By James E. Lee
Complying with the new rules is so much complicated than that
It seems there has always been a fundamental disconnect between how the United States and the European Union view privacy and data security. The newly enforceable EU General Data Privacy Regulation (GDPR) and its opt-in email rule is forcing a reckoning that could fundamentally change how data is collected, used, and protected around the globe.
Fundamentally different approaches
In the US, privacy and security are largely treated as two separate issues. While privacy is a right rooted in the First Amendment to the US Constitution, it is subject to change by judicial interpretation or further amendment. The last comprehensive data protection law the US Congress passed was 32 years ago – the Computer Fraud and Abuse Act of 1986. Since then, new legislation has been more indirect – where improved data security was implied, not mandated, or left to the states to address.
In the European Union, privacy is considered a Human Right and data security an integral element of privacy.
Concepts like the “Right to be Forgotten” and “Privacy by Design” are bedrock beliefs in the EU that simply do not exist in the US (and many other parts of the world), creating a near constant conflict between the US government, the US private sector, and EU regulators.
It’s all about the data
US companies make billions of dollars collecting and selling consumer data with few requirements to obtain permission or share what information is collected and stored.On the other hand, EU companies are severely restricted in what information they can collect and how it can be used. The data is still considered to be the consumers’ information. In the US, the information is owned by the company that collects the data.
When the original EU Privacy Directive adopted in 1995 failed to be the catalyst for companies to protect the privacy and data, the European Parliament adopted the General Data Privacy Regulation (GDPR) – an EU law that is binding on all member states. (The United Kingdom has already passed legislation that enshrines the GDPR and will survive the so-called Brexit.)
Adopted in 2016, and enforceable as of 25 May 2018, the GDPR is wide ranging law. Most of the attention and compliance effort, though, has focused on only two areas: the requirement to give EU residents control over their information; and, the potential for significant fines.
The former resulted in inboxes filled to capacity prior to the deadline with mandatory opt-in emails in the EU or updated privacy policies outside the EU. The latter has business leaders holding their collective breaths waiting to see who becomes the first organization worthy of fines of up to 20 million EUR or 4% of global sales, whichever is greater (!).
(As an aside, we may find out sooner rather than later. Lawsuits were immediately filed the day the GDPR was enforceable against major tech companies including Google and Facebook alleging their efforts fall short of GDPR compliance.)
Marketing databases have been cleansed and privacy policies have been updated. The heavy lifting to comply with the GDPR is over, right? Not by a long-shot. Arguably, the real work is only starting.
More than just Opt-in
Chapter Four, Article 32 of the GDPR requires organizations subject to the law to take “appropriate technical and organisational measures to ensure a level of security appropriate to the risk.”
The terms being used to describe this requirement are “Privacy by Design” and “Security by Default.”In other words, privacy protection must be considered from the very beginning of the product development cycle and data security must be embedded in every product, process, and service.
Let’s not forget about those big fines for violating the GDPR. Enforcement actions are based on a company’s failure to comply, not just when a breach occurs as is usually the case in the US. “Failing to ensure a level of security appropriate to the risk” can take many forms, but we already know of one threat that is particularly problematic for software dependent businesses: failure to patch known software flaws on a timely basis.
One vulnerability management vendor claims that 86% of high severity flaws go unpatched for 30 days or more in web applications. Oracle executives, whose company offers the world’s most popular software development language, saytheircustomers lag in patching by months if not years.
That was the state of play in early 2018 when the United Kingdom’s Information Commissioner’s Office (ICO) issued a fine against Carphone Warehouse for a breach, citing a “seriously inadequate” patching program. The ICO also issued additional guidance:
“Under the General Data Protection Regulation taking effect from May 25 this year, there may be some circumstances where organizations could be held liable for a breach of security that relates to measures, such as patches, that should have been taken previously.”
That’s an enormous task. With an estimated 111 billion new lines of code written each year and the US National Vulnerability Database growing at an average rate of one new software flaw reported every 30 minutes, there simply is not enough time or fingers-on-keyboards to fix known software flaws before hackers can exploit the bugs. New technologies like real-time patching where software code is fixed on the fly without downtime or expensive, time consuming source code changes are proven to offer better, faster, cheaper protection for organizations of all sizes.
One other area where organizations are likely to struggle is the 72-hour reporting provision in the event of a breach. While it takes attackers less than a week on average to penetrate organizations and begin to extract consumer data, it takes the targeted company more than six monthsto learnthey’ve been attacked. It can take another three months to stop the attackand fix the problem according to research from the Ponemon Institute.
