The last few months have seen the Australian Government release both its long-awaited mandatory data breach notification bill and a brand-new Cyber Security Strategy. The dual release is a clear indication that cyber security opportunities and threats must be considered together and addressed proactively by all Australian businesses.

The Data Breach Notification Bill: An overview

Essentially, if passed, the Privacy Amendment (Notification of Serious Data Breaches) Bill 2015 will require private sector organisations and Federal government agencies to notify the Federal Privacy Commissioner and affected individuals of serious data breaches.

What is the trigger for notification?

The notification requirement applies where there are “reasonable grounds” to believe that a “serious data breach” has occurred.

A data breach is “serious” if:

  • personal information, credit reporting or credit eligibility information or tax file information is subject to unauthorised access or disclosure; and
  • the breach gives rise to a “real risk of serious harm” to the affected individual.

A determination on whether there is a “real risk of serious harm” should be based on a range of factors including the sensitivity of the information and whether the information is protected by security measures. (The Privacy Commissioner is expected to provide further guidance on interpreting the “real risk of serious harm” test).

“Harm” is defined broadly in the draft bill, and includes physical, psychological, emotional, reputational, economic and financial harm. The term “reasonable grounds” is not defined in the draft bill, and the explanatory memorandum notes only that this will “vary depending on the circumstances”.

What are the timeframes for notification?

If an entity suspects but is not certain that a serious data breach has occurred, it must conduct reasonable investigations within 30 days to determine whether notification is required.

The notification obligation and time periods are triggered when the entity “ought reasonably to be aware of” the data breach, or when the entity actually became aware (whichever occurs first).

Who must be notified of a serious data breach?

Where notification is required, the entity must notify the Privacy Commissioner and take reasonable steps to notify affected individuals of the following:

  • the identity and contact details of the entity;
  • a description of the breach and the “reasonable grounds” upon which the entity believes the breach occurred;
  • the kinds of information involved in the breach; and
  • recommended steps for the individual to take in response to the breach.

If it’s not practicable to notify the affected individuals, an entity can satisfy the notification requirement by publishing a statement with the above information on its website and taking other reasonable steps to publicise the statement.

Key potential improvements under the draft bill

One key area of improvement under the draft bill (if passed) will be that greater emphasis will be placed on establishing “reasonable grounds” for determining that a “serious data breach” has occurred before deciding to notify. This is a critical issue, as it distinguishes between notifiable and non-notifiable breaches.

Another key potential improvement under the bill is the addition of a proposed “assessment period” of 30 days to allow an entity to more fully investigate a breach. Accurate information can be difficult to collate immediately after a data breach incident, and assessments of the scale and severity of a data breach incident often evolve rapidly as new information becomes available. At the same time, there are significant potential pitfalls for entities notifying before they have the full picture, so a 30 day “assessment period” will be a welcome addition.

What has the banking sector’s response to the draft bill been?

There is broad public support for, and political consensus on, the introduction of a mandatory data breach notification requirement in Australia. The introduction of data breach notification requirements would significantly strengthen Australian privacy laws, and bring Australia in line with other jurisdictions that have already implemented, or are in the process of implementing, data breach notification laws (such as the EU and certain US states).

A number of organisations across various sectors have made submissions on the exposure draft of the bill, including the Australian Bankers' Association (ABA). The ABA is concerned that:

  • the "real risk of serious harm" test is too uncertain;
  • the use of the words "ought reasonably to be aware" of a breach make it unclear when the notification requirement takes effect (the ABA proposes the test should be “ought reasonably to have become aware”);
  • if the provisions are not made clearer, a potential outcome could be “notification fatigue” and the associated desensitising of customers;
  • a scheme that is too broad could also contribute to an erosion of public confidence in the digital economy.

What are the implications for the banking sector and what can you do to prepare?

The implications of the draft bill for the banking sector and other Australian businesses (including foreign businesses conducting business in Australia) are likely to be significant and far-reaching. Australian companies using off-shore data processing services are particularly likely to be impacted.

Businesses should start preparing for the introduction of data breach notification requirements by ensuring they have appropriate operational procedures (and contractual rights) to identify, assess and manage data breaches when they occur.

The New Cyber Security Strategy: An overview

The launch of the Australian Government’s new Cyber Security Strategy (CSS) followed 18 months of public consultation and review.

Prime Minister Turnbull’s foreword to the CSS states that the strategy gives cyber security “the attention it requires in an age where cyber opportunities and threats must be considered together and must be addressed proactively”.

This goes without saying – we often see first-hand the financial and reputational cost of cyber security incidents, particularly data security breaches. The absence of cyber resilience, and accompanying effective regulation, has serious implications for banks, and other organisations, and individuals.

What are the main aims of the CSS?

The CSS aims to balance the need for Australia to innovate in the online environment, against “real and growing” cyber security threats. It outlines the Government’s plan to develop national cyber resilience, with a view to “unlocking” Australia’s digital potential.

It also includes a significant investment by the Government in cyber security: $230 million over four years.

These funds will be applied to improving cyber capability and delivering new initiatives, with over $30 million to be invested in an industry-led Cyber Security Growth Centre. This is positive news for innovative Australian companies with products or services aimed at addressing cyber threats or improving cyber resilience within the public and private sectors.

5 key components of the CSS’s action plan

There are 5 key components of the cyber security “action plan”:

  1. National cyber partnership between government, research and business.
  2. Strong cyber defences (including improved sharing of information on cyber threats, and raising the bar on cyber security performance).
  3. Global responsibility and influence (including co-operation with international law enforcement and agencies on cyber crime).
  4. Growth and innovation (including establishing an industry-led Cyber Security Growth Centre).
  5. Developing a “cyber smart” nation.

How the CSS will raise the bar on cyber security performance?

Being cyber resilient is not an IT issue. It is also more than a compliance issue: as the CSS notes, it “belongs at the centre of business strategy for organisations across the public and private sectors”.

Cyber security is a real business risk to be prioritised, managed and funded by both the public and private sectors.

A key component of the CSS is to raise the bar on cyber security performance. This includes plans to:

  • co-design national voluntary cyber security “good practice” guidelines, aligned with international standards; and
  • conduct voluntary “health checks” (for ASX100 listed companies), to help organisations understand their cyber security strengths and gaps.

We would expect these guidelines to include a corporate road-map and other practical tools for preparing and responding to malicious cyber activities, including data security breaches (similar to the Corrs Dealing with Cyber Security Corporate Road-Map). But, for guidelines and “health checks” to be effective, they need to be properly implemented and adopted by your organisation. They also need the support of the Board and senior executives.

Hopefully the release of the CSS will help get cyber security issues the attention they require within organisations, particularly at the Board and executive levels.