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AES-256 Encryption Isn’t Enough: Why Enterprise File Security Requires Multi-Layer Protection

by Bob Ertl updated November 21, 2025 Secure File Sharing

Reading Time: 12 minutes

AES-256 encryption protects files stored on servers and databases by converting data into unreadable ciphertext. However, data exists in three distinct states during its lifecycle: at rest, in transit, and in use. Each state requires specific encryption technologies to maintain protection. Without encryption coverage across all three states, sensitive data becomes vulnerable during transfers between systems, while being processed in application memory, or when encryption keys are stored insecurely.

In this post, we’ll explore all three encryption types to better understand how they differ but, more importantly, how they’re all critical for protecting all your sensitive data, no matter where it’s stored, with whom it’s being shared, or how it’s being used.

Table of Contents

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Executive Summary

Main Idea: AES-256 encryption secures data at rest but leaves data vulnerable during network transmission, active processing, and throughout the encryption key lifecycle without additional encryption technologies.

Why You Should Care: Organizations that encrypt only data at rest expose sensitive files to interception during transfers, compromise during processing, and theft through insecure key storage even when files remain encrypted on disk.

5 Key Takeaways

1. Data exists in three states that each require encryption: at rest on storage systems, in transit across networks, and in use during active processing. AES 256 encryption addresses only the first state, leaving two critical vulnerability windows unprotected.

2. TLS 1.2 or higher protocols encrypt data in transit using the same AES cipher suites that protect data at rest. Organizations need both technologies working together to maintain encryption coverage as files move between systems.

3. Encryption in use protects data while applications actively process it in memory or display it on screens. Technologies like Intel SGX, ARM TrustZone, and confidential computing prevent memory dumps and side-channel attacks from exposing decrypted data.

4. Hardware Security Modules store and manage encryption keys in tamper-resistant devices that prevent key theft even when servers are compromised. HSMs provide FIPS 140-3 Level 1 validated encryption or higher protection for the cryptographic keys that unlock encrypted data.

5. Encryption key management determines whether your data protection remains secure or becomes the weakest link in your security architecture. Poor key storage, inadequate rotation policies, and lack of key recovery procedures undermine even the strongest encryption algorithms.

What AES-256 Encryption Actually Protects

AES-256 is a symmetric encryption algorithm that uses 256-bit keys to encrypt data at rest on storage devices, databases, and backup systems.

The algorithm transforms readable files into ciphertext that appears as random characters to anyone without the decryption key. When implemented correctly, AES-256 encryption protects data stored on hard drives, solid-state drives, and storage area networks from unauthorized access. NIST approved AES for protecting classified information up to the Secret level, and the algorithm has withstood decades of cryptographic analysis without successful attacks against its core design.

However, AES-256 encryption at rest provides no protection once data leaves storage systems. Files must be decrypted before they can be transmitted to other systems, displayed to users, or processed by applications. These transition points create vulnerability windows where data exists in unencrypted form unless additional encryption best practices protect it.

What AES-256 data-at-rest encryption protects:

Files stored on servers, databases, and storage arrays
Data on backup tapes and archived media
Information on lost or stolen devices

What AES-256 data-at-rest encryption does not protect:

Data moving across networks between systems
Files being processed in application memory
Information displayed on user screens or transmitted via email

Understanding the Three States of Data

What Are the Three States Where Data Needs Encryption?

Data moves through three distinct states during its lifecycle, and each state presents different security challenges that require specific encryption approaches.

Data at rest describes information stored on physical or virtual storage media including hard drives, databases, file servers, and backup systems. AES-256 encryption protects data at rest by encrypting entire disks, individual files, or database fields so that physical theft or unauthorized system access cannot expose sensitive information.

Data in transit refers to information actively moving across networks, whether between data centers, from servers to user devices, or through email systems. During transmission, data passes through routers, switches, firewalls, and other network infrastructure where it could be intercepted. Network-level encryption protocols protect data in transit by creating encrypted tunnels that prevent eavesdropping.

Data in use represents information being actively processed by applications, loaded in system memory, or displayed on user screens. Applications must decrypt data to process it, creating a window where information exists in plaintext form in RAM. Specialized encryption technologies protect data in use by creating secure computing environments that isolate sensitive processing from the rest of the system.

Encryption requirements for each state:

Data at rest: AES-256 file or disk encryption with secure key storage
Data in transit: TLS 1.2 or higher with strong cipher suites
Data in use: Confidential computing, secure enclaves, or memory encryption

Encryption for Data in Transit

How Does TLS Encryption Protect Data Moving Across Networks?