Even the most sophisticated organizations with cutting edge protections struggle with rapidly detecting and assessing the depth and breadth of an attack. The information initially gathered almost always needs to be updated as cybersecurity experts learn more about what happened.Think of all the cybersecurity attacks that turned out to be worse than first reported.
Yet, the GDPR requires company officials to alert regulators within 72 hours of any data breach that could cause harm to a consumer. Rapidly patching known software flaws can be fixed with new technology. Rapidly informing government regulators will require significant adjustments to company cultures and behaviors. Think of the companies that paid hackers rather than fess-up or only reported a breach after many months or years later. Doing so within hours requires a seismic shift in attitude and approach.
While companies subject to GDPR work through the rest of the compliance requirements, the ripple effect is in full force. The New York Department of Financial Services has already adopted the 72-hour reporting rule and annual risk assessments to name two GDPR concepts. California is considering the strictest privacy and data security law in the US, including the potential for payments of $1000 to each consumer impacted by a breach.
Like the laws and regulations that came before them, some organizations will embrace them willingly and some with fight them vigorously. Ultimately, though, regulations can only create an environment for improvement. They do not improve privacy or security. People and technology do.
James E. Lee is the Executive Vice President of Waratek, a leading application security company. He is also the former Chair of the US-based Identity Theft Resource Centerand an executive at ChoicePoint, the first US company to issue a nationwide data breach notice in 2005.
Dealing with the loneliness crisis with assistive technology
By Karen Dolva, CEO and Co-Founder of NoIsolation
Humans are social beings, and for most children, school will be their most important social arena. Unfortunately, however, many children and adolescents with long-term illnesses are unable to attend school for extended periods, due to treatment plans, ill health or more recently due to the risk of infection. Research has shown that long-stints of school absence for children and adolescents with Chronic Fatigue Syndrome (ME) and cancer can range from months to years.
These prolonged periods of absence, which often lead to limited interactions with other children and adolescents, can result in children completely losing their social network, leaving them feeling cut off, lonely and isolated, all as a result of something that is completely out of their control. What kind of consequences can this type of social isolation have for children and young adults?
In a recent in-depth investigation into the impact of COVID-19 on the emotional and educational development of British school-aged children, No Isolation partnered with independent researcher, Henry Peck, to look into the impact of COVID-19 on school aged children, to shed further light on the consequences of school closures, not only across the UK, but the long term effects that this can have on children and adolescents everywhere throughout the pandemic.
As a company working to abolish loneliness and isolation amongst those suffering with chronic illness, we were already aware of the effect that social isolation can have on a child’s educational development and mental health. For the investigation we collected responses from 1,005 parents and carers of 1,477 children spanning primary and secondary school.
Results of the study found that a concerning 76% of parents and carers reported that, since lockdown, they have become worried that their children are suffering from loneliness. Results also showed that parents and carers of 5-10-year-olds worry that their children are lonely often or all of the time, whilst parents and carers of 11-16-year-olds are concerned that their children are lonely at least some of the time. This is likely due to the fact that older children have greater access to social technologies, while younger children often rely on non-verbal forms of communication such as facial expression, physical contact, and through play, all of which is difficult to recreate whilst away from the school setting.
At No Isolation we are committed to creating solutions that will help children stay connected to their friends and their education, regardless of circumstance. We’ve seen first-hand the devastating impact that loneliness can have on a child, and know that children that can’t attend school don’t just miss out on learning, they miss out on friendships too. Losing this contact during the early years developmental stages can be devastating, leading to anxiousness and an increase in feelings of isolation. This report sheds light on the hundreds of thousands of young people that may not be able to rejoin their friends in school, and it is vital that they don’t fall through the cracks. We plan to continue researching the impact of this unprecedented pandemic and driving the conversation around how we, as a nation, can ensure the mental wellbeing and educational development of those most affected.
Loneliness has been found to have serious implications for both physical and mental health. People suffering from loneliness are 32% more likely to have a stroke and are 26% more at risk of early mortality. From No Isolation’s own research into the impact of school absence due to long-term illness, we have found that children are particularly vulnerable to loneliness if they cannot attend school.
Researchers, Perlman and Peplau, define loneliness as a negative feeling, stating that a lonely person is experiencing a discrepancy between desired and actual social contact. Being socially isolated is not synonymous with being lonely, but there will often be a correlation between social isolation and loneliness. Though much empirical research on adults and adolescents shows a link between loneliness and depression, many studies have found that friendship-related loneliness is more explanatory for depressive symptoms among adolescents than parent-related loneliness. One possible explanation is that friends are the preferred source of social support during adolescence.
