is secure and thus may not follow usual precautionary methods. This can occur in several scenarios:

If, for example, users copy encrypted files to FAT volumes, the files will be decrypted and thus no longer protected. Because the user has the right to decrypt files that they encrypted, the file is decrypted and stored in plaintext on the FAT volume. Windows 2000 gives no warning when this happens, but Windows XP and Windows Server 2003 do provide a warning.

If users provide others with their passwords, these people can log on using these credentials and decrypt the user’s encrypted files. (Once a user has successfully logged on, they can decrypt any files the user account has the right to decrypt.)

If the recovery agent’s private key isn’t archived and removed from the recovery agent profile, any user who knows the recovery agent credentials can log on and transparently decrypt any encrypted files.

By far, the most frequent problem with EFS occurs when EFS encryption keys and/or recovery keys aren’t archived. If keys aren’t backed up, they cannot be replaced when lost. If keys cannot be used or replaced, data can be lost. If Windows is reinstalled (perhaps as the result of a disk crash) the keys are destroyed. If a user’s profile is damaged, then keys are destroyed. In these, or in any other cases in which keys are damaged or lost and backup keys are unavailable, then encrypted files cannot be decrypted. The encryption keys are bound to the user account, and a new iteration of the operating system means new user accounts. A new user profile means new user keys. If keys are archived, or exported, they can be imported to a new account. If a revocation agent for the files exists, then that account can be used to recover the files. However, in many cases in which keys are destroyed, both user and revocation keys are absent and there is no backup, resulting in lost data.

Additionally, many other smaller things may render encrypted files unusable or expose some sensitive data, such as the following:

Finally, keeping data secure takes more than simply encrypting files. A systems-wide approach to security is necessary. You can find several articles that address best practices for systems security on the TechNet Best Practices page at The articles include

Attacks and Countermeasures: Additional Protection Mechanisms for Encrypted Files

Any user of encrypted files should recognize potential weaknesses and avenues of attack. Just as its not enough to lock the front door of a house without considering back doors and windows as avenues for a burglar, encrypting files alone isn’t enough to ensure confidentiality.

Use defense in depth and use file permissions. The use of EFS doesn’t obviate the need to use file permissions to limit access to files. File permissions should be used in addition to EFS. If users have obtained encryption keys, they can import them to their account and decrypt files. However, if the user accounts are denied access to the file, the users will be foiled in their attempts to gain this sensitive information.

Use file permissions to deny delete. Encrypted files can be deleted. If attackers cannot decrypt the file, they may choose to simply delete it. While they don’t have the sensitive information, you don’t have your file.

Protect user credentials. If an attacker can discover the identity and password of a user who can decrypt a file, the attacker can log on as that user and view the files. Protecting these credentials is paramount. A strong password policy, user training on devising strong passwords, and best practices on protecting these credentials will assist in preventing this type of attack. An excellent best practices approach to password policy can be found in the Windows Server 2003 product documentation. If account passwords are compromised, anyone can log on using the user ID and password. Once user have successfully logged on, they can decrypt any files the user account has the right to decrypt. The best defense is a strong password policy, user education, and the use of sound security practices.

Protect recovery agent credentials. Similarly, if an attacker can log on as a recovery agent, and the recovery agent private key hasn’t been removed, the attacker can read the files. Best practices dictate the removal of the recovery agent keys, the restriction of this account’s usage to recovery work only, and the careful protection of credentials, among other recovery policies. The sections about recovery and best practices detail these steps.

