On 22 August 2016, the Australian Information Commissioner and the Privacy Commissioner of Canada published a joint report into the online data breach that occurred as a result of the successful hacking of the Ashley Madison dating website.

The breach enabled the hackers to obtain access to the personal information associated with approximately 36 million Ashley Madison user accounts, including disclosure of sensitive information regarding users' practices, proclivities and fantasies.

The report into Ashley Madison's privacy practices and the effectiveness of its information handling procedures at the time of the breach serves as a useful reminder to organisations of their obligations under the Australian Privacy Principles (APPs).

Obligations imposed on organisations by the APPs

Generally speaking, private sector organisations with a turnover of more than $3 million are required to comply with the Privacy Act1988 (Cth). Section 15 of the Privacy Act prohibits organisations bound by the Privacy Act from breaching an APP.

The APPs are broad, high-level principles directed to shaping the way in which organisations handle personal information.

The Ashely Madison report focused on three groups of obligations arising under the APPs, those being obligations with respect to:

  • information security (APPs 1.2 and 11.1);
  • the indefinite retention of information (APP 11.2); and
  • the accuracy of personal information (APP 10).

Procedural expectations

In reaching its findings, the report contains a useful summary of the expectations of the Commissioner with respect to compliance with the abovementioned APPs. In particular, the report highlights that:

  • Organisations have a responsibility to maintain the accuracy of all personal information provided to them: A subset of the email addresses published by the hackers of the Ashley Madison website related to people who had never used the site. In the course of the investigation, Ashley Madison confirmed that it did not verify the email addresses provided by users. However, it sought to argue that the relevant APPs only afforded protections to users submitting information to organisations, not uninvolved individuals whose information was improperly submitted by a user. The Commissioner disagreed and expressed the view that the protections afforded by the accuracy provisions of the APPs applied to all individuals whose information was collected, used or disclosed by an organisation, regardless of whether the information was provided by the individual.
  • Organisations must have suitable privacy safeguards: The safeguards that an organisation has in place must be commensurate with the type, quantity and sensitivity of the personal information held and the business in which the organisation is engaged. In assessing the effectiveness of privacy safeguards, organisations “should not focus solely on the risk of financial loss to individuals due to fraud or identity theft, but also on their physical and social well-being at stake, including potential impacts on relationships and reputational risks, embarrassment or humiliation.” In considering the safeguards of Ashley Madison, the report noted that "Ashley Madison is a website designed for people who are seeking to engage in an affair, an activity where discretion is expected and paramount". The report went on to note that appropriate safeguards may include:
    • documented information security policies and procedures for managing network permissions, which provide clarity to employees about the importance placed on information security in the workplace;
    • documented risk management processes, which provide guidance on the security measures proportionate to the risks faced by the organisation, including regular internal/external risk assessment; and
    • adequate training for all staff (including senior management) to ensure that they are aware of, and properly carry out, the privacy and security obligations relevant to their role within the organisation.
  • Organisations must evolve their security practices: As the business of an organisation grows or changes, so must its practices with respect to maintaining the security of personal information. This will ensure that those practices appropriately protect the nature and breadth of the personal information held and the risks faced. Organisations should also reassess whether collecting certain personal information remains necessary as business functions develop or change.
  • Appropriate destruction policies must be implemented: An organisation needs to have an appropriate policy for the destruction of personal information that is no longer required to conduct its business. Destruction polices should state the retention period for certain types of personal information and provide guidance on the technical practices to properly destroy personal information no longer required. Organisations should give people the option not to provide personal information where appropriate.
  • Transparency: Organisations should be open and transparent with the public about their privacy procedures so as not to mislead. The terms and conditions of organisations must appropriately reflect their privacy procedures.

Responding to the breach

The report also makes comments with respect to how organisations should respond to privacy breaches including by:

  • recognising that a breach is a crisis management event with the potential to escalate rapidly;
  • employing advanced preparations such as a breach response plan;
  • acting quickly to stop furtherance of the breach by limiting an attacker's access to systems, investigating the attack through internal or external means and eliminating any continuing unauthorised access;
  • notifying the public of the details of the breach, including establishing a telephone/email inquiry system to enable affected users to communicate with the organisation about the breach; and
  • conducting a reassessment of internal privacy practices and breach response procedures to ensure that they are an effective means of protecting the personal information held, and continually updating/improving such systems as becomes necessary.

The Australian Government has released a draft data breach notification bill which, if passed, will require entities captured by the APPs to notify the Commissioner and affected individuals of serious data breaches. Against that background, the comments made in the report serve as a further reminder for organisations that they are likely to be obliged in the near future to provide formal notification of serious data breaches to the Commissioner and any affected individuals. The introduction of a notification obligation is likely to require organisations to undertake a review of their existing policies and procedures.

Applying the lessons of the Ashley Madison report

Together with practical guidance for complying with the APPs and responding to a data breach, the report is instructive for all organisations that collect, use of disclose personal information in that it provides useful insights into the way in which the Commissioner will interpret the law.

The report also serves as a useful reminder that, while data breaches can result in financial consequences for individuals, they can also cause long-term reputational damage and that privacy safeguards should be supported by a coherent and adequate governance framework, which serves to anticipate, prevent and mitigate cyber-attacks.