The Digital Economy & GDPR
The EU General Data Protection Regulation (GDPR), which is due to come into force in May 2018, will affect every organization that uses the data of European citizens. In this article, Stephen Cameron and Chris Pinnock examine the implications of GDPR, consider the changing political landscape and analyze how businesses will be affected by the new regulation.
The electronic use of private information has increased exponentially since the EU's Data Protection Directive appeared in 1995 along with an update of the UK's Data Protection Act (DPA) in 1998.
When these laws were created, the world of computing was very different. Since that time, our dynamic use of the Internet through computers and mobile devices gives many businesses the capability to collect a plethora of information about our private lives, movements, locations, preferences and lifestyles. This has enabled a revolution in marketing methodologies and tools that provide extraordinary insight into customer needs and opportunities.
In the new digital economy, organizations have become increasingly connected across the globe by using services in the cloud and most of their applications are now Internet driven. This means that personal information can be found anywhere, spurring governments to recognize and formulate digital economies to service the needs of customers across the world.
In recent years, there have been several large organizations that have suffered personal data breaches. Recently, Sony's PlayStation network platform was compromised, leaking vast amounts of personal data. Similarly, TalkTalk's customer services portal was hacked and customer information was revealed including e-mail addresses, bank accounts and dates of birth.
It is therefore time for the current data protection legislation to get an update. The EU has ratified the new General Data Protection Regulation (GDPR) and it is due to come into force in May 2018. The Regulation aims to protect personal information and enhance the exchange of information to enable digital markets. It defines clear roles and responsibilities, and a strict process for personal data breaches. It applies to organizations processing the personal data of EU citizens regardless of whether the organization sits wholly in the EU or not.
This is particularly relevant to the telecom market, where businesses store a significant amount of customer data. In the future, we will see more digital interaction with customers via web portals and programmatic APIs. The need to mitigate risk on personal data breaches is therefore greater. The GDPR has further implications for organizations that outsource part of their customer-related operations outside of the EU.
In this paper, we describe the key changes to the regulations and suggest an action plan for organizations to use to start thinking about the GDPR in advance of its go-live date.
What is changing?
The new European General Data Protection Regulation (GDPR) was accepted into European Law in April 2016 and will be mandatory by May 2018. It will replace the current European Union Data Protection Directive 95/46/EC at the same time, whilst retaining compatibility with the ePrivacy Directive 2002/58/EC. Because it is a regulation rather than a directive, all member states of the EU must implement it within that timescale.
The regulation is 88 pages with 173 regulations supported by 95 articles. It defines roles such as Data Subject, Supervisory Authority, Processor, Controller and Data Protection Officer with clear responsibilities to protect the personal data of an EU citizen or a Data Subject. (See Table 1.)
Table 1: GDPR: Key Terms & Roles
|Personal Data||Any information relating to a Data Subject relating to biometric, physical, physiological, genetic, mental, social, cultural or economic factors.|
|Data Subject||An identifiable natural (living) person. The regulation does not apply to corporate entities or to any personal data of a dead person.|
|Processor||A natural or legal person, or other body that processes personal data on behalf of a controller.|
|Controller||A natural or legal person or other body that determines the purposes or means of processing personal data. A controller can work jointly with other controllers.|
|Data Protection Officer||An officer appointed by the controller or processor who independently oversees that regulation of data within the enterprise.|
|Supervisory Authority||An independent public authority established by the Member State to monitor the application of the GDPR to protect the Data Subjects|
|European Data Protection Board||Over-arching board for regulation to enable consistency across all Member States and countries outside the EU (also known as third countries)|
The aim of the GDPR is to protect the rights of the Data Subject, counterbalancing this with the EU's definition of the Digital Economy, where data flows freely across the EU. The European Data Protection Board has been established to support and enforce the GDPR and it will oversee and monitor the compliance of businesses or enterprises to the GDPR legislation. Each member state will have at least one Supervisory Authority and will have representation on the Board. In the UK, this body could be the current data protection body, the Information Commissioners Office (ICO).
There are some key highlights of the GDPR that need to be addressed by business:
The individual need not worry about the GDPR as it applies to businesses rather than individual persons. It also only applies to the personal data of living natural persons.