Transport Layer Security (TLS) encrypts data as it moves across networks between clients and servers, creating encrypted communication channels that prevent interception and tampering.

TLS 1.2 and TLS 1.3 use AES cipher suites to encrypt network traffic, providing the same cryptographic strength for data in transit that AES-256 provides for data at rest. When a client connects to a server, the two systems negotiate encryption parameters, authenticate each other using digital certificates, and establish session keys that encrypt all subsequent communications.

Modern TLS implementations support perfect forward secrecy, which generates unique session keys for each connection. This approach ensures that if attackers later compromise a server’s private key, they cannot decrypt previously captured network traffic.

Organizations should disable older protocols including SSL 3.0, TLS 1.0, and TLS 1.1, which contain known vulnerabilities. NIST recommends TLS 1.2 as the minimum acceptable version, with TLS 1.3 preferred for new implementations.

Critical TLS configuration requirements:

TLS 1.2 or higher with strong cipher suites (AES-GCM preferred)
Valid digital certificates from trusted certificate authorities
Perfect forward secrecy enabled

What Other Protocols Encrypt Data in Transit?

Email encryption protocols protect messages and attachments during transmission between mail servers and when stored in recipient mailboxes.

S/MIME (Secure/Multipurpose Internet Mail Extensions) encrypts email messages using recipient public keys and signs messages with sender private keys. This approach provides end-to-end encryption where only the intended recipient can decrypt messages, along with digital signatures that verify sender authenticity.

Secure file transfer protocols encrypt files during uploads, downloads, and server-to-server transfers. SFTP (SSH File Transfer Protocol) uses SSH encryption to protect file transfers, while FTPS (FTP Secure) layers FTP commands over TLS connections.

Email and file transfer encryption options:

S/MIME or PGP for end-to-end email encryption
SFTP or FTPS for encrypted file transfers
AS2 or AS4 protocols for B2B document exchange

Encryption for Data in Use

How Do Organizations Encrypt Data While It’s Being Processed?

Data in use encryption protects information while applications actively process it in system memory, preventing attackers from accessing decrypted data even when they compromise the underlying operating system or hypervisor.

Intel Software Guard Extensions (SGX) creates isolated execution environments called enclaves where applications process sensitive data. Code and data inside enclaves remain encrypted in memory, and the processor decrypts instructions only within the secure enclave. This isolation prevents privileged malware, compromised operating systems, and even physical memory attacks from accessing data being processed inside the enclave.

ARM TrustZone provides similar capabilities by partitioning processor resources into secure and normal worlds. Sensitive operations execute in the secure world where they remain isolated from applications running in the normal world.

AMD Secure Encrypted Virtualization (SEV) encrypts virtual machine memory with keys managed by the processor rather than the hypervisor. This approach protects workloads in cloud environments where organizations do not control the underlying infrastructure.

Technologies that protect data in use:

Intel SGX enclaves for isolated processing environments
ARM TrustZone secure world partitioning
AMD SEV for encrypted virtual machine memory
Confidential computing frameworks that combine these technologies

What Is Confidential Computing?

Confidential computing protects data during processing by performing computations inside hardware-based trusted execution environments that isolate data from the operating system, hypervisor, and other system software.

These technologies address scenarios where data must be decrypted for processing but the processing environment itself may be compromised or controlled by potentially untrusted parties. Financial institutions use confidential computing to process transactions in cloud environments, healthcare organizations analyze patient data without exposing it to cloud providers, and government agencies handle classified information on shared infrastructure.

Confidential computing use cases:

Processing regulated data in public cloud environments
Multi-party computation where no single party should see all inputs
Analyzing encrypted datasets without decryption to untrusted systems

Hardware Security Modules and Key Management

Why Do Encryption Keys Need Dedicated Hardware Protection?

Hardware Security Modules are tamper-resistant physical devices that generate, store, and manage cryptographic keys in a secure environment separate from general-purpose servers.

HSMs protect encryption keys through physical security controls that detect and respond to tampering attempts. FIPS 140-2 Level 3 HSMs destroy keys if someone attempts to physically open the device, while Level 4 devices include active tamper detection that erases keys when environmental conditions change.

The devices perform cryptographic operations internally without exposing keys to server memory where malware could capture them. When an application needs to encrypt or decrypt data, it sends the operation request to the HSM, which performs the cryptography and returns only the result. Keys never leave the protected hardware environment.

Organizations subject to compliance requirements often must use FIPS 140-2 validated HSMs for key management. PCI DSS requires HSMs for protecting payment card encryption keys, while CMMC Level 3 and above mandate HSM use for classified information protection.

