Mexico's Department of the Interior has announced that the
country's new Federal Law for Protection of Personal Data held
by Private Persons (Ley Federal de Protección de Datos
Personales en Posesión de los Particulares,
"LFPDP" or the "Act")1 came into
effect on July 6, 2010. The Mexican Senate unanimously voted to
pass the Act, which was nearly 10 years in the making. The Act aims
to protect personal data relating to Mexican citizens held by
individuals and private entities.2
The Act's intent is to enforce "controlled and
informed" processing of personal data in order to ensure that
Mexican citizens, referred to as "data subjects", possess
"privacy and right to self-determination." Data subjects
ultimately decide how their personal data will be used,
i.e., it must be used solely for the purpose for which it
was provided and according to the terms outlined in the privacy
notice. Companies handling information about Mexican citizens will
be forced to comply with specific obligations in the processing of
personal data or suffer severe penalties.
The Act requires companies to inform data subjects about the
information being used and the purpose for such use via a privacy
notice. It also provides special requirements for processing
"sensitive personal data." The Act gives data subjects
the right to:
- access their data;
- have inaccuracies in their data corrected;
- deny transfers of their data; and
- oppose use of their data or have it deleted from a company's system for "legitimate"3 reasons.4
While the Act does not provide a comprehensive data breach
notification provision similar to U.S. state laws, it requires
"immediate" notice to a data subject of any security
breach that "significantly" affects his/her
"property or moral rights."5
With the passage of the Act, the Federal Institute of Access to
Public Information changes its name to Federal Institute of Access
to Information and Data Protection6 (the
"Institute"). The Institute is authorized to monitor and
enforce compliance with the Act by private companies processing
personal data.7 Companies will be held liable for
interfering with a data subject's exercise of his/her rights
under the Act and for failing to safeguard his/her personal data.
Data subjects who believe that a company is not processing their
personal data in accordance with the Act may also request an
investigation by the Institute.8 Following an
investigation, the Institute may dismiss the data subject's
claim or affirm, reject, or modify a company's answer to a data
subject's claim.9
The Institute's decision may be appealed before the Federal
Tribunal of Fiscal and Administrative Justice (the
"Tribunal") by either the data subject or the company
processing the personal data.10 Penalties for violating
the Act's provisions can be as severe as a US$1.4 million fine,
a prison sentence of five years, or double the penalties in the
event of sensitive personal data.11 Below is a summary
of a company's obligations under the Act and a description of
possible penalties for failure to comply with its provisions.
OBLIGATIONS UNDER THE ACT—A COMPANY'S
PERSPECTIVE
Covered Entities and Application
The Act creates obligations for "natural persons or private
legal entities that process personal data" concerning Mexican
citizens.12 The Act does not apply to certain companies
in the credit information business or to the use of personal data
that is personal; that is, use of personal data that is not for
disclosure or commercial purposes.13 Thus, in general,
the Act imposes restrictions and obligations in the
"processing" of "personal data," with more
onerous restrictions and obligations on the processing of
"personal data" relating to Mexican citizens. Such
restrictions also apply on the transfer of such personal data
outside of Mexico.
The Act defines "processing"14 as the
"collection, use, disclosure or storage of personal data by
any means," including "any act of access, management,
use, transfer or disposal of personal data."15
"Personal data" is also defined broadly and means
"any information concerning an identified or identifiable
physical person."16 "Sensitive personal
data" is defined as "personal data involving the most
intimate sphere of the data subject, or whose misuse can lead to
discrimination or cause a serious risk to the data
subject."17 Sensitive personal data includes data
containing information about race, ethnicity, health status,
genetic information, religion, philosophical or moral beliefs,
union membership, political views, or sexual
preference.18
Principles for the Protection of Personal
Data
Notice and Consent. The Act provides that there is
a "reasonable expectation of privacy" in the processing
of personal data and requires consent by the data subject prior to
such processing.19 Generally, according to the Act,
consent can be obtained by means of a privacy notice that informs
the data subject of the information being used, the method of use,
the purpose for such use, and the data subject's rights of
"access, rectification, and cancellation or
opposition."20 Under the Act, data subjects may
revoke consent at any time without retroactive effect, and
companies must establish and explain procedures for such revocation
within their privacy notice.21
Processing of sensitive personal data requires written consent from
the data subject via a handwritten signature, electronic signature,
or authentication mechanism.22 The privacy notice must
expressly state that the data to be used is of a sensitive
nature.23 Moreover, the Act prohibits the creation of
databases containing sensitive personal data without
"legitimate" business justification.24 Where
extenuating circumstances would make it "impossible" to
provide a privacy notice, a company may, with the authorization of
the Institute, implement alternative methods for providing such
notice.25 It is not known at this time what form such
alternative methods might take, but companies operating in Mexico
might anticipate that such methods will be aimed at accomplishing
the same legal principles and objectives of the Act, and thus could
be onerous.
