Canada: New Mandatory Data Breach Reporting Rules – Tips To Protect Your Organization

What was the first thing that went through your mind the last time you lost your cell phone? How about that time when your laptop was stolen from your car? Your first thoughts were probably focused on how you could track it down, if you had backed up the proposal that was due later that week or the $800 you were going to have to shell out to replace that month-old phone.

In the midst of all those thoughts, you probably didn't consider reporting the incident to the federal privacy commissioner. Well, under new federal laws taking effect on November 1, 2018, businesses, societies, charities and other private sector organizations in BC may be required to report these mishaps to the Office of the Privacy Commissioner of Canada ("OPC") where the incident involves the loss or disclosure of personal information.

Why should it matter to you?

Mandatory data breach reporting for private sector organizations collecting, using or disclosing personal information is about to become the new normal. This has been a requirement for public sector organizations for some time. Alberta imposed a similar reporting scheme on the private sector in 2010 and the European Union followed suit earlier this year with its General Data Protection Regulation.

Under the new federal laws coming into effect on November 1, 2018, organizations must implement new procedures to identify and report data breaches involving personal information to both the OPC and the affected individual, where that breach creates a real risk of significant harm to an individual. Organizations will also be required to keep records of data breaches involving personal information, copies of which must be provided to the OPC upon request.

When should I report?

Currently, Canadian privacy laws require organizations to implement security safeguards to protect personal information they hold against loss, theft or unauthorized access, disclosure, copying, use or modification. Most data breaches described in the media involve reports of sophisticated hacking syndicates influencing national elections or infiltrating commercial data centres to steal and sell customer names and credit card details on the dark web. Unfortunately, the reality is often much more mundane and hits closer to home. Typically, a data breach is a lost or misplaced USB stick or an employee sending an email to an unintended recipient.

Under the new data breach reporting rules, organizations must report a data breach if it is reasonable to believe that the breach creates a real risk of significant harm to an individual.

What does this mean in practice?

Whether or not the incident causes significant harm requires the organization to consider a variety of factors, including the potential for bodily harm, humiliation, damage to reputation, financial harm and identity theft. In determining whether there is a real risk of that harm materializing, your organization will need to consider the sensitivity of the lost or disclosed information and the possibility that it has been, is being or will be misused.

The OPC recently published draft guidelines that provide guidance on how organizations can assess whether a breach gives rise to a real risk of significant harm. In particular, when assessing the probability of misuse, the OPC recommends that organizations ask themselves a number of questions, including the amount of personal information exposed, whether the information has been recovered and whether the person who obtained the personal information is likely to cause harm with it.

In addition to the OPC's guidelines, past experiences in Alberta provide some helpful guidance on when a breach of security safeguards should be reported, demonstrating a tendency toward reporting where:

  • the breach involved theft or some deliberate or malicious act, such as actual fraud;
  • the breach was undiscovered or ongoing for a period of months or years; or
  • the data or device was unencrypted, not password protected or never recovered.

What are the consequences if you don't report?

Depending on the nature of the breach and your organization's response or lack of response, the OPC can impose a fine of up to $100,000. However, as a practical matter, the fine itself may pale in comparison to the impact of a data breach on your brand's reputation and customer loyalty.

Proactive reporting will also provide your organization with the opportunity to shape the narrative relating to the breach, rather than your customers learning about their lost credit card details through their Facebook feed.

What can I do to protect my organization?

There are a number of measures your organization can undertake now to be ready for the new mandatory data breach reporting rules, including the following:

Review your existing security safeguards

As most organizations collect, use or disclose personal information on a daily basis, now would be a good time to take stock of where that information is stored, who has access to it and what measures your organization currently has in place to protect it.

For example, if you keep client or customer documentation in filing cabinets, are they fitted with locks? If so, are they routinely secured when not in use? Is the data on your organization's computers, USB sticks and other devices encrypted and password protected? How strong are your organizational password policies and do you require two factor authentication? If your data is in the cloud, is your cloud provider required to notify you of security breaches and, if so, will the cloud provider notify you directly or are notices posted on their customer portal?

Updates to security safeguards and practices now may help prevent future breaches and mitigate the organizational risks associated with the data breach notification rules.

Develop and implement a data breach management policy

Given the diversity of events that can lead to data breaches, it is more a matter of 'when' rather than 'if' your organization will be impacted by a data breach. A key component in your privacy compliance arsenal is a comprehensive data breach management policy, together with an effective data breach response plan. The policy and plan should provide your organization with a framework and action plan to address data breaches, including:

  • a clear statement of what constitutes a data breach to assist personnel to identify incidents;
  • the roles and responsibilities of key personnel when a breach is identified, including when it is appropriate to engage external advisors to investigate the source of the breach and protect the confidentiality of any resulting reports;
  • a strategy to contain, assess, manage and remediate the breach;
  • comprehensive documentation protocols to record the details of each data breach, which should align with the information to be notified to the OPC including the circumstances of the breach, when it occurred, the personal information affected and the steps your organization will take to minimize the risks; and
  • an effective program for managing post-breach communications to both the OPC and consumers generally.

Promote a culture of compliance

At an organizational level, developing a culture of privacy compliance is a sound investment from both a risk and reputational perspective. Personnel who are familiar with an organization's privacy policies and aware of the importance of safeguarding personal information are more likely to identify both potential and actual breaches and to notify the appropriate personnel to take action.

On that basis, all personnel should be provided with induction training on the proper handling personal information which should be supported by on-going refresher training. All of this should be supported by effective technology and a clear alignment between the organization's goals and privacy compliance.

Is BC different?

Does data breach notification apply in BC? The answer is yes and no. Yes, breach notification will apply to all personal information that is caught by the federal privacy law, the Personal Information Protection and Electronic Documents Act ("PIPEDA"), but does not apply to personal information caught only by the British Columbian privacy law, the Personal Information Protection Act ("PIPA"). The federal PIPEDA law applies to organizations which are federally regulated industries (e.g. banks, airlines and telecos), organizations which move personal information across provincial or international borders or in provinces who have failed to adopt similar legislation to PIPEDA. Because BC's PIPA is similar to the federal PIPEDA, if personal information is collected, used or disclosed within BC only, it will not be caught by the federal PIPEDA and the breach notification rules and obligations under PIPEDA.

However, it is important to be aware that BC will likely adopt data breach notification rules under PIPA similar to those found in PIPEDA in the near future. Further, it is best practice to ensure that your organization is compliant with the federal law and ready for the likely changes in BC law, as these are the expectations in the marketplace.

Next Steps?

The new mandatory data breach notification rules are a significant change that alters the risk profile of dealing with personal information in the digital age. However, like any risk, it can be managed with appropriate level of foresight and preparation. With less than a month remaining before these new requirements come into effect, now is the time to ensure your organization is prepared to act on its next data breach.

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.

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