Cyber security and data protection has been arising as issues that financial institutions of China must be confronting with, among which personal information shall be emphasized mostly. In April, 2018, Shanghai Police Bureau disclosed several crimes regarding infringing citizen's private information, one of which was that more than 10 million pieces of private information have been illegally disclosed and traded by two former employees and two current employees of an insurance company over less than six months, with illegal amount of over 20 million RMB (Chinese Yuan).1
On May 30, 2018, the former China Insurance Regulatory Commission, Jiangsu Bureau released "The Warning on Prevention of Disclosure Risk of Private Information of Insurance Customers", pointing out that recently crimes regarding infringing citizen's private information occurred in Jiangsu Province and local branches of life insurance companies and insurance agencies should give top priority on customers' private information protection, and take solid measures to prevent private information from leakage risks.
Financial institutions shall pay attention to legal issues regarding private information as set forth below:
1. Ascertain the scope of critical information infrastructures
Article 31 of the Cyber Security Act of China and the Regulation on Critical Information Infrastructure Security Protection (Draft for Comments) specifically indicate that finance sector is within the scope of critical information infrastructure. On June 2016, the Central Office of Cyber Security and informationization and Cyber Security Coordination Bureau released "The Operating Guideline on National Cyber Security Inspection", which explicitly enumerates banking operations, securities and futures trading, payment and clearing, insurance operations of the financial sector into the scope of critical information infrastructure.
After identifying critical operations, financial institutions may sort out, on a case-by-case basis, information systems or industrial control systems that support critical business operations or are related to critical business, forming a list of candidate critical information infrastructures, including website type, platform type and production business type. Each type shall be subject to different standards, and shall be protected as critical information infrastructure if it may result in: (1) the disclosure of private information by more than 1 million persons or; (2) the disclosure of sensitive information of a large number of institutions or enterprises, or; (3) other systems that may severely damage the social and economic order or endanger national security.
Subject to stricter national security reviews and assessments, the operator of critical information infrastructure would confront with stricter requirements of cybersecurity protection, including procurement of network products and services, the storage and transmission of private information and critical business data.
2. Strengthen Personal Data Protection
The Cyber Security Law of China defines "Private Information" as a variety of information recorded electronically or otherwise which could identify a natural person individually or in combination with other information, including, but not limited to, the name of the natural person, date of birth, identity document number, personal biometric information, home address, phone number, etc.
The People's Bank of China defines private information generated in the banking and financial industries in "The Notice of Banking Financial Institutions Regarding Private Financial Information Protection" as "personal financial data", including personal identifiable information, personal property information, personal account information, personal credit information, personal financial transaction information, derivative information, and other personal information obtained or stored in the course of establishing business relations with individuals.
Being released and executed by the Administration of Quality Supervision, Inspection and Quarantine and Standardization Administration of the People's Republic of China on May 1, 2018, "The Standard of Private Information Security of Information Security Technology" ("The Private Information Security Standard") distinguishes private information from sensitive private information and other general information. Sensitive private information refers to private information that, once disclosed, illegally provided or misused, may endanger the safety of persons and property, and may further lead to damages of personal reputation, physical and psychological health or discriminatory treatment, including ID numbers, personal biometric information, bank account number, communication records and content, property information, credit information, tract information, accommodation information, health care information, transaction information, personal information of children under 14 years of age (including), etc.
When dealing with the protection of private information, financial institutions shall pay attention to important private sensitive information and give stricter protection, especially in regards of personal tract information, communication records and content, credit information, property information, accommodation information, health care information, transaction information, etc., failing to appropriately protect such sensitive information in these important categories may give rise to criminal liability.
The Judicial Interpretation on Several Issues Concerning the Application of Law in Criminal Cases of Infringement of Citizens' Personal Data (effective as of June 1, 2017) by the Supreme Court and the Supreme People's Procuratorate indicates circumstances that constitute "aggravated circumstances" and violate Article 253 of Criminal Law of China as the "crime of infringement private information of citizens": (1) illegally obtain, sell or provide tract information, communication content, credit information, property information over 50 pieces, or; (2) illegally obtain, sell or provide accommodation information, communication records, health care information, transaction information that may affect the safety of persons or property more than 500 pieces, or; (3) illegally obtain, sell or provide other forms of citizen's private information over 5,000 pieces, or with illegal income more than RMB 5,000. When constituting a crime of financial institution, it shall impose a fine on the institution and punish the person in charge and other persons with direct responsibilities.
Strengthening the protection of private information shall follow the principles of legality, legitimacy and necessity in the process of collecting and using private information, including clearly indicating the purpose, manner and scope of the collection and use of information, and obtaining the consent of the individuals. In regards of sensitive private information, the express consent shall be obtained in accordance with the requirements of "The Private Information Security Standard".
Banking financial institutions shall improve data security technology preventive measures to ensure that personal financial data will not be disclosed during the collection, transmission, processing, preservation, usage and other processes, and shall not illegally sell or illegally provide personal data to others. The personal data of a citizen should not be provided to other persons without the consent of the individual, except where the processing does not identify a particular individual and cannot be recovered. Where banking financial institutions conduct their business through outsourcing, they should fully review and evaluate the ability of outsourced service suppliers to protect personal financial information and use it as an important indicator for the selection of outsourced service suppliers.
3. Strengthen the establishment of cyber security organs and the management of employees
To avoid disclosure and sale of customers' private information by their employees, financial institutions shall strengthen the management of employees.
The Cyber Security Law requires that operators of critical information infrastructures are responsible for: (1) setting up specific security management organs and security management leaders, as well as conducting security background checks on such managers and employees in key positions, and; (2) conducting regular network security education, technical training and skill assessment for employees.
The Private Information Security Standard requires the entities in charge of private information to provide that its legal representative or principal is the responsible person who has overall responsibility for the security of private information, including providing human, material and financial resources for private information security. Institutions that fulfill one of the following conditions shall establish full-time dedicated private information protection principals and agencies responsible for private information security work: (1) the main business involving personal information processing and having over 200 employees, or; (2) processing over 500,000 pieces of personal information, or within 12 months of the expected processing of over 500,000 pieces of personal information.
Furthermore, financial institutions shall, in the form of rules and regulations or employment contracts and agency contract terms, incorporate the protection of customers' private information into the assessment system of employees, and establish disciplinary mechanisms by means of commissions and compensation, downgrading and termination of employment contracts. Employees who violate restricted access, use customers' information, and divulge and trade customers' private information shall be dealt with seriously, and those suspected of constituting a crime shall be transferred to the judicial authorities in accordance with the law, and the relevant managers shall be held liable for their management responsibility.
1. "Insider of Insurance Company Sold Ten Millions of Personal Information of Customers Will Buying Insurance Lead to Leakage of Personal Information?"， 2018-04-22，Source: https://www.csai.cn/
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