A statement said executive-branch departments and agencies have up to 90 days to begin discontinuing use of Kaspersky software and remove the products from computer systems.
"The risk that the Russian government, whether acting on its own or in collaboration with Kaspersky, could capitalize on access provided by Kaspersky products to compromise federal information and information systems directly implicates US national security", it said.
Kaspersky counts among its ranks former Russian intelligence officials and has assisted Russian authorities in investigations of cybercrime, but such links to domestic security services and assistance are routine in the cybersecurity industry.
Kaspersky said it was disappointed by the decision but would attempt to prove that the allegations were unfounded.
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Kaspersky Lab, on the other hand, firmly denies the accusations, stating that it "doesn't have any inappropriate ties with any government" and that there's "no credible evidence" to back up the "false allegations".
"Kaspersky Lab has never helped, nor will help, any government in the world with its cyberespionage or offensive cyber efforts, and it's disconcerting that a private company can be considered guilty until proven innocent, due to geopolitical issues", the company said.
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The directive comes in the wake of an unprecedented Russian operation to interfere in the USA presidential election that saw Russian spy services hack the networks of the Democratic National Committee and other political organizations and release damaging information.
This action is based on information security risks presented by the use of Kaspersky Products on federal information systems.
The order applies to all civilian government networks, but not the military, according to The Washington Post, which first reported the ban. In June, she successfully amended the defense policy bill to ban the Defense Department from using Kaspersky software.
"Regarding the Russian polices and laws being misinterpreted, the laws and tools in question are applicable to telecom companies and Internet Service Providers (ISPs), and contrary to the inaccurate reports, Kaspersky Lab is not subject to these laws or other government tools, including Russia's System of Operative-Investigative Measures (SORM), since the company doesn't provide communication services".
The directive suggests the USA government puts some credence in reports that the popular antivirus company, and its founder Eugene Kaspersky, have close ties to Russian intelligence services.
"The reason all this drama is happening is because there were articles that came out indicating that Kaspersky had ties to the Russian government", said Dan Tentler, founder of Phobos Group.
Earlier this year six top intelligence and security officials told a Congressional hearing that they would not use Kaspersky software.
Also in July, the U.S. government's General Services Administration removed Kaspersky Lab from a list of approved vendors.