Australia: Legal Frontiers in Cyber-Security

Last Updated: 23 November 2015
Article by Tal Williams and Joann Yap

Tips

  • Take the time to develop an understanding of the cyber threats that could affect your business.
  • Work with your clients or board to create a solid cyber-security program that involves the board, management, IT team and employees. A holistic and inclusive approach is required to ensure that proper and functional policies are in place that can and will be complied with.
  • Within this ever changing space, continued vigilance and attention to new and current methods, policies, systems and procedures is fundamental if organisations are to minimise the chance of a cyber-attack.

Introduction

Recent high-profile data breaches by Sony Pictures, eBay and the dating website Ashley Madison highlight the increasing importance of hypervigilance in relation to cyber-security. The economic and reputational damage to businesses where poor or inadequate business practices are in place to protect data are self-evident, but legal ramifications are becoming more of an issue. Given the potential impact and frequency of cyber-attacks, it is increasingly obvious that businesses of all sizes and in all industries should allocate resources and tools to implement appropriate strategies. Failure to do so may have legal as well as business related consequences.

Mobile Devices

It is not just central systems that need to be considered. With the increased use of and access to laptops, mobile access devices and remote access computers, many attacks are directed towards these devices rather than to the central system itself. While many organisations implement security measures in relation to their central systems, hackers have found that peripheral devices are often far less protected, and once infiltrated, often provide a clear and open line to the business.

IoT

Cyber-security cannot now be limited to information, data and systems security. The growth of the Internet of Things (IoT), in which products ranging from entertainment systems to children's toys and medical devices are increasingly connected to the internet, means businesses which engage in these areas need to consider cyber-security from yet another angle. A study released by Hewlett-Packard stated that 70 per cent of the most commonly used IoT devices contained serious vulnerabilities.i The impact of such a cyber-security breach was demonstrated on 24 July this year where the Fiat Chrysler Group issued a recall notice for 1.4 million vehiclesii as a result of the ability of two external cyber-security researchers to remotely control a Jeep over the internet and disable the engine and brakes.iii

Previous bulletins have provided high-level outlines of strategies that corporate legal counsel will need to consider to mitigate risk. This article will drill down further in the context of the Australian Signals Directorate and Office of the Australian Information Commissioner advice, as well as the recent Wyndham case arising in the United States to determine how these might impact on organisations and directors in the Australian cyber-security legal landscape.

Cyber-attacks: a distant threat for Australians?

While the cyber threat is not new and has received international media attention, its importance may not often be fully appreciated by Australian businesses. Material damage can be done by hackers and malicious software, but also by those much closer to home. As indicated in the Australian Government's Computer Emergency Response Team (CERT) Cyber Crime & Security Reportiv a large proportion of organisations surveyed indicated that many cyber-attacks are perpetrated by trusted insiders, ex-employees or business competitors seeking to do damage or to extract valuable information.

On 29 July 2015 the Australian Cyber Security Centre (ACSC) released its first unclassified Threat Report to assist businesses in understanding the types of cyber security threats, their impact and mitigation advice. The report aims to advise businesses of their responsibility to ensure adequate protection from cyber threats and to encourage reporting of cyber incidents to the ACSC. Businesses will need to be aware that such attacks can affect them, and additionally ensure that they meet not only their formal obligations under, for example, Australian privacy law, but also to enact baseline protocols and systems to meet the standards expected of their industry. For Australian businesses with international operations, there are also the requirements of the jurisdictions in which the business operates.

This has been brought home recently in the case of Adobe Systems Software Ireland Pty Ltd (Adobe). In late 2013 that there had been a major breach of information that affected more than 38 million Adobe customers globally. The compromised information included email addresses, encrypted passwords, encrypted payment card numbers and payment card expiration dates which were held on a backup system that was selected to be decommissioned. The breaches related to information contained in Adobe's cloud. The United States, the United Kingdom, Australia and India all have laws that raise the prospects for multi-jurisdictional legal action.

