Some privacy experts believe that a law
ordering notification would make companies more careful and more
accountable for the use of personal information, but the financial
industry has resisted the calls for legislation.
The FSA has told OUT-LAW that it backs
notification in almost all cases, but that a blanket rule was not
the best option. It said it does have the power to create such a
rule, though, which would bind the UK's entire financial services
industry to notification.
The news comes as Nationwide Building Society,
the UK's largest, faces an almost £1 million fine for lax security
procedures and controls which led to the exposure of the personal
details of an unknown number of customers when a Nationwide laptop
was stolen.
Both the FSA and Nationwide refused to
disclose whether or not it ordered Nationwide to inform customers
of the security breach. "I don't want to get in to the hows or the
whens of it," said FSA spokesman Patrick Humphries.
The FSA spokesman did concede, though, that it
had a role in the disclosure. "We did think very carefully and
talked to other bodies like the police and the Information
Commissioner's Office about when and how Nationwide should
communicate with its customers," he said.
A Nationwide spokeswoman would not say whether
or not it had been told or advised to inform customers by the FSA,
the Information Commissioner or any other body. All the spokeswoman
would say when asked that question was: "We advised the police, the
Information Commissioner and the FSA of the theft of the laptop and
have been co-operating with them since".
Though the employee whose laptop was stolen
from his home last year told the company about the incident
straight away, it is reported that he did not inform Nationwide
that customer data was on the machine until after a three week
holiday.
Nationwide did eventually alert all its
customers by letter that the breach had occurred, it said. But the
delay worries some information security experts, who say that those
whose data has been compromised should know straight away.
The scandal could increase calls for the UK to
adopt a California-style requirement that organisations publicise
serious data breaches. There is currently no demand that
organisations admit breaches.
"The FSA's actions raise the issue of whether
the UK should import the Californian style security breach
requirement," said Dr Chris Pounder, a privacy expert at Pinsent
Masons, the law firm behind OUT-LAW.COM.
"In an environment where the government is
warning about ID theft it seems sensible to alert data subjects to
the fact that their identity has been exposed," said Pounder.
The Information Commissioner's Office (ICO),
which is responsible for monitoring compliance with the Data
Protection Act, has stopped short of calling for security alerts,
but Assistant Commissioner Phil Jones told Channel 4 News this week
that his office thought such a law would be valuable.
"There certainly is quite a considerable
amount of pressure to follow what I understand is the model in the
US, which is to introduce some form of formal mandated reporting,"
he told Channel 4 News. "Certainly we can see a value in this. I
think what is the most important thing, before reporting an
incident to anybody is to make an immediate assessment of what's
gone wrong and to take immediate action to seek to minimise the
further risk."
The FSA's Humphries said that though the FSA
had no firm position on the matter, it thought that a law
applicable to all situations may not be appropriate. He said that
there could be some situations where publicising the breach would,
in fact, make it worse, and each case should be assessed on its own
merits.
Humphries also said that the £980,000 fine was
not just in relation to one single laptop incident. "We went in and
did an investigation and found wider failings, and took action on
the security systems and controls, which we found were not up to
scratch," he said.
