European Union: Data Protection Developments In Europe, From Whistleblowing Principles To Security Breach Planning

Last Updated: 17 May 2007
Article by Renzo Marchini

In this issue of our regular data protection and privacy updates we highlight some recent developments in individual member states around Europe.

In Belgium, the SWIFT saga continues with the Belgian Privacy Commission issuing a strong second advisory opinion on SWIFT's failure to comply with its obligations when transferring data to the US. The Commission also issued a recommendation containing basic principles on whistleblowing, which will affect companies which implement whistleblowing schemes.

In Germany, the thresholds for the requirement for a data protection officer have been increased. In France, the regulator (CNIL) has sought to balance the prohibition on collecting data relating to a person's racial or ethnic origin with employers' needs to collect such data in order to implement policies preventing racial and ethnic discrimination in the workplace.

Whilst in the UK, security breaches are all the rage, with the FSA applying a fine of almost £1 million on Nationwide Building Society, and the Information Commissioner accepting undertakings from other banks for their disposal of personal data. These serve as a reminder that firms must continue to assess Information Security risks, and to evolve plans for dealing with breaches of security.

Belgium

SWIFT

The SWIFT saga continues. By way of background, the operations centres of SWIFT, the worldwide financial telecommunications network operator, in Belgium and the US each hold all messages processed by SWIFT, which includes information about transactions occurring entirely outside Europe. The US Treasury Department had served subpoenas on SWIFT requesting general data (the requests were not specific to particular individuals or dates). SWIFT had not informed any EU authorities, Member States or clients of this, but elected to enter into secret negotiations with the Treasury Department regarding the data it would hand over. The Belgian Privacy Commission held SWIFT to be in breach of its obligations as a data controller, specifically failing to inform regulatory authorities of its processing, and failing to comply with the rules concerning personal data transfer to countries outside the EEA.

To bring the matter up to date, following the request of the Belgian Prime Minister, the Belgian Privacy Commission in December analysed the SWIFT case in greater detail and issued a second advisory opinion, which confirmed and built further on both an earlier such opinion as well as the November 2006 opinion of the European Article 29 Working Party.

Although recognizing the existence of a situation of conflict between American and European law, and the fact that SWIFT made considerable efforts to provide certain guarantees through its negotiations with the United States Treasury Department, the Privacy Commission confirmed that SWIFT should have, but failed to, comply with several obligations contained in the Belgian Privacy legislation (i.e. the notification obligation and the obligation to comply with the rules concerning personal data transfers to countries outside the EU).

Whistleblowing Hotlines

The Belgian Privacy Commission recently issued a recommendation with respect to the compatibility of whistleblowing schemes with the Belgian Private Data Protection Law of 8 December 1992.

In this recommendation, the Belgian Privacy Commission indicated that since the Private Data Protection Law applies as soon as personal data is processed by automatic means or is filed or is intended to be filed, it will apply to almost all whistleblowing schemes. The Commission outlined a number of basic principles, which should at least be respected by whistleblowing schemes to be compatible with the Private Data Protection law. These principles are more detailed than the earlier recommendations of the Article 29 Working Party (see our update of August 2006 at http://www.dechert.com/library/DP_Issue1_08- 06.pdf) and relate to (i) honesty, legitimacy, purposefulness of the scheme, (ii) proportionality, (iii) accuracy of the personal data, (iv) transparency, (v) security of the processing operations and filing, (vi) rights of all persons involved (whistleblower, reported person and third parties), and (vii) registration of the database if the data will be automatically processed or at the request of the Belgian Privacy Commission.

The recommendations of the Belgian Privacy Commission are not binding but have an important persuasive authority, and are normally followed by the courts. Therefore, their practical impact is significant and the basic principles can be used as a guideline for companies wishing to implement whistleblowing schemes in Belgium.