Seek out and manage areas where plaintext copies of the encrypted files or parts of the encrypted files may exist. If attackers have possession of, or access to, the computer on which encrypted files reside, they may be able to recover sensitive data from these areas, including the following:

Data shreds (remanence) that exist after encrypting a previously unencrypted file (see the “Special Operations” section of this paper for information about using cipher.exe to remove them)

The paging file (see “Increasing Security for Open Encrypted Files,” an article in the Windows XP Professional Resource Kit, for instructions and additional information about how to clear the paging file on shutdown)

Hibernation files (see “Increasing Security for Open Encrypted Files” at

Temporary files (to determine where applications store temporary files and encrypt these folders as well to resolve this issue

Printer spool files (see the “Special Operations” section)

Provide additional protection by using the System Key. Using Syskey provides additional protection for password values and values protected in the Local Security Authority (LSA) Secrets (such as the master key used to protect user’s cryptographic keys). Read the article “Using the System Key” in the Windows 2000 Resource Kit’s Encrypting File System chapter. A discussion of the use of Syskey, and possible attacks against a Syskey-protected Windows 2000 computer and countermeasures, can be found in the article “Analysis of Alleged Vulnerability in Windows 2000 Syskey and the Encrypting File System.”

If your policy is to require that data is stored on file servers, not on desktop systems, you will need to choose a strategy for doing so. Two possibilities existeither storage in normal shared folders on file servers or the use of web folders. Both methods require configuration, and you should understand their benefits and risks.

If encrypted files are going to be stored on a remote server, the server must be configured to do so, and an alternative method, such as IP Security (IPSec) or Secure Sockets Layer (SSL), should be used to protect the files during transport. Instructions for configuring the server are discussed in “Recovery of Encrypted Files on a Server” (283223) and “HOW TO: Encrypt Files and Folders on a Remote Windows 2000 Server” (320044). However, the latter doesn’t mention a critical step, which is that the remote server must be trusted for delegation in Active Directory. Quite a number of articles can be found, in fact, that leave out this step. If the server isn’t trusted for delegation in Active Directory, and a user attempts to save the file to the remote server, an “Access Denied” error message will be the result.

If you need to store encrypted files on a remote server in plaintext (local copies are kept encrypted), you can. The server must, however, be configured to make this happen. You should also realize that once the server is so configured, no encrypted files can be stored on it. See the article “HOW TO: Prevent Files from Being Encrypted When Copied to a Server” (302093).

You can store encrypted files in Web folders when using Windows XP or Windows Server 2003. The Windows XP Professional Resource Kit section “Remote EFS Operations in a Web Folder Environment” explains how.

If your Web applications need to require authentication to access EFS files stored in a Web folder, the code for using a Web folder to store EFS files and require authentication to access them is detailed in “HOW TO: Use Encrypting File System (EFS) with Internet Information Services” (243756).

Once you know the facts about EFS and have decided how you are going to use it, you should use these documents as a checklist to determine that you have designed the best solution.

By default, EFS certificates are self-signed; that is, they don’t need to obtain certificates from a CA. When a user first encrypts a file, EFS looks for the existence of an EFS certificate. If one isn’t found, it looks for the existence of a Microsoft Enterprise CA in the domain. If a CA is found, a certificate is requested from the CA; if it isn’t, a self-signed certificate is created and used. However, more granular control of EFS, including EFS certificates and EFS recovery, can be established if a CA is present. You can use Windows 2000 or Windows Server 2003 Certificate Services. The following articles explain how.

Troubleshooting EFS is easier if you understand how EFS works. There are also well known causes for many of the common problems that arise. Here are a few common problems and their solutions:

You changed your user ID and password and can no longer decrypt your files. There are two possible approaches to this problem, depending on what you did. First, if the user account was simply renamed and the password reset, the problem may be that you’re using XP and this response is expected. When an administrator resets an XP user’s account password, the account’s association with the EFS certificate and keys is removed. Changing the password to the previous password can reestablish your ability to decrypt your files. For more information, see “User Cannot Gain Access to EFS Encrypted Files After Password Change or When Using a Roaming Profile” (331333), which explains how XP Professional encrypted files cannot be decrypted, even by the original account, if an administrator has changed the password. Second, if you truly have a completely different account (your account was damaged or accidentally deleted), then you must either import your keys (if you’ve exported them) or ask an administrator to use recovery agent keys (if implemented) to recover the files. Restoring keys is detailed in “HOW TO: Restore an Encrypting File System Private Key for Encrypted Data Recovery in Windows 2000” (242296). How to use a recovery agent to recover files is covered in “Five-Minute Security AdvisorRecovering Encrypted Data Using EFS.”

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