In Australia, for example, the attack affected at least 1.7 million people. The Office of the Australian Information Commissioner (OAIC) conducted an investigation in cooperation with the Data Protection Commissioner of Ireland and the Office of the Privacy Commissioner of Canada pursuant to cross-border privacy and legal enforcement arrangements. On 9 June 2015 the Commissioner found that Adobe breached the Australian Privacy Act 1988 (Cth) (the Privacy Act) and failed to take reasonable steps to protect the personal information it held, stating that 'The Privacy Act does not require an organisation to design impenetrable systems, however, this case demonstrates the importance of organisations applying sufficiently robust security measures consistently across systems'.v As the breach occurred before the new privacy regime changes were brought into effect on 12 March 2014, the Commissioner's powers to resolve the investigation were limited to making recommendations and requesting Adobe to engage independent auditors to certify that it had implemented planned remediation, and to provide a copy of the certification and auditor's report. If the breach occurred after 12 March 2014, Adobe could have been fined up to $1.7 million and had further onerous and binding orders placed upon it.

To give some idea of the Australian industries and organisations affected by cyber-attacks and the intersection of privacy law, it should be noted that the Commissioner has more recently finalised investigations into breach notifications by a number of Australian organisations, including Catch of the Day and Aussietravelcover, and is now conducting an own-motion investigation into a suspected data breach of iiNet subsidiary Westnet in which a cyber-attack had allegedly compromised the personal information of Westnet customers and which had been subsequently offered for sale online.

The Wyndham case

The US case of Federal Trade Commission v Wyndham Worldwide Corporation, et al.vi is one of the first to highlight the increasing emphasis on the requirement for certain baseline cyber-security practices to be implemented. The FTC has previously issued policy statements and guidance for business in relation to data security. In that case it was alleged that there were three breaches in which directors and officers of the Wyndham Worldwide Corporation (Wyndham) failed to implement reasonable and appropriate data security measures for consumers' personal information, and therefore violated a legislative provision against acts or practices in or affecting commerce that are 'unfair' or 'deceptive'.

In Australia that would seem to correlate with an allegation of breach of director's duties under the Corporations Act 2001 (Cth), and also a misleading and deceptive conduct claim under the Competition and Consumer Act 2010 (Cth).

The Federal Trade Commission (FTC) in the Wyndham case alleged that Wyndham had privacy policies regarding the privacy and confidentiality of personal information on its website which represented that Wyndham safeguarded the information using industry standard practices. It was alleged that Wyndham had not actually implemented reasonable and appropriate measures, and that Wyndham's representations were false or misleading and constituted deceptive acts or practices. A number of complaints included that Wyndham:

  • allowed software at hotels to store payment card information in clear readable text;
  • failed to monitor its network for malware used in a previous breach that was then reused by hackers to access the system;
  • did not employ common methods to require user IDs and passwords that are difficult for hackers to guess, such as allowing remote access to a property management system that used default/factory setting passwords;
  • did not readily available security measures, such as firewalls, to limit access; and
  • failed to employ reasonable measures to detect and prevent unauthorized access to the network or to conduct security investigations.

The United States District Court of New Jersey confirmed that the FTC had the authority to pursue claims that companies failed data security requirements under the legislative provision and had sufficiently plead deception and unfairness claims under that provision. Wyndham attempted to have the matter struck out early, but was unsuccessful. The United States Court of Appeals for the Third Circuit has now issued a ruling in FTC's favour, upholding the District Court's ruling that the FTC, under the unfairness provision, has authority to bring enforcement actions against companies whose inadequate cybersecurity measures caused substantial injury to consumers.

The case highlights that:

  1. Businesses are expected to have in place minimum standards and must ensure ongoing compliance with those data protection standards. Failure to do so could result in compensation or penalties being imposed, together with the potential for civil action.
  2. Cooperation with industry regulators is key. Published guidance from regulators are a starting point for developing cybersecurity policies and practices.
  3. Data breaches are expensive and the cost of regulatory investigation and litigation can be high. Businesses are better served by investing in upfront security measures.
  4. Privacy policies and other public-facing documents may be cited in future cybersecurity litigation.
  5. A solid cyber-security program is essential, and lawyers and boards should work holistically and seek assistance in understanding the company's data security and compliance policies.
  6. Businesses should reduce risk in relation to data security by implementing measures such as limiting data collection and retention and limiting third party access.
  7. Businesses should review insurance policies as mentioned in previous bulletins.