France

Collection of Data to Measure Diversity of Employees in France

The French data protection law of 1978 (Article 8) as a general principle prohibits the collection and processing in France of personal data which directly or indirectly shows a person's racial or ethnic origin, except in certain limited cases. However, the fight against discrimination, in particular against racial or ethnic discrimination in the workplace1, which has 1 Pursuant to Article L.122-45 of the French Labor Code, no person may be excluded from a recruitment procedure, no employee may be sanctioned, dismissed or subject to a discriminatory measure owing in particular to his/her origin, his/her actual or presumed belonging to an ethnic group, nation or become a public priority2, has led employers in France to implement tools to measure the diversity of the origin of its employees, and thereby collect and process personal data which could show a person's racial or ethnic origin.

As a result, the French Data Protection Authority (so-called CNIL) "Commission Nationale Informatique et Libertés" issued recommendations on the methods to be used in order to measure the diversity of the origin of employees. Prior to implementing such diversity policies, employers must discuss their objectives with the personnel representatives. Only the use of data which is pertinent vis-à-vis the objectives of the study on diversity within the company and/or company anti-discrimination policy may be used. Certain personal data such as the candidate's or employee's first name, last name, current and original nationality, place of birth, address and parents' nationality or birth place may be collected and processed in order to implement tools to measure the diversity of origins, but the CNIL recommends that data relating to the employee or candidate's original nationality or the nationality or place of birth of his/her parents not be saved in the HR files given the sensitivity of such data and its uncertain relevance. The collection of such data would only require the filing of a normal declaration with the CNIL (as opposed to an authorization). Other data, especially data related to racial, real or presumed ethnic origin, should in no event be collected by employers as there exists no national or regional ethnic-racial statistics in France with which to compare, as there does in the United States. In any event, concerned employees must be informed of the processing on such data, its objectives, the recipients of such data, their rights of opposition, access and rectification. Such processing must be carried out confidentially and must guaranty the anonymity of the employees concerned. After statistics have been issued, the CNIL recommends that the individual data files be destroyed.

Germany

In August 2006, the so called Act on Reduction of Bureaucratic Obstacles, in particular for mediumsized businesses (Erstes Gesetz zum Abbau bürokratischer Hemmnisse insbesondere in der mittelständischen Wirtschaft) was enacted. This act amended the provisions of the German Data Protection Act (Bundesdatenschutzgesetz) dealing with the threshold for the appointment of a Data Protection Officer (Datenschutzbeauftragter) in a company. If a certain number of people are concerned with personal data in the company, such an officer must be appointed. The officer is obliged to ensure that the company complies with the applicable data protection laws. The threshold for people concerned with automatic data processing (automatische Datenverarbeitung) of personal data has now increased from five to ten people. The threshold for those concerned with manual data processing (manuelle Datenverarbeitung) of personal data has not changed and remains twenty. Accordingly, a company is obliged to appoint a data protection officer, if either of those thresholds have been reached.

For companies which have already appointed a data protection officer according to the former laws, such data protection officer can be revoked if a company has less than ten people concerned with automatic data processing. However, it should be noted that a company has to assure that it is in compliance with the applicable data protection laws at all times, i.e. regardless of the obligation to appoint a data protection officer.

United Kingdom

FSA takes action over security breaches by Nationwide

Nationwide Building Society found itself the subject of a great deal of unwanted publicity last November when it emerged that a laptop stolen from the home of an employee in August 2006 contained customer information. On 14 February 2007 this security lapse resulted in the UK Financial Services Authority fining Nationwide £980,000. The fine would have been £1.4 million but for Nationwide's cooperation with the investigation and agreement to settle at an early stage.

The FSA found that Nationwide's security systems and controls were inadequate and, as such, Nationwide had breached Principle 3 of the FSA's Principles for Business: "A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems." The FSA criticised Nationwide's assessment of risk regarding the security of its customer information, and Nationwide's procedures and controls in managing those risks. Nationwide had failed adequately to train and monitor staff, and to have appropriate management procedures to deal with a breach of security. Nationwide's investigations of what information the laptop contained were inadequate (it was a full three weeks after the theft was reported that it realised that the laptop contained customer information) and inhibited its ability to respond rapidly. As such, although no financial crime had been committed here, there had been an increased opportunity that the information could have been used for such purposes. In November 2004 the FSA published a report entitled "Countering Financial Crime Risks in Information Security", and believed that as a result of this report (and other related activities) there should have been an increased awareness of the risks of identify theft. The FSA found it was particularly serious that Nationwide's security measures had not been enhanced as a result of this heightened awareness despite internal recommendations of its own staff.