Privacy Notice Content. Under the Act, a
company's privacy notice must, at a minimum, inform data
subjects about:
- the company's identity and address;
- the purpose for processing the data;
- the options and means available to the data subject for limiting use or disclosure of his/her personal data;
- the means by which the data subject may exercise his/her rights of access, rectification, cancellation, and opposition under the Act;
- any planned transfer of the data; and
- the procedure and means for informing the data subject about changes to the privacy notice.26
If a company plans to process sensitive personal data, its privacy
notice must expressly state that it is doing so.27
Accuracy of Data and Purpose of Use. The Act
requires companies to ensure that personal data is accurate and
up-to-date.28 It also requires a company to dispose of
the data once it has served the original purpose outlined in the
privacy notice.29 A company must make "reasonable
efforts" to finish its processing of sensitive personal data
as quickly as possible.30 However, the Act does not
define what is meant by "reasonable efforts."
Accordingly, companies might, at a minimum, consider adopting
established industry practices, and implementing internal policies,
that define temporal limitations on the processing of sensitive
data, including its destruction, to address this requirement.
If a company intends to use the personal data for any purpose not
outlined in the privacy notice, it is required to provide notice
and obtain renewed consent from the data subject.31 Any
personal data retained for the purpose of proving or disproving a
claim of breach of contract must be eliminated after 72 months from
the date of the alleged breach.32
Responsibility for Third-Party Use. The Act also
addresses certain responsibilities in relation to third parties.
Companies are required to adopt "necessary" measures to
ensure compliance with the Act, including by third
parties.33 This obligation exists even if the company
employs a third party to assist in the processing of the personal
data.34 A company must take "necessary and
sufficient" measures to guarantee that the terms of the
privacy notice are respected at all times by the company and by any
third parties with which it bears "some legal
relationship."35 Thus, the Act requires that
companies legally impose on their third-party providers and
partners necessary and sufficient binding obligations consistent
with the Act's requirements and the company's privacy
notice. This has often been done in the form of a binding data
processing and protection agreement between the company
(i.e., the data controller that collects and/or is in
possession of the personal data) and the third-party data
processor.
Security Measures in Maintaining Data. The Act
requires companies to establish and maintain security measures and
administrative techniques to protect the personal data against
damage, loss, alteration, destruction, or unauthorized access or
use.36 While the Act does not specify the types of
security measures that a company must implement, it requires that
such measures be at least as comprehensive as those used to protect
the company's proprietary information.37
Data Breach Notification. The Act requires
"immediate" notice to the data subject of any security
breach that "significantly" affects his or her
"property or moral rights."38 The Act,
however, does not provide guidance on what is meant by
"immediate" or the form and substance of such notices. It
is also not known whether the term "significantly" is
meant to impose some "risk of harm" threshold or
condition prior to providing notice. It is possible, and indeed
likely, that the Institute may provide guidance on how companies
may meet these requirements. Until then, companies may look to
recent experiences in other jurisdictions where similar data breach
notifications are required.