Does this matter to the UK with Brexit?
The question of whether Brexit affects the UK's GDPR stance is moot. Ostensibly, the possible timing of the UK leaving the EU will still mean that the UK will still need to adhere to the GDPR as the earliest the UK will leave the EU is 2019, well after the GDPR is adopted.
Even so, the GDPR has been regarded as the gold standard by which a digital economy should operate with respect to privacy of data and its exchange. Industry experts have suggested that as the UK is a leading digital economy, being founded on a strong finance industry, that adherence to the GDPR naturally will be embraced. The UK Government has reinforced that sentiment by working on an EU transition bill, the Grand Repeal Act, which will incorporate the current EU legislation to reduce the costs and effects of sudden change out of Europe.
The GDPR is written, as you would expect, in terms of the European Union, its bodies and processes. There are a few explicit exceptions where it is incompatible with member state legislation. Effectively outside of the EU, the UK will be a third country in terms of the GDPR. To properly adopt the GDPR post-Brexit, there needs to be a UK version of the GDPR that is compatible with the processes of the EU GDPR. One likely scenario is to appoint a supervisory authority (such as the ICO) to maintain the UK version of the GDPR as both a UK Data Protection Board but also a recognized supervisory authority to the EU Data Protection Board.
Organizations like the British Computer Society would like to see data protection equivalence with the EU a minimum standard (see note 2), with an opportunity for the UK to become a world leader in this area of legislation (note 8), possibly having even stronger laws of protection (note 9).
In summary, any company based in the UK will still need to comply with the GDPR when it processes personal data belonging to EU citizens. Furthermore, it will be subject to similar UK legislation for processing personal data of a UK citizen post-Brexit.
What happens if the GDPR is breached?
The ICO has the power under the current data protection legislation to investigate UK institutions for personal data breaches and can fine institutions up to £500,000 for breaches that are not handled correctly.
When the GDPR comes into force, the potential fines are much larger. The financial penalty will be at least 2% of the global revenues for the business (or €10 million if higher). In comparison to some actual fines given by the ICO, the increase in penalties will be substantial -- see Table 2.
Table 2: Recent High Profile Data Security Incidents and Potential GDPR Fines
|Company||Incident||Numbers Affected||Date of Incident||Original Fine||Potential GDPR Penalty|
|Sony||Play Station Network accounts hacked.||77 million (see notes 1 and 3 - usernames, passwords and credit card details)||19 April, 2011||£250,000 (by the Information Commissioners Office - see note 4)||>$1 billion (where 2011 turnover was $63.84 billion - see note 5)|
|TalkTalk||Cyber Attack on Customer Services Portal||1.2 million (157,000 names, addresses, phone numbers; 21,000 bank accounts; 15,000 dates of births)||23 October, 2015||£400,000 (by the Information Commissioners Office - see note 6)||£35 million (where 2015 turnover was $1.79 billion - see note 7)|
|Notes: See the end of the article for the full list of footnotes.|
Therefore, it is critical that businesses have adequate controls in place on the personal data they manage and, in the event of a breach, that they have effective processes in place to report breaches to the appropriate authorities.
Call to action
Businesses should consult with specialists who deal with assessing risks and identifying gaps in their security and private data management processes. The models of operation are complex and profuse; they need to be understood and applied to the specific business: e.g. understanding the roles of Controller and Processor.
For a relatively new business or new project involving personal data, the security and risk to personal data must be considered from day one with systems and processes developed with the GDPR "built in." Existing businesses will need to assess their Information Systems stack and retro-fit changes to ensure that the integrity and privacy of personal data is guaranteed.
Here are some key points that need to be considered:
— Stephen Cameron is an Information Management and Digital Strategy Leader working in the Financial Industry. He is the author of a successful and authoritative book Enterprise Content Management, A Business and Technical Guide (ISBN 978-1906124670, BCS 2011), a BCS Fellow and a Chartered Engineer.
— Chris Pinnock is an IT Consultant working in the Telecommunications Industry. He holds a PhD in Mathematics, is a BCS Fellow and a member of the BCS ELITE IT leadership group.