What is the cost of breaching the law? The Privacy Commissioner has powers to issue fines of up to $1.7m for breaches of the Privacy Act 1988 (Cth) (the Act) and instead on 26 March 2015 it accepted a promise from Optus to engage an independent reviewer to review its systems, make recommendations, adopt those recommendations and have its compliance certified by an independent third party. What is the likely cost to Optus? What is the wider benefit to the Privacy Commissioner in terms of deterrence? What comfort can the public draw from this outcome that businesses are changing their practices to adequately protect personal information?
As any business that's been subject to an enforceable undertaking will know, they are hard work. The outcomes an undertaking can deliver are reportedly what interests the Privacy Commissioner, as enforceable undertakings can institute improvements in practices that the regulator can monitor. If a business does not comply with an undertaking the regulator can obtain court orders to compel compliance and this results in additional costs and reputational damage to the business.
Telcos are no strangers to enforceable undertakings, but in the past the usual player accepting the undertaking is the ACCC in regards to consumer law issues. Optus has now found itself in this position with the Privacy Commissioner due to a series of privacy related incidents in 2013 and 2014. Some of these incidents were prior to the changes to the Act coming into place in March 2014. They are referred to in the enforceable undertaking as the 'white pages incident', the 'modem incident' incident and the 'voicemail incident'.
What did Optus do with its customers details?
In the case of the white pages incident, due to a coding error the names, addresses and mobile phone numbers of approximately 122,000 Optus customers who had requested 'silent' listings had their personal information listed in the White Pages online directory. Presumably at least some of these thousands of customers felt aggrieved and perhaps could justify some form of damage they incurred as a result of the disclosure. There were also individual privacy complaints to the Commissioner as a result of this incident.
In the modem incident, Optus left the management ports for its modems open assuming they were only accessible for network management purposes. It further left some 300,000 of these modems set to factory default settings including default names and passwords without conducting connectivity testing. These customers were left vulnerable to a person hacking into the modem and making and charging calls as though they were the Optus customer. There is apparently no evidence this security vulnerability was exploited. Optus became aware of this issue up to six years later through the media.
The voicemail incident involved a flaw in Optus' security processes which led to certain customers not being asked for their password when attempting to retrieve voicemail from outside the Optus network. These customers were exposed to 'spoofing' attacks, meaning a third party could potentially access and use the customers' voicemail messages including being able to listen to recorded messages and change settings and preferences.
Optus alerted the Commisioner to these three incidents between April and June 2014.
What were the Privacy Commissioner's concerns?
In the guidance provided by the Privacy Commissioner much air time is given to the factors that may lead to an adverse finding or breach of the Australian Privacy Principles (APPs). In this case, the incidents suggested to the Privacy Commissioner that Optus may not have had reasonable steps in place to safeguard the personal information held in its systems at the relevant times in breach of APP11.
In reaching this conclusion, the Commissioner factored in:
- the large number of individuals whose personal information was compromised (over 100,000 per incident);
- the risk of harm for affected individuals particularly in the case of the White Pages incident which the Commissioner had previously found (in relation to its own motion investigation into Telstra) can create significant risks for affected individuals;
- particularly in relation to the White Pages incident, the security measures Optus had in place were not reasonable to protect the information;
- that all of the incidents were detected and brought to the attention of Optus by third parties, presuming a failure by Optus to detect matters and resulting in delays in taking action to contain each incident and prolonging the time in which the affected individuals were at risk; and
- the fact that Optus had cooperated with the investigation worked in its favour for candidacy for an enforceable undertaking (as opposed to an alternative remedy such as a fine).
What does the undertaking involve for Optus?
Over the coming 18 months, Optus will need to complete various reviews and certifications and implement any recommendations identified by these reviews. It will further need to provide a report by an independent third party that those recommendations have been implemented.
How can my business learn from Optus to prevent similar incidents?
Perhaps the incidents could have been prevented by comprehensive privacy impact assessments at the time changes were implemented or new products introduced.
Often, privacy issues are left to the compliance and legal departments, but in this case comprehensive IT checks, testing and monitoring may have picked up these issues before any information was disclosed. Compliance and legal advisers can ask questions such as 'what personal information is being collected or stored as part of this project', but often need the assistance of those at the coalface to identify the privacy implications and to implement the required security measures. In the case of the change in website coding, such a change might not even be flagged for legal or compliance review but all team members should be trained to identify when a task they are performing as part of their role potentially impacts the personal information of customers or members of the public. The Commissioner has said as part of the recent privacy law reform report card that it is more effective, and ultimately cheaper, to embed privacy in day-to-day processes than to respond to issues as they arise.
How should my business respond if it is faced with similar privacy incidents?
In its media release, the Privacy Commissioner has spoken favourably of the fact that Optus took steps to contain the incidents once it was aware of them and that it worked with the OAIC in a positive way to address the incidents. The Commissioner offered encouragement to organisations and agencies to 'notify affected individuals and the OAIC, where there is real risk of serious harm to an individual' and recommended that all organisations develop a data breach response plan. According to a recent Parliamentary Joint Committee report endorsed by the Government, the notification of such incidents will soon become mandatory. The Government has indicated it would introduce a mandatory data breach notification scheme by the end of 2015 and will consult on draft legislation.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
