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The Ashley Madison Breach: Canada-Australia Report of Investigation and Takeaways for all Organizations

On August 23, 2016, the Office of the Privacy Commissioner of Canada (OPC) released its joint report with the Office of the Australian Information Commissioner (OAIC) regarding its investigation of the 2015 Ashley Madison breach.

The report articulates several takeaways for all organizations. However, if there is one key lesson to be learned, it is that the OPC considers a solid information compliance and governance program to include documented policies and procedures. Organization’s safeguards should be adopted with “due consideration of the risks faced” and with a formal framework in order to ensure its proper management.

The following summarizes the report by the OPC and OAIC including several takeaways for all organizations.

The Breach

As many recall, on June 12 2015, a group identified as ‘The Impact Team’ hacked Avid Life Media, Inc. (ALM), headquartered in Toronto, Canada and operator of Ashley Madison and several other dating websites.

It is believed the intrusion took place over several months, beginning with the compromise of an employee’s valid account credentials and used to understand ALM’s systems until ALM’s information technology team detected unusual behavior on July 12. The next day, ALM computers projected warning notices from The Impact Team stating ALM had been hacked and threatened to expose the personal information of Ashley Madison users unless ALM shut down the website. The Impact Team published its actions and threats to the internet on July 19. The OPC contacted ALM soon after, and ALM voluntarily reported the details of the breach. On August 18 and 20, 2015, after its demands were not met, The Impact Team published information allegedly hacked from ALM of approximately 36 million Ashley Madison users from around the world.

The Personal Information Exposed

The sensitive personal information exposed by The Impact Team fell into three main categories:

  1. Profile information that described the users, including names, physical descriptions, date of births, experiences sought through Ashley Madison, details relating to intimate desires, personal and sexual interests.
  2. Account information such as e-mail addresses, security questions and answers and hashed passwords.
  3. Billing information for users who made purchases on Ashley Madison, including real names, billing addresses and the last four digits of credit cards. (Note: As billing information was stored by ALM’s third party processor, it is strongly believed the third party processor was also hacked by The Impact Team).

The sophisticated and targeted hack made it a challenge to determine the extent of the access gained by The Impact Team. ALM reported to the OPC and OAIC, as well as notified affected individuals, that exposed information could also include photos and communications between users.

Canadian and Australian Joint Investigation

The OPC and OAIC did not focus or report any conclusions with respect to the cause of the breach itself. The report is an assessment of the practices by ALM against its obligations under both the Personal Information Protection and Electronic Documents Act (PIPEDA) and the Australian Privacy Act. The OAIC established an “Australian link” (s.5B(1A) of the Australian Privacy Act)) with the foreign-based ALM as a result of ALM’s targeting of its services to Australians, the collection of personal information of Australian residents and advertising in Australia. The collaboration was made possible by the OPC’s and OAIC’s participation in the Asia-Pacific Economic Cooperation (APEC) Cross-border Privacy Enforcement Arrangement

Report of Findings and Takeaways for all Organizations

  1.  Safeguards

Under both PIPEDA and the Australian Privacy Act, organizations must protect personal information by safeguards appropriate to the sensitivity of the information from loss and unauthorized access, use, disclosure, etc. Both jurisdictions require a similar assessment of the risk of harm to individuals. The Commissioners agreed the key risk for users of Ashley Madison was reputational harm.

Discretion and secrecy in being a member of AshleyMadison.com was a central marketing and legal representation to its users. ALM also stated to the OPC and OAIC that protection of its customer’s confidence was a core element of its business. ALM advertised a series of trust-marks including “Trusted Security Award”, “100% Discreet Service” and “SSL Secure Site” on the front page of AshleyMadison.com. It was later discovered some trust-marks were fabricated. Further, the Terms of Service warned users that security and privacy of information could not be guaranteed, a statement many organizations include in their policies. However, the OPC and OAIC found the qualifier in the Terms of Service did not absolve ALM of its obligations.

The Commissioners found ALM lacked appropriate safeguards considering the sensitivity of the personal information. The safeguards adopted by ALM allegedly did not consider the risks individuals could face as a result of unauthorized access.