Liability under the Australian regime

While the Wyndham case is still ongoing and can now move to the merits phase at the District Court, it provides an example of the types of actions that can be brought against companies, directors and officers as a result of cyber-attacks. Similar powers to that of the FTC are conferred on the OAIC under the Australian Privacy Principles which govern privacy and data protection in Australia. Shareholders and customers relying on privacy policies or statements that are subsequently found to be inadequate due to a successful cyber-attack may also find that they can resort to similar misleading and deceptive conduct legislation, including under the Australian Consumer Law.

Lawyers should be aware in advising clients on their corporate governance practices that, in addition to the above, cyber-security and security of data should be of key concern in the organisation's risk management strategy. There is some potential for the development of tort liability for consequential damages caused by inadequate or negligent cybersecurity measures. Directors may be personally liable for misleading and deceptive conduct should shareholders or customers bring proceedings following a data breach where a director has either 'aided and abetted' or 'been in any way, directly or indirectly, knowingly' involved.

The duties of directors in relation to care and diligence and continuous disclosure are likely to include the requirement for directors to put themselves in an informed position as well as the responsibility for, and continuous monitoring and review of, policies relating to data and cyber-security. The United States National Association of Corporate Directors has published a number of guides including Cybersecurity: Boardroom Implicationsvii and Cyber-Risk Oversight: Director's Handbook Seriesviii which encourages a top-down approach to encourage board cyber literacy.

It should be noted that cyber-security breaches may also have some bearing on the general obligations of publicly listed companies on the Australian Stock Exchange (ASX) to inform the ASX of any information that a reasonable person would expect to have a material effect on the company's share price or value. Directors in that instance would need to consider whether disclosures should be made to avoid breaching the Corporations Act and limit the potential for class action.

Practical Assistance

A - Top four strategies to mitigate cyber attacks

Lawyers and particularly in-house counsel need to understand and be prepared to develop a culture of cybersecurity awareness in their own organisations as well as to assist clients in their own infrastructure and processes. While it is not possible to have an impenetrable system, the Australian Signals Directorate (ASD) has published a report on the security effectiveness of 35 strategies to mitigate cyber intrusions, measured against metrics including relative user resistance, upfront cost and maintenance cost.ix The ASD found that at least 85% of the intrusions responded to by the ASD in 2011 involved unsophisticated hackers that would have been mitigated by implementing the top four strategies as a package.

Accordingly, the ASD has listed the top four strategies as essential for overall security effectiveness to protect an organisation from low to moderately sophisticated intrusion attempts. The ASD's report found that the remaining strategies can be selected for implementation in conjunction with a risk assessment, to plug security gaps until an acceptable level of residual risk is reached. The top four are:

  1. Whitelisting: Application whitelisting allows only specifically authorised applications to run on a system, to protect computers and networks from malicious or unapproved applications.
  2. Patching Operating System Vulnerabilities: A patch is a piece of software designed to update, add a new feature, fix a bug or add documentation to a computer program or its supporting data. Operating systems should be patched typically within two days of a vulnerability being made public.
  3. Patch Applications: Specific applications such as Java, Flash and Microsoft Office should also be patched within a two-day timeframe for serious vulnerabilities.
  4. Restrict Administrative Privileges: Administrators are often targeted due to the high level of access to an organisation's ICT system. Minimising administrative privileges makes it more difficult for hackers to spread or hide their existence on a system. Additionally, separate accounts with IT administrator privileges but without internet access should be created.

