The amendments to the Act on Promotion of Information and Communications Network Utilization and Information Protection (the "Network Act") and the Personal Information Protection Act (the "PIPA") were promulgated on March 22 and March 29, 2016, respectively.
The amended version of the Network Act (the "Amended Network Act") and the amended version of the PIPA (the "Amended PIPA"; collectively with the Amended Network Act, the "Amended Acts") both contain a number of far-reaching amendments that raise the overall level of regulatory requirements applicable to information and communication service providers ("ICSPs") and data handlers, respectively. Under the Amended Acts, ICSPs and data handlers are required to comply with stricter data processing principles and are subject to heavier penalties in the event of violations.
The Amended Network Act will take effect on September 23, 2016, with the exception of the requirements regarding consent for the granting of the Smartphone Access Authority (to be defined below) (which will take effect on March 23, 2017) and the punitive damages provisions (which will take effect on July 25, 2016). Meanwhile, the Amended PIPA will take effect on September 30, 2016.
The provisions of the Amended Acts with the most significant implications are summarized below.
1. AMENDED NETWORK ACT
(1) New Provisions Regarding Smartphone Access By App Developers etc. (Article 22-2)
- From March 23, 2017, ICSPs (e.g., smartphone app developers) wishing to access stored data or functions within a user's smartphone will be required to obtain the user's prior informed consent to the granting of certain access authority ("Smartphone Access Authority"). When requesting Smartphone Access Authority from users, ICSPs must further distinguish between authority that is necessary no matter what to provide the subject services ("Necessary Authority") from other types of authority ("Optional Authority") and clearly articulate the reasons for such categorization.
- Further, ICSPs (e.g., providing online service through smartphone apps) may not refuse to provide the subject services to the user based on the fact that the user did not consent to the granting of Optional Authority to the ICSP.
- In conjunction with ICSPs, the developer/supplier of a mobile handset's basic operating system, the manufacturer of a mobile handset, and the developer/supplier of a mobile handset's software are also required to implement necessary measures to protect the personal information of the user – including having in place a function which allows the user to provide or withdraw his/her consent to the granting of Smartphone Access Authority to the ICSP.
- Details of the foregoing requirements such as the scope of the ICSP's access authority, the method for obtaining the user's consent, and other measures that an ICSP is required to take will be prescribed in the Enforcement Decree subordinate to the Network Act (yet to be promulgated).
(2) Stricter Requirements For Outsourcing And Re-outsourcing The Processing Of Personal Information (Article 25(6)-(7))
- In the event the ICSP wishes to outsource the processing of personal information to a third-party service provider (the "Outsourced Processor"), it must enter into a written arrangement with the Outsourced Processor. The Outsourced Processor may not subcontract the processing of the personal information to another third party without the consent of the ICSP.
(3) Protection Of Personal Information That Is Transferred Across National Borders (Article 63(2) & Article 64-3(1), (8))
- From September 30, 2016, the user's consent must be obtained for the following types of cross-border transfer of personal information: (a) provision of personal data to a third party (for the third party's benefit) (including cases where the personal information of Koreans is accessed from abroad); (b) outsourcing of processing of personal information to the Outsourced Processor; and (c) storage of personal data outside of Korea.
- More importantly, in the event the ICSP transfers personal information across borders without obtaining the subject user's required consent, it may be subject a administrative fine of up to 3/100 of the revenue it generated from engaging in such transfer in the case of (a) above or an administrative fine of up to KRW 20million (appx. USD 20 thousands) in the cases of (b) and (c) above. As such, these changes would provide ICSPs with significant incentive to review in advance whether or not a contemplated cross-border transfer of personal information would require the user's consent under the Network Act.
(4) Reporting Requirement Of The Chief Privacy Officer And The Legal Responsibility Placed On Corporate Executives (Article 27(4) & Article 69-2(2))
- In the event the Chief Privacy Officer of an ICSP becomes aware of a violation of a data protection/privacy law or regulation, s/he must immediately take measures to remedy or correct the situation, and if necessary report the violation to business owner (if a privately-held company) or representative director of the ICSP (if a corporation).
- In the event the ICSP violates the Amended Network Act, the Korea Communications Commission ("KCC") may recommend that the ICSP impose sanctions on corporate executives such as the representative director and other responsible executives in connection with such violation. Subsequently, the ICSP must notify the KCC of the action/inaction taken pursuant to the KCC recommendations.
(5) Other Provisions
- If a person suffers damages due to his/her personal information being stolen, lost, leaked, falsified, altered or damaged due to the ICSP's fault, the court may award the victim punitive damages of up to three times the actual damages (Article 32(2)-(3); i.e., the "punitive damages provision"). Additionally, any proceeds that an ICSP acquires from the illegal processing of personal information may be confiscated or collected by the courts (Article 75-2).
