Beware the loopholes in the Privacy Alerts Bill

The Privacy Alerts Bill looks set to be passed by the Senate, after it received a ringing endorsement from the parliamentary committee investigating the proposed mandatory data breach notification law.

The bill should have an impact on how organisations secure customer information, but the extent of that impact is uncertain given the legislation provides two loopholes that are big enough for most organisations to jump through.

The first ‘get out of jail free card’ is provided in the form of a test proposed by the Australian Law Reform Commission (ALRC), that a data breach notification be made when a data breach has occurred that might cause ‘a real risk of serious harm’.

The problem with this test is its subjective nature when applied. Who is going to determine what constitutes a ‘real risk of serious harm’ – will it be the organisation that lost the information?

The bill attempts to strengthen the reporting requirements by providing for regulations to specify particular situations that may also be serious data breaches that may not be categorised as a real risk of serious harm.

However, the provision for a government agency to regulate what data breaches will be reported could be a source of increased discord between consumer and business advocates.

The second flaw in the legislation, which could be leveraged by an unscrupulous organisation, is a failure to set a minimum security and privacy standard. This means that organisations may decide to hide data breaches by opting for a low quality network security solution that does not include a security monitoring capability.

Privacy advocates argue an important reason for mandatory data breach reporting is to measure the number of data breaches that occur annually and to identify organisations that have multiple data breaches. This information is of vital importance because the regulator will not be able to identify specific particular situations that need to be added to the reporting requirements unless it knows the actual number of data breaches per annum and what organisations are affected.

It is unclear whether provisions for organisations to be fined for repeated data breach offenses will make the final legislation, and business lobbyists continue to argue against any compulsory notification.

"For organisations with large customer bases, the notification requirement may result in a disproportionate cost compared with the possible harm caused by the breach," Australian Bankers Association policy director Ian Gilbert has said.

The Association of Data-driven Marketing & Advertising (ADMA) has also argued against the legislation, arguing it comes at a time when businesses large and small are already grappling with the most extensive changes to privacy legislation seen in the last 10 years.

Despite the complaints, the introduction of mandatory data breach reporting should provide organisations with the spark needed to review how customer data is being stored, communicated and used.

Organisations should be seeking out best practices for securing customer information and putting in place protocols that include:

1. systems and practices that utilise the latest security techniques such as secure certificates and two-factor authentication and the use of internal network security approaches such as intrusion detection, network segmentation and monitoring;
2. the introduction of a privacy officer and an internal security and privacy committee that meets regularly to prepare and maintain security and privacy plans and to review the implementation and effectiveness of internal systems and practices; and
3. the introduction of an annual security and privacy audit by a third party information security consultancy. The “second opinion” audit should be carried out separate to the function of the security and privacy committee so that the audit result can be compared with the approach being taken by the internal privacy officer and security and privacy committee.

The Privacy Alerts Bill may not be perfect when it is passed into law, but it can only provide more momentum for organisations to take security and privacy seriously.