Key elements ALM’s safeguards allegedly lacked included:

  • a comprehensive information security program expected of an organization collecting and processing such sensitive personal information.
  • documented information security policies and procedures for managing network permissions including critical gaps in security coverage indicative of the absence of documented policies and practices.
  • an adequate intrusion detection system or prevention system , including a security information and event management system in place, or data loss prevention monitoring
  • adequate training for all staff and senior management

Takeaways regarding safeguards for all organizations

  • Organizations should have documented privacy and security practices as part of their compliance program
  • The sensitivity of the personal information collected must be considered when determining and developing an organization’s information and security program
  • Organizations should conduct regular and documented audits and risk assessments
  • Documenting your privacy and security practices can assist your organization identify gaps
  • Training of all employees, including senior management is part of a functional and robust compliance program.

        2. Indefinite Retention and Paid Deletion of User Accounts

Both PIPEDA and the Australian Privacy Act place require limits on the length of time that personal information may be retained and require organizations take reasonable steps to destroy or de-identify information no longer needed for any purpose.

The investigation highlighted that information of deactivated accounts as well as accounts that have not been used for a prolonged period were retained by ALM indefinitely. Further, at the time of the breach, Ashley Madison provided users with two methods to close an account; a basic de-activation that would allow users to re-activate their accounts in the future should they choose to, and a full deletion for a fee of CAD $19 that would delete all personal information within 48 hours (Note: This fee was not disclosed in ALM’s privacy policy or terms of service). However, it was alleged that ALM did not delete all personal information and retained certain financial information in the event of charge backs for a period of up to 12 months following the purchase of a full deletion. ALM presented statistics to the OPC and OAIC that if any chargebacks were to occur, they would happen within 6 months from the date of purchase. Among those affected by the breach were individuals who purchased the full deletion and likely believed their information was destroyed.

The OPC and OAIC had the following findings regarding retention and deletion:

  • ALM had data that the vast majority of users who deactivated their account reactivated it within 29 days. As such, ALM was unable to justify an indefinite retention period of users who deactivated their accounts. Further, it was not clear to users that information would be retained indefinitely.
  • Accounts that have been inactive for prolonged periods were retained indefinitely. While such account users did not provide an affirmative indication of their intent to no longer use their account, justification to retain the personal information diminishes over an extended period of time. Lack of clear retention limits and inability to justify retaining inactive profiles indefinitely contravened PIPEDA and the Australian Privacy Act.

The OPC and OAIC varied in their conclusions regarding the retention of information of users who purchased the full delete option.

  • Under the Australian Privacy Act, ALM is required to destroy or de-identify personal information once it no longer needs it for any primary purpose (deliver its online dating services) and can only retain data for a secondary purpose (reasonably believes is necessary for charge backs to address the risk of fraud ) for a limited time period. ALM provided sound business and legal reasons to retain the financial data to which the OAIC found ALM provided a reasonable basis to retain the financial information for 12 months.
  • The OPC also found ALM satisfied its retention of financial information to prevent chargebacks for 12 months following a full delete (Note: ALM has reduced the retention period to 6 months since the breach), however the OPC found ALM contravened PIPEDA as a result of photo’s that were retained by error following a full deletion.

The OPC found ALM’s practice of charging a CAD $19 fee for withdrawal of consent and full deletion contravened PIPEDA, as ALM did not disclose the fee at the time of sign up, as well, the OPC is not convinced ALM met the high burden to request such a fee. ALM no longer charges a fee for full deletion.

Takeaways regarding deletion and retention for all organizations

  • While PIPEDA is silent on whether organizations may charge a fee to delete their personal information, the OPC has established a high bar in demonstrating such a fee is reasonable.
  • If a fee were reasonable, it must be clearly disclosed and communicated prior to an individual providing consent.
  • Organizations should document retention policies based on a demonstrable rationale and timeline
  • Organizations must clearly disclose and communicate such retention timelines to individuals
  • Organizations should review and audit their practices to ensure information is being deleted and de-identified accordingly.

         3. Accuracy of Email Addresses

Both PIPEDA and the Australian Privacy Act require organizations to take steps to maintain the quality and accuracy of the personal information they collect and use.

ALM collects e-mail addresses in order to create accounts and send confirmation, support and marketing e-mails. ALM’s practice was not to verify e-mail addresses as manner to enhance privacy. Also, ALM feared it would discourage some individuals from signing up. A subset of e-mail addresses involved in the breach belonged to people who never used Ashley Madison. ALM admitted it was aware that some users do no provide their real e-mail addresses when they register, and as such, was in possession of e-mail addresses that belonged to non-users.

