Canada: CRTC's Troubling Guidelines On CASL Accessorial Liability

Last Updated: November 20 2018
Article by SnIP/ITs Blog and Barry B. Sookman

Most Read Contributor in Canada, August 2019

If you thought CASL wasn't draconian enough, think again. The CRTC's interpretation of CASL in the new Guidelines on the Commission's approach to section 9 of Canada's anti-spam legislation (CASL) (Compliance and Enforcement Information Bulletin CRTC 2018-415) has tightened the noose on Canada's already speech impairing anti-spam law. Under the Guidelines, intermediaries of all stripes including telecom providers, ISPs, hosting companies, payment processors, advertising brokers, electronic marketers, software and application developers and distributors can be liable for CASL violations of their users – whether these intermediaries even intend or know that their users are using their products or services to violate CASL.

This incredibly broad reading of CASL is based on the Commission's interpretation of Section 9 which makes a person potentially liable under CASL for aiding, inducing, procuring, or causing to be procured a CASL breach. Under the Guidelines, a person could be liable for CASL breaches of others merely by providing tools, products or services, even where they did not intend or were not aware that their actions enabled a CASL breach. According to the Commission:

With regard to strict liability violations, it is possible for an individual or organization to be held liable and face administrative monetary penalties for violating section 9 of CASL, even if they did not intend to do so or were unaware that their activities enabled or facilitated contraventions of sections 6 to 8 of CASL by a third party. When engaging in regulated activities, such as those relating to electronic commerce, individuals and organizations must comply with the associated legislative and regulatory requirements. With respect to section 9 of CASL, compliance includes ensuring that an individual's or organization's actions and/or omissions are not aiding or inducing a third party to violate sections 6 to 8 of CASL....

While awareness of violations may be a factor when assessing section 9 violations, it is not necessary to be found liable. Determination of section 9 violations will depend on the exact context and circumstances surrounding each case.

According to the Commission, "a person may contravene section 9 of CASL by giving assistance to or enabling a third party to carry out violations of sections 6 to 8 of CASL. This may take the form of providing access to the tools or equipment necessary to commit a violation. Alternatively, it may involve facilitating a violation by giving technical assistance or advice."

Intermediaries must also act proactively. Merely following industry standards is not sufficient.

Further, It should be recognized that simply following industry standards may be insufficient. Where a threat or vulnerability has been identified, steps should be taken to address it, even if that means going beyond industry standards.

Here are some examples given by the CRTC of the kind of activities that could attract accessorial liability under CASL.

Example 1

Company A specializes in online marketing and sells a bundle of services to Company B, which includes a messaging template and a collection of email addresses and mobile phone numbers for the purpose of mass marketing. The messaging template does not include sender identification information or an unsubscribe mechanism, and no attempt has been made to ensure the express or implied consent of the persons whose contact information appears on the list, all of which are required under section 6 of CASL. In this scenario, Company B may be in violation of section 6 of CASL if it uses the messaging template and contact lists provided by Company A to send commercial electronic messages (e.g. email or SMS). Even though Company A is not the sender of the messages, it could be violating section 9 of CASL by providing the tools that were used to violate section 6 of CASL.

Example 2

Company A offers web hosting services. Its client, Company B, uses Company A's services to launch a phishing campaign that redirects unsuspecting Canadians to a fake banking website created to obtain their personal data – a violation of section 7 of CASL. Company A was alerted to the malicious activity by a cyber security firm, but took no action to stop it. In addition, there is no statement in its web hosting terms of service requiring clients to be compliant with CASL, nor does it have processes to ensure compliance. Therefore, while it was Company B that launched the phishing campaign, Company A may be responsible pursuant to section 9 of CASL for having "aided" the doing of the section 7 violation.

Example 3

An individual visits an online app store and downloads a video game, which comes bundled with a custom browser toolbar. Not all toolbar functions, such as the pushing of advertisements, are described during the installation process, and consent for the toolbar is sought through a pre-checked box – contrary to the requirements of section 8 of CASL. During an investigation, it is determined that several customers had previously complained to the online app store about the toolbar. Although the video game developer may be the responsible party for a section 8 violation, the online app store may have violated section 9 of CASL for having "aided" the doing of the section 8 violation.