Confidentiality. The Act requires companies and
third parties involved in the processing of personal data to
maintain the confidentiality of personal data at all
times.39 The obligation to maintain confidentiality
exists even after the relationship with the data subject
ends.40
Data Subject Rights
Data subjects generally have the right to oppose use of their data,
access their data, have inaccuracies in their data corrected, or
have their data deleted.41 A data subject's request
for cancellation triggers a "blockade period" during
which the personal data shall be suppressed.42 During
this period, a company may only retain the personal data for
purposes of investigating liability arising from such
use.43 This "blockade period" is equal to the
statute of limitations time for actions arising from the
relationship between the parties.44
The Act requires a company to appoint a specific person or
department to address requests by data subjects asserting the
rights listed in the preceding paragraph.45 After
receiving the request, a company has 20 days to contact the data
subject.46 A company must state its determination in its
response and implement the communicated plan of action, if any,
within 15 days from the date of the response.47 One
extension of these time limits is available if warranted by the
circumstances.48
A company's requirement to provide access to the personal data
is satisfied when the data is available to a data subject either
through simple copies, electronic documents, or any other form set
forth in the company's privacy notice.49 A company
cannot charge a data subject for access to his or her personal
data, with the exception of "justified" shipping and
reproduction costs.50 However, a data subject may be
charged up to approximately US$1351 for a repeat request
within a 12-month period, unless the repeat request is prompted by
a substantial change to the privacy notice.52
If a data subject requests rectification or cancellation of his or
her personal data, a company must also notify third parties to
which it transferred the data.53 If removal is required,
a company must notify the data subject once his or her personal
data is removed from the system.54
Data Transfers
In most instances, a company must disclose to data subjects any
planned transfer of personal data to third parties and include a
clause in the privacy notice allowing the data subject to accept or
deny such transfer.55 Once personal data is transferred
to a third party, that third party is also subject to the
requirements of the Act.56 The Act provides that
national or international transfers of data may be carried out
without the consent of a data subject when the transfer is made to,
among others, holding companies, subsidiaries or affiliates under
common control of the company, or a parent company or any
associated company working under the same processes and internal
policies.57
Procedure for Data Subject Exercise of
Rights
In some cases, a data subject may petition the Institute to ensure
that a company satisfies its duty to the data subject under the
Act.58 The data subject must submit this petition within
15 days from the date that the company responds to its opposition
or request for access, rectification, or deletion of
data.59 The Institute will conduct its own investigation
and make a determination as to whether or not the company has
satisfied its duty to the data subject.60 If the
Institute determines that the company has not satisfied its duty,
the company must comply with the Institute's decision and
provide the Institute with a written account of its compliance
within 10 days of being notified of the decision.61 The
Institute's decisions may be appealed to a tribunal for
adjudication.62
Procedure for Verifying Compliance
The Institute is authorized to check whether a company is in
compliance with the Act.63 This verification may be
initiated at the Institute's discretion or at the request of a
data subject.64 During the verification process, a
company is required to provide the Institute with access to the
information and documentation that the Institute deems necessary
and relevant to its investigation.65
VIOLATIONS AND PENALTIES
In penalizing a company for violating the Act, the Institute
considers: the nature of the data involved; whether there was
blatant impropriety on behalf of a company in responding to a data
subject's request; whether a company's act or omission was
intentional; a company's financial capacity; and whether a
company has previously violated the Act.66 Penalties for
violations of the Act may include:
1) Warning: A warning issued to comply with a data subject's request for access, rectification, cancellation, or opposition pursuant to the Act.67
2) Fine:
a) A fine up to about US$736,300 for any of the following violations:68
- Acting with negligence or willful misconduct in processing data and responding to a data subject's requests for access, rectification, cancellation, or opposition.
- Fraudulently declaring that the company does not have the personal data when such data exists at least partially in the company's database.
- Processing personal data in a manner conflicting with the principles of the Act.
- Omitting any required elements from the privacy notice.
- Failing to maintain accurate data or failing to implement rectifications or cancellations lawfully requested by a data subject.
- Failing to comply with the Institute's warning to grant a lawful request by a data subject pursuant to the Act.
b) A fine of up to about US$1.4 million for any of the following violations:69
- Failing to maintain the confidentiality of information obtained through processing of the data.
- Substantially deviating from the purpose of use originally outlined in the privacy notice.
- Transferring personal data to third parties without first disclosing the planned transfer and providing the data subject an opportunity to opt out of such use in the privacy notice.
- Creating vulnerabilities in the security of the database, facilities, programs, or equipment used in processing the personal data.
- Transferring or assigning personal data except where allowed by the Act.
- Collecting or transferring personal data without the express consent of the data subject where such consent is required by the Act.
- Obstructing investigations by the authorities.
- Collecting data through deceptive or fraudulent means.
- Continuing prohibited use of personal data after being asked to cease such use by the Institute or the data subject.
- Processing personal data in a way that affects or impedes the data subject's right to access, rectification, cancellation, or opposition.