Given the sensitivity of the Ashley Madison service and the possible harm a non-user could face, the OPC and OAIC found ALM did not take reasonable steps to ensure the e-mail addresses were accurate. The Commissioners did not agree with ALM’s argument that making the e-mail address field mandatory, but not verified, is a practice of enhancing the privacy of its users. The Commissioners found such approach creates an unnecessary risk in the lives of non-users in order to provide users with a possibility of denying their association with Ashley Madison. The Commissioners highlighted other options available to ALM to address this issue and emphasized that ALM has a responsibility for all information it collects, including considering the personal information provided from a user that does not belong to them (a user providing an e-mail address that is not theirs to register) and must consider the possible harm of the non-user.

Takeaways regarding accuracy for all organizations

  • The level of accuracy required by organizations is impacted by the foreseeable consequences of inaccuracy
  • Organizations must take reasonable steps to ensure information in their possession is accurate
  • Organizations are responsible for all information in their control, including information that belongs to non-users, non-customers or other third parties who did not directly provide their information to the organization.
  • The requirement to maintain accuracy must include considering the interests of all individuals about whom the information might be collected, including non-users, non-customers and other third parties.

           4. Requirement for transparency and informed consent

PIPEDA states that consent is only valid if it is reasonable to expect the individual would understand the nature, purpose and consequences of the collection, use and disclose of the personal information to which they are consenting. PIPEDA also requires organizations to make their handling practices readily available and understandable to individuals.

The OPC analyzed two issues, first whether the privacy practices of ALM were adequate under PIPEDA, and two, whether the privacy practices at the time individuals were consenting to provide their information to ALM was adequate and not obtained through deception.

Generally, the OPC found that while ALM did provide some information about its security safeguards, account closure options and retention practices, critical elements of their practices that would be material to users’ decision to join Ashley Madison were not as clear as they should be. For example:

  • The fabricated “trusted security award” trust-mark
  • Language in the privacy policy and terms and conditions were not consistent regarding retention of personal information and could confuse a user or lead them to expect that inactivity can alone lead to the deactivation or deletion of their information
  • The required fee for a full deletion was not disclosed until after creating an account
  • Users who requested a full deletion were not informed until after they paid the fee that their information would in fact be retained for an additional 12 months

The OPC found ALM did not meet its obligations under PIPEDA to be open and transparent about its policies and practices of its management of personal information. The OPC further found the lack of clarity regarding certain practices could materially impact a prospective user’s informed consent to join Ashley Madison and allow the collection, use and disclosure of their personal information.

Takeaways regarding transparency for all organizations

  • Organizations must be cautious of the representations they make in their privacy policies and terms and conditions
  • Omission or lack of clarity of material statements may also impact the validity of consent. Organizations should make effort to ensure an individual understands the nature, purpose and consequences of their consent.
  • Organizations privacy policies, terms of service and other disclosure of practices should be clear and inform individuals prior to or at the time of consenting.

The Commissioners noted that ALM was cooperative during the investigation. ALM has entered into a compliance agreement with the OPC and an enforceable undertaking with the OAIC. The events of the hack and the report by the Commissioners provide important lessons for all organizations that collect personal information.

To read details of the compliance agreement with the OPC and the steps Avid Life Media has undertaken to take, click here.

The news release released by the OPC on August 23, 2016 can be found here.

The OPC’s summary of takeaways for all organizations can be found here.

To read the full joint report of the investigation by the OPC and OAIC click here.

The Ashley Madison Breach: Canada-Australia Report of Investigation and Takeaways for all Organizations

Office of the Privacy Commissioner of Canada discusses its investigation against Compu-Finder

The Office of the Privacy Commissioner of Canada (OPC) recently hosted a knowledge session to stakeholders to discuss its recent investigation against Compu-Finder. This was the first investigation by the OPC involving the address harvesting provisions under the Personal Information and Electronic Documents Act (PIPEDA). See our post summarizing the findings and the OPC’s full report here.

While the OPC could not disclose details of its investigation, the OPC provided attendees with information about its interpretation of its investigative powers, its approach to the investigation and tips for organizations.

The Investigation

Unlike its complaint-driven investigations, this investigation was an intelligence-driven case under the address harvesting provisions that were added to PIPEDA by Canada’s Anti-Spam Legislation (CASL). After significant intelligence gathering to meet its reasonable grounds burden, a Commissioner-initiated investigation was commenced allowing the OPC to collect further intelligence from Compu-Finder, affected individuals and third parties, including by affidavits. The OPC highlighted it applied a cross-functional investigation, using numerous departments and tools, including extensive use of the OPC technology LAB.