The Commission notes that when "assessing the role individuals, businesses, or other entities play in potential section 9 violations, the Commission will consider a variety of factors" such as

  • the level of control that an individual or organization has over the activity that violates sections 6 to 8 of CASL, and the extent to which they have the ability to prevent or stop that activity (as required by the situation);
  • the degree of connection between the actions that could constitute a violation of section 9 of CASL, and those that contravene sections 6 to 8 of CASL. For example, selling a computer, which is then used to commit an unlawful activity, would not create a strong degree of connection between parties. However, selling malicious software to unsuspecting parties would suggest a stronger degree of connection; and
  • evidence that reasonable steps were taken, including precautions and safeguards to prevent or stop violations from occurring.

According to the Commission, intermediaries have a responsibility to actively monitor the activities of their users.

The most effective way to demonstrate due diligence is to ensure that measures are in place to mitigate non-compliance risk. Individuals and organizations should take steps to maintain a high standard of awareness and take decisive, prompt, and continuing action to prevent CASL violations from occurring, or to stop them once identified. A 'set it and forget it' compliance program or policy is an ineffective strategy. The key to due diligence is not just establishing a proper system to prevent the occurrence of violations, but, more fundamentally, taking reasonable steps to ensure the effective operation of the compliance measures, such as through ongoing management and active oversight, including audits and the monitoring of activities carried out by third parties. Further, compliance measures should not be generic in nature, but should instead specifically address identified non-compliance risks...

Individuals and organizations should identify their vulnerabilities based on the nature of their business, activities, or technology used. The Commission encourages the implementation of a robust compliance program along with preventions and safeguards, which may be taken into consideration when reviewing cases of non-compliance. The Commission considers the following to be examples of reasonable steps, which may vary based on individual circumstances:

Here is what the CRTC says intermediaries should do.

  • Incorporating regular threat and risk assessments into compliance or information technology security programs to identify vulnerabilities and risks.
  • Validating the identity of clients, including company name and address, previous or current aliases, length of time in operation, primary corporate directors, or other relevant company stakeholders.
  • Being cognizant of location discrepancies (e.g. clients doing business in one region while incorporated, banking, or having online registration in another, unrelated region).
  • Obtaining further proof of identity, such as incorporation records, government-issued identification, or tax records, as appropriate in the given situation.
  • Avoiding doing business with those seeking total anonymity through the use of aliases, post office boxes as mailing addresses, or cryptocurrency for transactions.
  • Researching the reputation of potential clients, including any malicious activity associated with them.
  • Reviewing the products or services of potential clients for legal compliance prior to doing business with them.
  • Implementing written agreements that bind clients and their downstream clients to comply with CASL.

Further, intermediaries must also take steps to detect, notify and share information

  • Auditing how existing clients are making use of services.
  • Detecting and reporting possible violations to relevant authorities.
  • Where appropriate, sharing lessons learned and best practices within the industry to reduce the risks to other potential victims.
  • Ensuring regular monitoring to detect threats and notifying stakeholders.

They must also take steps to remediate and assist users with recovery steps

  • Allocating resources to take down threats, address security vulnerabilities, and implement sustainable changes in a timely manner to prevent similar threats from occurring in the future.
  • Providing assistance to users whose devices and accounts have been compromised.

To be clear, intermediaries clearly can have liability under CASL in certain circumstances. Further, they may need to take responsible steps to mitigate violations occurring using their products, services, or tools. But, the CRTC apparently seeks to impose liability even on completely innocent intermediaries with no actual or constructive knowledge that their products, services, or tools are being used to violate CASL.  It is hard to imagine a more aggressive interpretation of CASL's accessorial liability provisions. Sadly, they were adopted with no public consultation or input, something they would obviously have benefited from.

For more information on CASL, see Barry Sookman, CASL: the unofficial FAQ, regulatory impact statement, and compliance guideline

To view the original article click here

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.

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