B - US Framework

As a result of President Obama's Executive Order 13636: 'Improving Critical Infrastructure Cybersecurity, the US National Institute for Standards and Technology has published a comprehensive guide relating to the US's Cybersecurity Framework. It is based upon a 5 tier approach of Identifying, Protecting, Detecting, Responding and Recovering. While now about 18 months old, and not directly referable to Australian standards, it outlines a useful approach that could be adapted for local purposes. x

C- What other reasonable steps should organisations take in the context of privacy?

The OAIC's 'Guide to securing personal information'xi (the Guide) provides further guidance on the reasonable steps organisations should take under the Privacy Act to protect personal information. While not legally binding, the OAIC has stated that it will refer to this guide when investigating whether entities have complied with personal information security obligations or when undertaking assessments.

Broadly, the Guide considers steps and strategies across the following non-exhaustive areas:

  • Governance, culture and training;
  • Internal practices, procedures and systems;
  • ICT security;
  • Access security;
  • Third party providers, including cloud computing;
  • Data breaches;
  • Physical security;
  • Destruction and de-identification; and
  • Standards.

Lawyers will need to consider their client's risk profile (such as the level of sensitivity of data held by a client) and response plans across these and other areas, including notification of affected individuals and the OAIC where there is a data breach. Cyber-security should be taken as a comprehensive holistic approach and not simply limited to the perimeter. Lawyers should understand what data is held on their client's systems, including where the data is located (such as on the cloud), and understand the threat profile attached to the data.

Take for example the own-motion investigation of Cupid Media Pty Ltd (Cupid Media) by the OAIC.xii The outcome of that investigation illustrated that at a minimum, organisations that hold personal information should ensure that customer passwords are encrypted and that more stringent steps are required of organisations handling sensitive information. Lawyers should also ensure that clients have a system or procedure in place to audit, identify and destroy or permanently de-identify information that is no longer required or used.

Conclusion

While it is impossible for organisations to construct impenetrable defences across systems, peripheral devices and even IoT products without limitless resources, it is imperative for lawyers to work collaboratively with board members, IT professionals and all parties in the supply chain to drive a dedicated and fully considered approach to cyber-security. Appropriate data protection and risk management processes must be in place, audited and reviewed periodically. Attention must be paid to regulatory requirements and guidance to limit any potential damage should a cyber-attack occur. Within this ever changing space, continued vigilance and attention to new and current methods, policies, systems and procedures is fundamental if organisations are to minimise the chance of a cyber-attack.

Written by:

Tal Williams, Partner and Joann Yap, Solicitor

This article was first published in Lexis Nexis (September Edition 2015).

Footnotes

i Hewlett-Packard, Internet of Things Security Study, 2014 Report, September 2014, go.saas.hp.com.

ii Fiat Chrysler Automobiles, Statement: Software Update, July 2015, www.media.chrysler.com.

iii Andy Greenberg, Hackers Remotely Kill a Jeep on the Highway – With Me In It, July 2015, www.wired.com.

iv Australian Government, CERT Australia, Cyber Crimes & Security Report 2013, www.cert.gov.au.

v Australian Government, Office of the Australian Information Commissioner, Office of the Australian Information Commissioner cooperates with international counterparts to finalise Adobe investigation, June 2015, www.oaic.gov.au.

vi FTC v Wyndham Worldwide Corporation, et al. See www.ftc.gov.

vii National Association of Corporate Directors, Cybersecurity: Boardroom Implications, January 2014, www.nacdonline.org.

viii National Association of Corporate Directors, Cyber-Risk Oversight Handbook, June 2014, www.nacdonline.org.

ix Australian Government, Defence Signals Directorate, Top four mitigation strategies to protect your ICT system, October 2012, www.asd.gov.au.

x National Institute of Standards Technology, Framework for Improving Critical Infrastructure Cybersecurity, February 12, 2014.

xi Australian Government, Office of the Australian Information Commissioner, Guide to securing personal information, www.oaic.gov.au.

xii Australian Government, Office of the Australian Information Commissioner, Cupid Media Pty Ltd: Own motion investigation report, June 2014, www.oaic.gov.a

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.