With that in mind, we should be both sad and alarmed by the high numbers of young people unable to attend school, and more so by the fact that we do not really know who they are or exactly why they cannot go to school. Research has shown that social isolation and loneliness often correlate with mental disorders, including depressive disorders, there are, however, options available for children and adolescents in the form of assistive technologies, enabling them to stay connected with education and their peers.
The provision of dedicated school staff, inspirational hospital schools, the use of avatars like AV1 that enable children to attend school remotely, are just a few of the ways that assistive technology and exemplary attitudes are helping children with long-term illnesses from becoming disconnected from essential social networks. There are also examples of individuals who are pushing to keep children from falling between the cracks and becoming invisible, such as Amy Dixon, who is running a petition that will do exactly that, bringing these issues to the attention of those who can make a real change. It is, and will be, thanks to these exemplary changes that more support is being offered to children that are virtually invisible across the UK at present.
However, not all children have the option to receive these kinds of provision. There are pockets of excellent practice driven on an individual and local level, but there needs to be systemic change at a policy level, to ensure everyone is supported.
Educational provision for children out of school due to illness appears to be something of a postcode lottery, with some families having to fight for 3 hours of home tuition a week, whilst others are offered 15 hours by default. This is thought to be, in part, due to the open statutory guidance which allows for flexible interpretation of government guidelines, as well as financial limitations schools and city councils face. To improve the lives and outcomes of this group of children, is to create a more accurate view and analysis. This can be done by joining up existing datasets, by asking better questions, and by building a model that predicts future numbers of children from falling outside of the system. This, in turn, will push the issue up the political agenda and drive much needed changes to statutory guidance. Most importantly, it would lead to more support for children that are seemingly invisible across the UK.
Regulatory overlaps cause conflicts, confusion and complexity: is collaboration the answer?
By Rob Fulcher, Head of Business – Americas, CUBE Global
Regulatory overlaps are an ongoing, perplexing and often time-consuming anomaly. They occur where multiple market regulators act disjointedly in their attempt to address a market failure, thereby imposing different regulatory requirements with contradictory or overlapping obligations. For financial institutions, this can be problematic: which regulation should take precedence? Will they face punitive action for neglecting one obligation in favour of another?
Following the global financial crisis of 2008, a swathe of new policies and acts came into force with a view to protecting the system and essentially preventing another market crash. Inevitably, this led to a host of new regulations, some of which created overlaps and inconsistencies. In turn, this leads to inefficiencies and misunderstandings as businesses endeavour to comply with all and every regulation, often finding themselves at a stand-off.
Financial institutions – especially the compliance team – are desperate for regulatory clarity. However, in many cases, it is not forthcoming. Regulatory clarity is not, it seems, high on the regulator’s agenda. A recent report by CUBE, RegTech for Regulatory Change, in association with Burnmark, explored the evolving landscape of regulatory overlaps. We now delve deeper into this topic to ask, ‘what is the solution?’
GDPR, PSD2 and MiFID II – to collect or protect data?
One notorious regulatory overlap that causes consistent headaches for financial institutions is that between GDPR and PSD2.
While GDPR gives individuals greater control over their data and restricts the freedoms of organisations to share it, PSD2 imposes data sharing requirements on ﬁnancial service providers. It is up to the banks to ensure that correct policies and procedures are in place so as to comply with both pieces of legislation. This is not often an easy task considering their almost diametrically opposite aims.
The same can be said for the regulatory rules that surround both MiFID II and GDPR – two pieces of legislation filled with inherent contradictions. While the former focuses on consumer protection through transparency and retaining more information about the investor community; the latter is concerned with data protection and limiting the access to investor data if so desired by the owner of the data and giving investors the right to be forgotten.
Data privacy and AML – data sharing can only go so far
Data is a commodity – compared often to crude oil. For financial institutions, data is not only part of ongoing business functions, but it also holds potential for manipulation, misinformation or illicit activity. Surprisingly, the value of data has only truly been realised in recent years. In turn, we have seen a swathe of money laundering and data protection activity – leading to new and amended regulations to bolster data protections and simultaneously impose supervisory requirements to avoid money laundering. Global banks are ﬁnding it challenging to comply with one without compromising on the other.