It is important to note that unlike the Canadian Radio-television and Telecommunications Commission (CRTC), which is the regulator with main responsibility for enforcement of CASL, the OPC must have reasonable grounds to start an investigation that has not been filed by an individual. The CRTC does not have to discharge that burden before commencing an investigation.

Key Takeaways

“The truth is in your records”. The OPC stressed the importance of record keeping. This has become a consistent theme regarding PIPEDA and CASL. (See our post on the CRTC’s guidance here.) The OPC highlighted that record-keeping was a fundamental issue in its investigation. Organizations must be able to meet their due diligence obligations and prove they have consent for the personal information they collect and use, and for every e-mail they send under CASL. The OPC found that Compu-Finder’s records were inadequate or in some cases may have contradicted their position.

Other lessons offered were:

  • Exercise care when crafting responses to the OPC during investigation
  • An established privacy compliance program can greatly assist you in demonstrating accountability
  • Part of due diligence involves following up, double checking and auditing your policies and procedures

Stakeholders undoubtedly appreciated the OPC’s proactive gesture in providing this opportunity to learn more.

Office of the Privacy Commissioner of Canada discusses its investigation against Compu-Finder

Impact of the European General Data Protection Regulation (GDPR) on Adequacy and 5 Tips to Weather the Changes

Recent media coverage has brought to light the internal deliberations of the Government of Canada regarding the possible impact of the entry into force in 2018 of the GDPR on Canada’s adequacy status to receive personal data from the European Union (EU).  Ten other countries, and the businesses in those countries, should examine the same question:  Andorra, Argentina, Faroe Islands, Guernsey, Israel, Isle of Man, Jersey, New Zealand, Switzerland and Uruguay. The EU-US Privacy Shield, to which U.S. companies may self-certify, has received adequacy status.

Two issues arise: i) since the provisions of the new GDPR are stricter than the current  European regime with which these eleven States have been deemed  adequate,  will adequacy survive the coming into force of the new GDPR? And,  ii) now that adequacy may be repealed, how should governments or business prepare in that regard?

The following seeks to summarize what to watch for and how to weather this significant,  yet still ill-defined legal development.

  1. Why is adequacy status important?

European privacy law prohibits the transfer of personal data outside of the EU, except to states that have been recognized as providing adequate privacy protection (GDPR, Chapter V). “Non-adequate” states may only receive EU data under onerous conditions, namely:

  • Individual consent, and even then this is not valid for employee information as the employer-employee relationship is one of authority which defeats the assurance of “free” consent; or,
  • Standard model clauses, adopted by the European Commission, that bind the parties to the same level as European data protection law and submits the party receiving the data to audits by the party transferring the data; or,
  • Binding Corporate Rules, which apply within “a group of enterprises engaged in a joint economic activity” (Article 43.1) and bind the companies within the group to the European standards of privacy law.

Non-EU states that have been recognized as providing adequate protection for privacy may receive transfers of personal data from Europe without “any specific authorization.” (Article 41.1)

With a European market of 500 million, this is a critical economic advantage.

  1. How is a State considered adequate?

Article 41.2 of the GDPR summarizes the conditions for adequacy:

  • Respect for “the rule of law, human rights and fundamental freedoms, relevant legislation both general and sectoral, data protection rules and  security measures, including rules for onward transfer of personal data to another third country or international organization, as well as the existence of effective and enforceable data subject rights and effective administrative and judicial redress for the concerned data subjects;
  • Existence of an effective data protection authority;
  • International commitment of the State to uphold protection of personal data.
  1. What is the difference between State adequacy and the EU-US Privacy Shield?

Because the U.S. does not have adequacy status for not meeting the criteria above, U.S. companies  require a specific legal instrument to receive EU personal data. That is the EU-US Privacy Shield under which U.S. companies self-certify and commit to:

  • European data protection standards;
  • The new scrutiny of the Ombudsperson to be created in the US as well as of the Department of Commerce and Federal Trade Commission;
  • Stronger requirements on consent ;
  • New Europeans’ access to remedies in the U.S.

It is noteworthy that the EU-US Privacy Shield process is still more burdensome than for companies in States that have adequacy status.

  1. What next for adequacy?

The coming into the force of the GDPR introduces the possibility for an adequacy decision to be “amended, replaced or repealed” (Article 41.3a) by a Commission decision. Moreover, the Commission will “monitor the functioning of decisions”  already adopted in view of adequacy remaining in force, being amended or repealed.

So nothing can be taken for granted.  The maintenance of adequacy will be earned with conformity to European standards on privacy law.

