I'm not necessarily a fan of the Encryption File System (EFS) built into Windows. However, I do agree that encrypting stored data is a valid means to improve security in most environments. Assuming you take the time to properly configure your recovery agents and store your decryption keys on removable media (such as USB memory sticks or at least a floppy), there are a few additional caveats you need to know to prevent catastrophe with Windows EFS.
EFS is a native feature via NTFS of Windows 2000, Windows XP and Windows 2003. However, EFS employs a different encryption mechanism depending on the version of Windows employed. Windows 2000 uses DES. Windows XP pre-SP1 uses 3DES. Windows XP SP1+ and Windows 2003 use AES. Windows 2000 can only decrypt files using DES. Windows XP pre-SP1 can decrypt files using DES or 3DES. Windows XP SP1+ and Windows 2003 can decrypt files using DES, 3DES or AES. If you have an environment where different versions of these platforms are deployed, you can easily get yourself in a situation where you encrypt a file using one platform and you need to decrypt that same file from another platform. The problem is, attempting to use a "lower end" decryption scheme to decipher a file encrypted using a "higher end" scheme can result not just in a failure to extract the original file, but a corruption of the file so that it cannot be decrypted even using the correct encryption mechanism. In other words, the attempt to decrypt actually damages the file rather than just failing.
Fortunately, there is a work around for this problem, but it requires you to elect to use the lowest common denominator in terms of encryption strength across all platforms. A simple Registry edit can change the default behavior of each platform to use a shared common encryption scheme. For details on making this change to your systems, see the Knowledge Base article #329741, EFS files appear corrupted when you open them.
About the author
James Michael Stewart is a partner and researcher for ITinfopros, a technology-focused writing and training organization.
For more information, visit these other resources:
