Worldwide: The Data Protection Series: #1 What Happens In A Breach?

Last Updated: 16 October 2017
Article by Samantha Bradshaw

"There are two types of companies: those that have been hacked, and those who don't know they have been hacked."-John Chambers, former CEO of Cisco. Mr. Chambers probably didn't know how correct he was when he made that statement years ago. Nowadays a breach of any data system can lead to massive regulatory obligations.

It's well accepted that there is no perfect security system in the world as is regularly shown to us by hackers. A few recent examples include NotPetye and WannaCry. It is not a matter of if your system will be comprised, but when. Isn't it better to have the contingency set in place beforehand? Apart from ensuring that a company can continue running with as little disruption to its customers as possible, there may also be government agencies that must be informed of the breach. Some countries impose massive fines if the government isn't informed, especially in cases of healthcare or financial information being inappropriately accessed.

Following the breach and access to potentially 143 million customer's personal information in the U.S. based credit monitoring giant, Equifax seemed to have a decent contingency plan, but as the weeks since the breach was publicly announced on September 7 passed, it has become clear that their contingency plan wasn't remotely as strong as it should have been.

Forty-eight states in the U.S. have legislation requiring private or governmental entities to notify individuals of security breaches of information involving personally identifiable information. Each state has different requirements based on the timeframe, what kind of information is covered, who must comply with reporting requirements, but the overall trend is the same. Giving notice of a breach to affected persons is required. The public wasn't informed of the breach for at months after the March hack occurred. Information accessed by the hackers included the names, addresses, Social Security numbers, dates of birth, potentially driver license numbers and more of roughly 40% of the American population, information that can make it incredibly easy to steal a digital or financial identity.

Equifax seems to be a perfect example of what not to do.

The public relations nightmare Equifax is dealing with in the fallout of the breach serves as the first reminder as to why companies need strong and regularly updated contingency plans in case of breach. Regulatory agencies like the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission are going to be beefing up its oversight of companies with access to such sensitive information and have already indicated that preventive credit monitoring will become a standard. The New York Department of Financial Services (DFS), which issued a subpoena to Equifax demanding more information about the breach. Other states are expected to investigate or directly sue, like California, as well. Equifax is dealing with federal laws, federal regulators, state laws, and state regulators in a dizzying patchwork of data protection laws.

Federal laws give the CFPB the power to supervise and examine large credit-reporting firms to ensure the quality of information they provide. In January 2017, the CFPB fined TransUnion and Equifax $5.5 million for deceiving customers about the usefulness and cost of their credit scores. More fines can certainly be expected for Equifax in addition to being the watershed moment for a whole new gamut of regulations over consumer financial data.

While most companies don't sit on the proverbial 'gold mine' of personally identifying information, they still collect it to some extent and store similar information. Equifax is facing such a complex situation because they operate in literally every state in the US, so every state and federal regulation that covers data protection, consumer protection and financial information is coming into play. However, that's exactly what companies, even outside of the US need to understand; storing data isn't simple anymore and dealing with a breach is even more complicated.

California state law, albeit one of the more advanced states in regards to data protection requires that data holders provide a notice of a data breach to the regulatory agency with 72 hours of learning of it and to affected Californians without undue delay. Equifax's contingency plan, or lack thereof, doesn't appear to comply with that as the public announcement occurred many weeks after learning of the breach on July 29th according to Equifax. The credit monitoring company is now being sued for violating this law in San Francisco. The natural fix for having to navigate 48 states laws is a federal law, but pushes to create a federal data protection system could preempt stronger state data protection laws like those in California.

At the federal level in the US, the data security laws that exist are typically industry based. We see a perfect example of this is the massive regulatory scheme applicable to banks, yet for credit reporting agencies, the scheme is relatively lax. In Europe, the EU has laid out some basic principles for general data protection in recent years, but follows the same route as the US in having more detailed and rigorous regulations in certain sectors like banking and healthcare.

With small, medium or multinational company operating in an interconnected world, chances are that each company winds up collecting personally identifiable information and chances are they will be the target of a hacker at some point. The logical step is to prepare for the inevitable breach. Initial steps are all preventative and ensuring that the system is as segmented and protected as reasonably possible. Companies should look to IT professionals for options on how to isolate and mitigate the threat of a breach. However, once the breach happens, none of the preventative things matter as long as they met the minimum standards for each country that can claim jurisdiction over the information on the hacked server.

The compliance requirements that should be built into a reaction plan need to be comprehensive of all the potential information on the hacked system. In healthcare, finance and generally sensitive data, there are typically specific regulatory agencies in the more developed jurisdictions.

In the EU, Regulation 611/2013 states that fines for non-compliance with post breach obligations can go up to 2% of the total worldwide annual turnover. However, a new e-Privacy Regulation will enter into force on 25 May 2018, the same date as the General Data Protection Regulation (GDPR) (Regulation EU 2016/679). This appears intentional to show the harmonious relationship between the two Regulations. The new law will keep a similar breach notification requirement as currently exists for EU Member States. However, certain sectors have additional requirements they need to look to as the law develops in the EU.

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
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.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

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.