United States: Uptick In Australian Data Breach Notifications

Following in the footsteps of numerous countries, including the United States, and the European Union, Australia enacted a mandatory data breach notification law earlier this year. The Notifiable Data Breach (NDB) Scheme under Australia's Privacy Act of 1988 went into effect on February 22, 2018. The new scheme requires organizations subject to the law to notify individuals and the Office of the Australian Information Commissioner (Commissioner) in the event of a data breach of personal information (PI) that may result in serious harm to an individual. The NBD Scheme applies to all eligible data breaches occurring on or after February 22, 2018. Not surprisingly, the new mandatory notification scheme has resulted in an uptick in Australian data breach notifications that is expected to grow.

NDB Scheme Breach Notification Statistics
The Commissioner intends to publish a quarterly statistics report about data breach notifications received subsequent to the passage of the NDB Scheme. At the publication of this article, the Commissioner had posted results through the first quarter of 2018. From February 22, 2018, through March 30, 2018, the Commissioner received 63 notifications, broken down for the top five industry sectors as follows:

  • Health service providers (15 notices representing 24%)
  • Legal, accounting and management services (10 notices representing 16%)
  • Finance (8 notices representing 13%)
  • Education (6 notices representing 10%)
  • Charities/nonprofits (4 notices representing 6%).

It is significant to note that this initial quarterly report represents approximately five weeks, so future notification statistics will likely be higher.

Organizations Subject to the NBD Scheme
The NBD Scheme applies to organizations that are subject to the Privacy Act and have an obligation to protect PI. This includes government and private sector organizations with an annual turnover (revenue) of more than AU $3 million, credit reporting agencies, credit providers and organizations that hold an individual's tax file number (TFN).

The NBD Scheme also applies to organizations that have an "Australian link." In addition to companies incorporated or formed in Australia, organizations may have a link to Australia if they (1) conduct business in Australia or one of its territories and (2) collect or hold PI in Australia or one of its territories. In other words, the new breach notification law is not strictly limited to Australian companies. For instance, a company that collects information stored on servers located in Australia might be subject to the NBD Scheme.

Protected Personal Information
Personal information is information that is linked to an individual who either is identified or can be reasonably identified if it is combined with other information. Personal information is broadly defined and may encompass sensitive information such as an individual's race or ethnic origin, political opinion, sexual orientation, criminal record, health information, credit information, employee record information and TFN information. These examples of PI are by no means exhaustive.

Notably, the Privacy Act is not limited to PI of Australian citizens. Instead, it applies to disclosure of PI collected in Australia, regardless of whether such information pertains to an Australian citizen or resident. Thus, the nexus for purposes of extraterritorial application of the Act is where the activity occurs (Australia) as opposed to the national origin of an organization or individual about which information is collected.

Risk Assessment for Eligible Data Breaches
For purposes of the NBD Scheme, a data breach means the unauthorized access, disclosure or loss of PI – whether intentional or inadvertent. The Commissioner has cited the following examples of data breaches: loss or theft of a mobile device, loss of paper records, inadvertent disclosure due to human error and malicious activity.

However, the breach notification requirements under the NBD Scheme apply only to an "eligible" data breach that is likely to result in "serious harm" to an individual, such as financial fraud, identity theft, violence, or physical or emotional harm.

It is incumbent on the organization to conduct an investigation to assess whether the risk of serious harm exists following a data breach involving PI – otherwise known as a risk assessment. Notably, the Commissioner has stated that entities must take reasonable steps to complete a risk assessment within 30 calendar days after the entity becomes aware of a suspected breach of eligible data. In the event the risk assessment cannot be completed in 30 days, the entity should take steps to document the reasons for the delay.

While the Privacy Act does not define the phrase "serious harm," the Commissioner has listed a number of factors that organizations may wish to consider in conducting their risk assessment, such as the:

  • Nature and sensitivity of the PI
  • Circumstances of the breach (such as the number of individuals involved or the length of time during which the PI was accessible)
  • Extent to which the PI was protected by security measures (such as technical safeguards, encryption or whether the data was anonymized)
  • Unauthorized person(s) who obtained the PI
  • Nature of the harm that may result (such as identity theft, financial loss, loss of business, threat to physical safety or reputational harm).

Of course, the foregoing is not an exhaustive list and there may be other factors that are relevant to an organization's risk assessment.

Mandatory Breach Notification Requirements
Notice to Affected Individuals
In the event an organization concludes that there has been an eligible data breach of PI that may result in serious harm to individuals, the organization is required to notify affected individuals "as soon as practicable."

The NBD Scheme does not dictate the specific method of notification to individuals. Instead, organizations may choose any "reasonable" means to notify individuals, such as in person or by phone, mail, text or even a social media post. The key consideration is the likelihood that the individual will actually receive the notice.

The content of the notice to individuals should include:

  • The identity and contact information for the organization that sustained the breach
  • A description of the breach (including the date(s) of unauthorized access or disclosure, the date the entity discovered the breach, steps taken by the entity to contain or remediate the breach)
  • The type of PI at issue
  • Recommendations for measures individuals may take to mitigate potential harm.

In certain instances, the organization may choose to provide notification by publication on its website for at least six months. Publication may be warranted when up-to-date contact information for individuals is not available.

Notice to the Commissioner
Organizations also are required to provide the Commissioner "as soon as practicable" with a written statement concerning any eligible data breach, which may be submitted to the government via an online form. The information contained in the statement largely mimics the information contained in notifications to individuals as set forth above. The Commissioner, in turn, will acknowledge receipt of the statement. In addition, the Commissioner may commence an investigation and request additional information from the organization and/or offer advice and guidance. In some instances, the Commissioner may choose to initiate a regulatory action against the organization. This could include seeking injunctive relief and/or the imposition of a civil penalty pursuant to a court order.

In short, under Australia's new NDB Scheme, organizations will be forced to respond promptly to and investigate actual or suspected data breaches concerning PI. Notably, the new mandatory breach notification law is not limited to Australian companies; any companies with an "Australian link" are subject to the law. Under the new NDB Scheme, organizations must conduct a risk assessment within 30 days to determine whether the breach may result in serious harm to the affected individuals. If so, organizations will be tasked with notifying individuals and Australia's Privacy Commissioner as soon as practicable. Failure to do so may result in the commencement of a regulatory action and/or the imposition of civil penalties. Companies potentially subject to the NDB Scheme are encouraged to familiarize themselves with the new legal requirements.

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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