- Creating a database containing "sensitive personal data" without a legitimate purpose.
c) An additional fine of up to about US$1.4 million for continuing violations.70
d) Double the applicable fine for violations involving "sensitive personal data."71
3) Imprisonment:
a) Three months to three years of imprisonment for anyone authorized to process personal data who, for profit, causes a security breach to the database under his charge.72
b) Six months to five years of imprisonment for anyone who, in taking advantage of an error committed by the data subject or person authorized to transmit the data, deceptively processes personal data with the goal of obtaining unjust profit.73
c) Double the applicable prison term for cases dealing with "sensitive personal data."74
CONCLUSION
The Act aims to safeguard individuals' autonomy in the use of
their personal information and to prevent such information from
being compromised. With overwhelming support from the Mexican
government, the Act has now become law and creates strict
requirements for companies processing individuals' personal
data relating to Mexican citizens. To avoid severe penalties,
companies should draft comprehensive privacy policies, procedures,
and guidelines aimed at satisfying the new legal requirements under
the Act. Such policies and procedures should address the
managerial, operational, and technical measures the company employs
to satisfy the notice and consent requirements, and that provide
data subjects an opportunity to opt out of third-party
transfers.
Companies should also develop internal mechanisms to ensure that
personal data is protected, accurate, and used within the confines
of the privacy notice. It is common, and indeed now mandatory, that
companies establish specific procedures and appoint dedicated
personnel to respond to data subject requests as efficiently as
possible and in accordance with obligations under the Act. Legal
counsel can offer advice and guidance on establishing or revising
privacy policies and complying with the Act.
Footnotes
1. No official English translation of the Act was available during the writing of this Commentary.
2. Ley Federal de Protección de Datos Personales en Posesión de los Particulares [L.F.P.D.P.] [Federal Law for Protection of Personal Data held by Private Persons], Diario Oficial de la Federaton [D.O.F.], 5 de Julio de 2010 (Mex.).
3. The word "legitimate" is not defined in the Act.
4. LFPDP art. 22.
5. LFPDP art. 20.
6. Currently known as the Federal Institute of Access to Public Information.
7. LFPDP art. 38.
8. LFPDP art. 45.
9. LFPDP art. 51.
10. LFPDP art. 56.
11. LFPDP art. 64, 67-69.
12. LFPDP art. 2.
13. Id.
14. The Act uses the word "tratamiento," which literally translates to "treatment" in English. However, purposes of this Commentary, we use the word "processing" as it most accurately encompasses the definition provided in the Act. LFPDP art. 3, subsection XVIII.
15. LFPDP art. 3, subsection XVIII.
16. Id., subsection V.
17. Id., subsection VI.
18. Id.
19. LFPDP art. 7.
20. LFPDP art. 16 IV, 28, 29, 32.
21. LFPDP art. 8.
22. LFPDP art. 9. Also, the implementing of any electronic signature and authentication method must comply with the relevant provisions of the Civil Code, the Civil Procedures Code, the Commerce Code, and the Consumer Protection Law (modified as part of Mexico's e-commerce amendments in 2000).
23. Id.
24. Id.
25. LFPDP art. 18.
26. LFPDP art. 16.
27. Id.
28. LFPDP art. 11.
29. Id.
30. LFPDP art. 13.
31. LFPDP art. 12.
32. LFPDP art. 11.
33. LFPDP art. 14.
34. Id.
35. Id.
36. LFPDP art. 19.
37. Id.
38. LFPDP art. 20.
39. LFPDP art. 21.
40. Id.
41. LFPDP art. 27 and 29.
42. LFPDP art. 25.
43. Id.
44. Id.
45. LFPDP art. 30
46. LFPDP art. 32
47. Id.
48. Id.
49. LFPDP art. 33.
50. LFPDP art. 35.
51. Under the Act, all cost and fine calculations rely on the Federal Daily Minimum Wage scheme. Mexico applies three different federal daily minimum wage amounts to each of three geographical regions, labeled A, B, and C. For the purpose of this Commentary, we calculate the USD amount based on Geographical Area "A," which applies the current highest federal daily minimum wage ($57.46 MXN). Mexico Facts and Figures, http://www.mexperience.com/discover/discov_ff.htm (last visited May 20, 2010).
52. LFPDP art. 35.
53. LFPDP art. 25.
54. Id.
55. LFPDP art. 36.
56. Id.
57. LFPDP art. 37.
58. LFPDP art. 14, 38, 39, 45, 59.
59. LFPDP art. 45.
60. Id.
61. LFPDP art. 48.
62. LFPDP art. 56.
63. LFPDP art. 59.
64. Id.
65. LFPDP art. 60.
66. LFPDP art. 65.
67. LFPDP art. 64.
68. Id.
69. Id.
70. Id.
71. Id.
72. LFPDP art. 67.
73. LFPDP art. 68.
74. LFPDP art. 69.
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.