Multinational banks often ﬁnd themselves walking a tight rope between trying to meet data privacy requirements and simultaneously meeting those surrounding anti-money laundering (AML). For example, banks in the US are forbidden from sharing Suspicious Activity Reports (SARs) with foreign branch counterparts due to disclosure restrictions, thereby making it diﬃcult to implement a group-wide compliance program.
Regulatory overlap in the US
The US has a long-established, complicated and often fragmented regulatory structure. Signiﬁcant and costly overlaps exist across the board, especially between the Oﬃce of the Comptroller of the Currency (OCC) and the Federal Reserve System’s data collection activities, along with its supervision and examination activities. Consumer protection is conducted by six US regulators, which naturally results in overlaps, duplication and confusion.
Similarly, the US Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and state securities regulators oversee securities and derivatives markets, leading to similar concerns of overlaps and fragmentation. Swaps and security-based swap products face the supervision of SEC and CFTC and market participants have made it known that this leads to signiﬁcant market and operational challenges.
Regulatory overlap is not new – nor is there a clear solution. We have occasionally heard tales of compliance team members writing to regulators to request clarification, often to no avail. In the meantime, financial institutions must take steps to implement all relevant regulations where they can and mitigate risks where they are not able.
Regulatory technology (RegTech), especially automated change management platforms such as CUBE, highlight overlaps and alert compliance teams where issues or inconsistencies arise. For now, this is the most effective means of managing unclear regulations.
Ultimately, the answer lies with financial regulators themselves. While uncertainty exists, regulators must issue guidance and expectations in order to standardise approaches across the industry. The ideal outcome is undoubtedly founded in collaboration: regulators across sectors, industry and jurisdictions should collaborate to ensure that legislative changes are consistent and do not tread on the toes of the other. With the emergence of new technology – and related new regulation – many regulators are calling for a joined-up approach and looking to work together in their supervisory goals. Perhaps collaborative, unambiguous financial regulators aren’t so far away after all.
Rob has 20 years’ experience in financial services sales and management. Following his early sales career at Euler Hermes, a global credit insurance business, Rob went on to establish a 15-year career in GRC. Initially working in London at Complinet, a compliance and risk business, Rob subsequently relocated to New York. In 2010, Complinet was acquired by Thomson Reuters and Rob played a pivotal role in growing GRC revenues, especially relating to regulatory change management. As Head of Sales Americas for CUBE Global, Rob re-built the sales team and consistently out-performed all other regions.
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Christmas isn’t cancelled; Santa now does click & collect
Despite fears that Christmas will be cancelled this year, new data from ACI Worldwide (NASDAQ: ACIW) finds that, with local lockdowns and social distancing measures in place across the UK, the Festive shopping season is starting earlier this year.
Based on analysis on hundreds of millions of eCommerce transactions around the globe, ACI’s latest eCommerce tracker predicts we will see a 27% increase in online shopping transactions. Along with a whopping 40% increase in click and collect purchases as consumers remain socially distant and local lockdowns continue.
Indeed, consumers acting as Santa’s little helpers have begun purchasing presents online even earlier than before to keep the Christmas dream alive. Concerns around limited product availability and delivery delays have seen online transactions increase by 21% in the last four weeks, when compared to the same period last year.
Amanda Mickleburgh, Director of Merchant Fraud Product at ACI Worldwide commented, “While Black Friday has typically been the starting line for the festive period, this year Prime Day sounds the klaxon. There are myriad reasons for this. With everyone encouraged to social distance and many areas of the UK now under even tighter local lockdowns, there’s more time than ever to browse online for presents. Added to this, many remember the severe delays in receiving purchases at the start of lockdown, and will be looking to avoid missing presents under the Christmas tree.
“Merchants should look to expand their same day shipping capabilities and provide free returns or extend T&Cs, to capitalise on this trend. Far from seeing physical stores as a lost cause, they should take advantage of the increase in demand for click and collect. And turn their stores into valuable real estate by expanding their click and collect capabilities.
However, there is a dark side to the holiday season kicking off earlier – fraud continues to increase as criminals take advantage of click and collect options and consumers start to buy higher-value items like the latest electronics. ACI’s analysis found that the value of attempted fraud increased from $7 to $9 per consumer this September compared to 2019.
Amanda Mickleburgh continued, “While click and collect is a major draw for consumers, merchants need to increase their fraud protection measures for this channel. As more merchants continue to offer this option to customers, there are greater opportunities for fraudsters to create a nightmare before Christmas.”
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