This is a salutary reminder of the need for proper security to be put in place by those controlling customer data.

ICO also takes action over security breaches

On 12 March 2007 the Information Commissioner's Office (ICO) found eleven banks to be in breach of their obligations as data controllers under the Data Protection Act 1998. The ICO received and investigated complaints regarding the processing of personal data at certain branches of various institutions including The Royal Bank of Scotland, National Westminster Bank plc, Barclays Bank plc, The Co-operative Bank plc and, again, Nationwide. Each was found to have disposed of documents containing personal data of its customers in waste receptacles outside branch offices. Items which were found include standing order details, customers' names and account numbers, details of a PIN number to a customer's account, completed insurance application forms, and personal financial overviews for customers.

As a result of the findings of the ICO investigation, the banks signed formal undertakings to comply with the data protection principles. Deputy Commissioner David Smith stated it was "unacceptable for banks and other organisations to carelessly discard their customers' information", and that "[i]ndividuals must feel confident that banks and other organisations are safeguarding their personal information". The ICO stated it would take further enforcement action against these companies if they fail to comply with their undertaking, and these companies should carry out an audit of their information security systems.

Other security breaches

Halifax, Nottinghamshire Teaching Primary Care Trust, and TKMaxx also all found themselves the subject of unwanted publicity as a result of serious security breaches.

A computer printout containing the names of around 13,000 Halifax mortgage customers was stolen from the car of a Halifax employee, together with address, mortgage account number and balance details on the print out. On (presumably, coincidentally) the same evening, laptops were stolen from the offices of Nottinghamshire Teaching Primary Care Trust (PCT). They contained the names, address and date of birth of children aged between 8 months and 8 years old in certain areas of Nottinghamshire. Access to this information was protected by password only. The PCT stated it has written to the families affected (of which there are almost 10,000) to notify them of the theft, and set up a helpline to provide further information. Lastly, the parent company of T.K.Maxx, TJX, recently announced it discovered that it suffered breaches of its computer security systems both in the US and in the UK relating to more than 45 million credit and debit cards used in transactions in, and customers who returned goods without a receipt to, its U.S., Puerto Rico and Canada stores.

No Security Notice Breach Requirement in the UK

These cases have reopened a debate as to whether there should be a requirement on those handling personal data to inform customers (the data subjects) of any security breach when that has occurred, which is not the law in the UK, but is the position in some US States. As it turns out, organisations do when suffering such breaches sometimes nonetheless voluntarily decide to notify customers/individuals. Enforcement agencies may well take such action into account when determining sanctions. For instance, Nationwide wrote to all 11 million of its customers, which was a factor relevant to the action taken by the FSA, although it is not clear whether Nationwide actually wrote as a result of a request by the FSA.

Key Points for Financial Institutions (and indeed others)

These cases are a salutary reminder of the need for proper security. For FSA regulated firms, the 2004 Information Security report remains essential reading for firms; and such firms should keep their security procedures up to date. Key points are that firms should :-

  • ensure they have adequately assessed risk regarding the security of their customer information;

  • put in place procedures to manage this risk, and controls to ensure that procedures are followed;

  • train and monitor employees in relation to their information security procedures; and in relation to dealing with emerging threats;

  • ensure they have management procedures to deal with the loss of IT equipment or other security breaches. These procedures should provide for rapid investigation into the nature of the breach (what data was compromised), incident management commensurate with the size of the operation and nature of the breach, rapid rectification, and reporting and handling by the appropriate level of senior management. The procedures should be adequately tested, and continually enhance following experience.

Footnotes

1 Pursuant to Article L.122-45 of the French Labor Code, no person may be excluded from a recruitment procedure, no employee may be sanctioned, dismissed or subject to a discriminatory measure owing in particular to his/her origin, his/her actual or presumed belonging to an ethnic group, nation or race. Despite these provisions, case law on racial discrimination is relatively scarce in France.

2 A High Authority to Fight against Discrimination and for Equality (the so-called HALDE) was created in 2005.

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
 
In association with
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
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 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.