HSM security capabilities:

FIPS 140-2 Level 3 or 4 tamper-resistant hardware
Secure key generation using hardware random number generators
Cryptographic operation acceleration
Key backup and recovery procedures

What Happens When Organizations Manage Keys Poorly?

Encryption key management failures undermine even the strongest encryption algorithms. Poor key storage practices, inadequate rotation policies, and missing recovery procedures create vulnerabilities that attackers exploit to access encrypted data.

Storing encryption keys on the same servers as encrypted data eliminates the protection encryption provides. An attacker who compromises the server gains access to both encrypted files and the keys needed to decrypt them.

Failure to rotate encryption keys regularly increases the impact when keys are compromised. If an organization uses the same encryption key for years and that key is eventually stolen, attackers can decrypt all historical data protected by that key.

Missing key recovery procedures create business continuity risks. When key management personnel leave organizations without documenting key locations or recovery methods, encrypted data can become permanently inaccessible.

Key management failures that compromise encryption:

Storing keys alongside encrypted data
Never rotating encryption keys
Lack of key backup and recovery procedures
Insufficient access controls for key management systems

How These Encryption Technologies Work Together

What Does Complete Encryption Coverage Look Like?

Complete encryption coverage protects data throughout its entire lifecycle by applying appropriate encryption technologies at each state and transition point.

A file created on a user’s laptop starts with encryption at rest protecting it on the local disk. When the user uploads the file to a corporate file server, TLS encryption protects it during transit across the network. The file arrives at the server where it is again encrypted at rest using AES-256 with keys stored in an HSM. When another user accesses the file, TLS encryption protects the download, and the receiving device applies encryption at rest on local storage.

This layered approach ensures that data remains encrypted everywhere except in the minimal processing windows where decryption is absolutely necessary.

End-to-end encryption coverage:

Data at rest encrypted with AES-256 on all storage systems
Data in transit protected by TLS 1.2 or higher for all network communications
Data in use processed in secure enclaves when handling extremely sensitive information
Encryption keys managed by FIPS 140-2 validated HSMs

Where Do Organizations Most Commonly Have Encryption Gaps?

File sharing and collaboration systems frequently lack encryption in transit when users share files through consumer services or email attachments without S/MIME protection.

Organizations may encrypt data at rest on servers but fail to encrypt it during email transmission, allowing anyone monitoring network traffic to intercept sensitive files. Similarly, cloud file sharing services may use HTTPS for web uploads but lack encryption for API-based transfers or mobile app synchronization.

Backup and archive systems represent another common gap. Organizations encrypt production data but store backups in unencrypted form, or encrypt backup files but store encryption keys alongside the backups on the same media.

Common encryption gap scenarios:

Email attachments transmitted without S/MIME or TLS
Backup systems that encrypt inconsistently or store keys insecurely
Legacy applications that predate modern encryption requirements
Mobile devices that lack full-disk encryption

Complementary Technologies That Work Alongside Encryption

How Do Authentication Systems Protect Encryption Keys?

Identity and access management (IAM) systems control which users and applications can access encryption keys and decrypt protected data.

Multi-factor authentication (MFA) requires users to provide multiple forms of verification before accessing systems that hold encryption keys. Even if attackers steal passwords, they cannot decrypt data without the second authentication factor. NIST recommends MFA for all systems accessing sensitive data, and compliance frameworks including CMMC Level 2 and HIPAA mandate MFA for systems containing regulated information.

Authentication controls for encryption systems:

Multi-factor authentication for all key management access
Role-based access controls limiting key permissions
Just-in-time access that grants temporary decryption rights

What Is Digital Rights Management for Encrypted Files?

Digital rights management controls maintain protections on files even after users authenticate and decrypt them for viewing or editing.

Kiteworks safeVIEW and safeEDIT features prevent users from downloading encrypted files to local devices, instead allowing them to view or edit content within a controlled browser environment. This approach keeps sensitive data on secure servers rather than distributing it to potentially unmanaged endpoints where it could be copied, forwarded, or exposed through device theft.

DRM capabilities that extend encryption protection:

View-only access that prevents downloads
Secure editing without local file copies
Expiring access to shared content

How Does Email Protection Maintain Encryption Coverage?

Email represents a significant encryption gap for many organizations because standard SMTP transmission lacks built-in encryption, and users frequently send sensitive files as attachments through unprotected channels.

Kiteworks email protection gateway encrypts all outbound email and attachments before transmission, applying S/MIME or TLS encryption automatically without requiring users to manage certificates or encryption keys. The gateway scans messages for sensitive content and can enforce policies that require encryption for messages containing regulated data.