  1. Honing privacy compliance strategies in the context of adequacy

Here are the best practices from our clients transferring or receiving European personal data:

  • Identify legal obligations under the coming GDPR;
  • Perform a gap analysis to address possible compliance issues in advance of the GDPR coming into force;
  • Negotiate with sub-contractors contract clauses compliant with GDPR;
  • Include monitoring provisions in the contract clauses such as the right to audit the sub-contractor to ensure compliance.
  • Establish data centres or hire cloud services in States having adequacy or companies being self- certified under the EU-US Privacy Shield.

Adequacy status is a shared objective by governments and companies.

Impact of the European General Data Protection Regulation (GDPR) on Adequacy and 5 Tips to Weather the Changes

CRTC ENFORCEMENT ADVISORY: REMEMBER, YOU MUST HAVE RECORDS TO PROVE CONSENT

The Canadian Radio-television and Telecommunications Commission (CRTC) issued an enforcement advisory to both businesses and individuals that send commercial electronic messages (CEMs) to keep records of consent. The CRTC reminded senders of CEMs that section 13 of Canada’s anti-spam legislation (CASL) places the onus on the sender to prove they have consent to send every single CEM.

The advisory made a point to note the CRTC has observed businesses and individuals unable to demonstrate they have obtained consent before sending CEMs. Failure to meet record keeping requirements has been alleged in recent CRTC enforcement decisions against organizations. However, today’s enforcement advisory may suggest the CRTC is finding record keeping to be a widespread concern, warranting this advisory.

Record keeping is one of the most contested provisions under CASL as the financial, organizational and technical burden weighs on senders to meet the high record-keeping standards set by the CRTC. Having the record keeping requirements on the CRTC’s radar adds further urgency to ensure a sender’s compliance program is sufficient.

The CRTC emphasized in its advisory that good record-keeping practices can assist senders establish a due diligence defense in the case of a violation under CASL. Violations of CASL may result penalties of up to CAD $1,000,000 for individuals, and up to CAD $10,000,000 for organizations.

The CRTC reiterated its guidance that record-keeping should document:

  • All evidence of express or implied consent from consumers who agree to receive CEMs. Evidence can be in various forms such as audio, electronic or paper.
  • The procedures and methods through which senders obtain consent
  • The sender’s CASL policies and procedures
  • All unsubscribe requests and subsequent actions taken

Click here to read the full CRTC Enforcement Advisory. For more guidance on record keeping, read the CRTC’s guidelines to help develop a corporate compliance program.

 

 

CRTC ENFORCEMENT ADVISORY: REMEMBER, YOU MUST HAVE RECORDS TO PROVE CONSENT

Dentons to Host Webinar “Don’t Call Me, I’ll Call You: Navigating TCPA Compliance and Class Actions”

Join Dentons on August 4th from 2:00-3:00 p.m. EDT as we discuss recent developments and upcoming issues under the Telephone Consumer Protection Act (TCPA). Our panelists will discuss the surge in class action activity, the anticipated impact of recent FCC declaratory rulings and orders, and steps you can take to protect yourself against liability.

Close up image of Smart Phone background

Topics covered during the one-hour webinar will include:

  • An overview of the TCPA, including what it prohibits, who it protects, and why it needs to be on the radar of every consumer-facing company
  • Frequently litigated provisions and emerging issues, including key agency orders relevant to TCPA suits
  • The implications of the Supreme Court’s Spokeo and Campbell-Ewald decisions for individual and class action litigation
  • Best practices, compliance tips, and business strategies for avoiding and defending against TCPA claims

The panel will feature the following Dentons partners:

  • Petrina McDaniel, a certified information privacy professional (CIPP/US) who has successfully litigated TCPA class actions in federal courts across the US and routinely counsel clients on TCPA compliance and FCC regulations.
  • Nathan Garroway, an experienced trial lawyer who has worked on federal and state TCPA matters for more than 10 years, including defending class actions in Illinois, Indiana, Florida, Georgia and California.
  • Laura Geist, whose complex litigation defense practice for the insurance and financial services industries includes her recent defeat of class certification in a federal nationwide “junk fax” class action brought under the TCPA.
  • Todd Daubert, an industry leader with nearly 20 years of experience in the telecommunications and technology space who has developed and implemented compliance strategies relating to telemarketing, defended against claims of consumer protection law violations and advocated for changes to telemarketing rules.

To register, click here.

Dentons to Host Webinar “Don’t Call Me, I’ll Call You: Navigating TCPA Compliance and Class Actions”