- The scope of violations that are subject to corrective measures under the Amended Network Act has been broadened to "any violation of the Amended Network Act" (Article 76(1)(xii) amended).
2. AMENDED PIPA
(1) Notice Requirements For Certain Data Handlers Seeking To Process Personal Information Received From Third Parties (Article 20(2), (3))
- In the event a data handler who satisfies certain criteria set forth in the Presidential Decree with respect to the type and volume of personal information, number of employees, and volume of sales revenue ("Substantial Data Handler") intends to process personal information it receives from anyone other than the data subject, even though the personal information was transferred lawfully (e.g., with the data subject's consent pursuant to Article 17(1)(i) of the PIPA), the Substantial Data Handler must also notify the data subjects of (i) the sources from which their personal information was collected, (ii) the purposes of processing of the subject personal information, and (iii) other required matters prior to the data processing.
- Therefore, unlike before, to process personal information legally obtained from a source other than the data subject, Substantial Data Handler will be required to provide notice to the data subject even if the data subject does not individually request such notice. As new types of services and businesses such as big data and internet of things ("IoT") continue to emerge, data handlers are expected to be held to higher standards with respect to their processing of personal data under the PIPA. As such, data handlers should continuously monitor any legislative developments and familiarize themselves with amendments to the Presidential Decree regarding the specific notice periods and notice methods for notifying data subjects as well.
(2) Regular Inspections Of Data Handlers That Process Particular Identification Information (Article 24(4), (5))
- In the event a Substantial Data Handler processes particular identification information (i.e., resident registration numbers, passport numbers, driver's license numbers, alien registration numbers), it will be subject to regular inspections by the Minister of the Interior (or a specialized institution designated by Presidential Decree) to determine whether the Substantial Data Handler has duly implemented necessary measures to ensure the security of the particular identification information. Detailed matters related to these inspections such as the scheduling of the inspections will likely be set forth in the Presidential Decree.
3. IMPLICATIONS OF THE AMENDED ACTS
Before the Amended Acts take effect, ICSPs and data handlers should conduct a comprehensive review of their processing of personal information to ensure that they are in compliance with the various new requirements set forth in the Amended Acts. Some of the key changes that were made pursuant to the Amended Acts are summarized below.
A. Changes to Smartphone Regulations
Smartphone app developers, operating system developers, and mobile handset manufacturers will all be required to establish plans to comply with the Amended Acts. Particularly smartphone app developers will be required to distinguish Necessary Authority from Optional Authority with respect to smartphone access while establishing a process to obtain consent from users for the granting of Smartphone Access Authority. Similarly, operating system developers and mobile handset manufacturers will be required to provide a function which allows users to withdraw his/her consent (e.g., an "opt-out" option). All of the foregoing user protection measures should be in place reasonably ahead of March 23, 2017, the date on which the applicable provisions become effective. Not only does the Amended Network Act extend its application to smartphone operating system developers and mobile handset manufacturers (in addition to the ICSPs that were already governed by the Network Act), but it also stipulates explicit 'consent' requirements regarding the Smartphone Access Authority of such developers and manufacturers. Therefore, IT companies should pay close attention to the new provisions of the Amended Network Act and (when necessary) improve the companies' current practices to ensure compliance with the new amendments.
B. Changes to Regulations Governing Cross-Border Transfers of Personal Information
Following lengthy debates, the Network Act's provisions governing the cross-border transfer of personal information have been completely overhauled to specify the instances in which consent of the data subject is required and further includes a penalty provision, unlike before. These amendments are expected to have a major impact on the processing of personal information by ICSPs in practice. In addition, because the laws and regulations governing the cross-border transfer of personal information are expected to undergo a number of significant changes over the years to come, affected entities should closely monitor any related legislative developments.
For your information, in August 2015, the Ministry of Government Administration and Home Affairs (subsequently renamed the Ministry of the Interior) launched a joint public-private sector task force with the aim of achieving "adequate" status for South Korea under the EU's Adequacy Assessment on personal data protection levels. Thus, if the EU subsequently determines that Korea provides an adequate level of personal data protection, the transfer of EU residents' personal information to Korea would be facilitated, thereby making it easier for certain well-prepared Korean companies to expand their business to the EU.
C. Increased Accountability for Entities that Process Personal Information
Please note that the Amended Network Act is consistent with the recent regulatory trend for data protection and privacy in Korea, which favors increased accountability for the collection, use and management of personal information. Overall, heavier responsibility has been placed on ICSPs and corporate executives, Outsourced Processors are subject to more oversight, regulatory agencies are assigned greater authority, and enhanced enforcement of legal requirements for the processing of personal information (e.g., a principle regarding collection of only the minimum amount of personal information necessary). Therefore, data handlers, including ICSPs, will need to review their personal information processing procedures and policies for compliance with the Amended Acts and make any necessary adjustments to their data processing systems.
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.