Email protection capabilities:

Automatic S/MIME or PGP encryption for outbound messages
TLS enforcement for server-to-server email transmission
Content scanning before encryption to enforce data protection policies

How Kiteworks Implements Multi-Layer Encryption

Kiteworks delivers encryption coverage across all three data states through integrated technologies that protect files throughout their entire lifecycle.

AES-256 encryption at rest protects all files stored in the Kiteworks system, with encryption keys managed through integrated HSM support or customer-controlled key management systems. Organizations can implement FIPS 140-3 Level 1 validated encryption for compliance with government and regulatory requirements.

TLS 1.2 and 1.3 encryption for data in transit protects files during upload, download, and sharing operations. The platform enforces strong cipher suites and perfect forward secrecy for all network communications.

Hardware Security Module integration provides FIPS 140-2 Level 3 protection for encryption keys, supporting both cloud HSM services and on-premises HSM appliances. Organizations maintain control over key management while benefiting from tamper-resistant hardware protection.

Private Content Network architecture consolidates email, file sharing, managed file transfer, and web forms into a unified encrypted environment. This approach eliminates the encryption gaps created when organizations use separate point solutions for different communication channels.

S/MIME and PGP email encryption protects messages and attachments through the Kiteworks email protection gateway, automatically encrypting sensitive content without requiring users to manage certificates or configure encryption settings.

safeVIEW and safeEDIT capabilities prevent file downloads while allowing users to view and edit content within secure browser sessions, keeping encrypted files on protected servers rather than distributing them to endpoint devices.

How Kiteworks Approaches Encrypted Data Transfer

AES-256 encryption provides essential protection for data at rest but addresses only one of three states where data requires encryption coverage. Organizations need TLS encryption for data in transit, confidential computing technologies for data in use, and Hardware Security Modules for encryption key management to maintain protection throughout the data lifecycle.

Encryption gaps at state transition points create vulnerabilities that attackers exploit to access sensitive information. Files may be encrypted on servers but exposed during network transmission, protected during transfer but compromised while being processed, or secured by strong algorithms but undermined by poor key management.

Complete encryption coverage requires appropriate technologies for each data state working together as a unified system. Authentication controls determine who can decrypt data, while digital rights management extends protections beyond the decryption point to prevent unauthorized distribution.

Kiteworks implements this multi-layer encryption approach through a Private Data Network that protects data at rest with AES-256, secures data in transit with TLS 1.3, manages keys through HSM integration, and maintains control over decrypted content through safeVIEW and safeEDIT capabilities. The platform consolidates secure email, secure file sharing, secure MFT, SFTP, and secure data forms into a single encrypted environment that eliminates the gaps created by using disparate point solutions.

To learn more about encryption and protecting the sensitive data you process, hold, and share, schedule a custom demo today.

Frequently Asked Questions

You need TLS 1.2 or higher for encrypting data in transit and S/MIME or PGP for end-to-end email encryption. TLS protects files during transfer between servers and clients, while S/MIME encrypts email messages and attachments so only intended recipients can decrypt them. Organizations should also implement SFTP or FTPS for encrypted file transfers and ensure all file sharing systems enforce TLS for uploads and downloads.

Software key storage keeps encryption keys in configuration files, databases, or key management services running on general-purpose servers where malware or compromised administrators can access them. HSMs store keys in tamper-resistant hardware that destroys keys if physical tampering is detected, performs cryptographic operations internally without exposing keys to server memory, and provides FIPS 140-3 Level 1 validated encryption, or higher, required by many compliance frameworks.

No, data must be decrypted for application processing, creating a vulnerability window where attackers with application-level access can capture information. Organizations handling highly sensitive data should implement confidential computing technologies like Intel SGX or AMD SEV that protect data in use by processing it in hardware-isolated secure enclaves where even privileged malware cannot access decrypted information.

CMMC Level 2 requires encryption for CUI at rest and in transit, which means implementing both AES-256 for stored data and TLS 1.2 or higher for network communications. The framework also mandates FIPS 140-3 Level 1 validated encryption modules, secure key management practices, and documented procedures for key generation, distribution, storage, and destruction throughout the key lifecycle.

Industry best practices recommend rotating encryption keys at least annually, with quarterly rotation preferred for highly sensitive data. After rotation, systems should maintain previous key versions to decrypt historical data while encrypting new data with current keys. Organizations need key versioning systems that track which key encrypted each file and automated processes that gradually re-encrypt older data with current keys over time.

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