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March 2019

Cyber risks to your organization and its consequences

New reporting standards from the Office of the Privacy Commissioner of Canada

As technology quickly advances, different industries are finding several ways to innovate, adapt, and evolve their practices to generate larger profits, create operational efficiencies, and respond to people's needs. The unfortunate consequence of this rapid proliferation of technology is that many firms are unaware, or underprepared for the risks that technology can attract and the consequences that follow when your data is stolen.

Organizational Risks

Whether you are a Fortune 500 company, midsize enterprise, or a local retailer, your organization could be at risk from a cyber-attack. These attacks can come from systems outside your firm, or trick staff inside your organization into granting unauthorized access to your data.

Hacking is one of the most well-known cyber risks and comes from outside of your organization. Typically, one imagines someone sitting behind a black screen with lines of code in front of them furiously typing commands into their computer, but what does it do? In its simplest terms, hacking is the act of gaining access to information to which they are not authorized by accessing or exploiting a system. Once inside, a hacker has very few limits on what systems and data they can access. This unauthorized entry leaves your organization vulnerable to the hacker stealing, changing, or destroying information.

Where hacking is the equivalent of someone trying to sneak into your house to steal from you, social engineering threats are the attacks that trick you into letting them in. Socially engineered threats are even more widespread than hacking and take on various forms including:image by gino crescoli from pixabay

  1. Phishing – the illegal attempt to obtain personal information such as names, addresses, social security, or banking information. Commonly phishing attacks impersonate a legitimate company and attempt to steal people's personal information or login credentials.

  2. Pretexting – an elaborate attack where attackers focus on creating a good pretext or fabricated scenario in order to steal their victim's personal information. Often the scammer pretends they need certain bits of information from the target in order to confirm their identity.

  3. Baiting – Similar to phishing, however, these attacks are distinguishable by the hackers use of an item or good that is used to entice a victim. Common examples include free music or points once you log in to a certain site.

  4. Quid Pro Quo – similar to baiting, quid pro quo attacks promise a benefit in exchange for information. This benefit usually assumes the form of a service, whereas baiting frequently takes the form of a good. A common quid pro quo attack is a fraudster who impersonates an IT service to spam direct contacts through your company directory.

  5. Tailgating – These types of attacks involve someone who lacks the proper authentication following an employee into a restricted area. A common type of tailgating attack is where a person impersonates a delivery driver and waits outside a building. When an employee gains security's approval and opens their door, the attacker asks that the employee hold the door, thereby gaining access off of someone who is authorized to enter the company.

Legal Ramifications

A hack from outside or an internal data breach is not only inconvenient to fix but puts your organization at risk of great legal liability. As we progress into the digital era, invasion-of-privacy torts are developing under Canadian law. The four invasion-of-privacy based torts protect different privacy interests and include:

  1. The intrusion upon an individual's seclusion or solitude, or into his or her private affairs;
  2. The public disclosure of embarrassing private facts about an individual;
  3. The publicity that places an individual in a false light in the public eye; and
  4. The appropriation for the defendant's advantage, an individual's name or likeness.

The tort of intrusion upon seclusion is especially worrisome for organizations as it allows courts to award "symbolic damages" even when no economic loss is proven. As these torts develop, large scale data breaches are resulting in more class actions.

The case of the 2014 data breach affecting Home Depot and Home Depot Canada is an example of the risks from external hacking. During the 2014 breach, criminals hacked the payment card system at self-checkout machines with custom made malware. Although Home Depot was not found in violation of any privacy legislation by the respective provincial privacy commissioners, several Canadian class actions were started. The American settlement included a USD $13 million cash fund and 18-month subscriptions to identity-theft monitoring services. The Canadian settlement was an additional CAD $400,000 and included Home Depot's ongoing commitment to take out identity-theft protection policies for customers affected.1

...cybercriminals accessed personal information through security vulnerabilities on Equifax's website.

More recently in another hack from 2017, cybercriminals accessed personal information through security vulnerabilities on Equifax's website. The breach resulted in names, addresses, social insurance numbers, and some credit card numbers being compromised for up to an estimated 143 million Americans and 100,000 Canadians.2

Recall, external hacks are not the only cyber-risk. American healthcare company UnityPoint Health is the target of a class action suit arising from a phishing scam that resulted in the information of at least 16,000 people being stolen. Further legal action is anticipated as another 1.4 million patient records were breached in another phishing scheme in 2018.

Of course, not all risks are malicious, an employee accidentally disclosing private information in correspondence or taking home a thumb drive with private information and losing it, is still a potential privacy breach that could result in legal action.

In addition to the risk of litigation and investigations by the Office of the Privacy Commissioner, a company that suffers a data breach must also contend with the reputational damages that follow. For publically traded companies this will often mean a short term drop in share value. In 2015, British telecommunications company TalkTalk reported a 10% decrease of its share price in the first two days following publication of a data breach and a further decline to the end of the year. When it comes to reputation overall, it seems that while a data breach may have a short-term impact the way the company handles the breach is a far greater influence than the breach itself.

Handling a Breach

The federal privacy law, the Personal Information Protection and Electronic Documents Act ("PIPEDA") imposes strict reporting requirements.3 PIPEDA is a very broad piece of legislation that applies to all organizations (from the largest multinational conglomerate to a sole proprietorship) that collect, use, or disclose personal information in the course of commercial activities. It defines "personal information" very broadly as any factual or subjective information, recorded or not, about an identifiable individual.4

If you have reason to suspect a serious data breach, contact legal counsel right away. Under PIPEDA it is an offence to knowingly contravene the reporting, notification and record-keeping requirements relating to breaches of security safeguards; doing so could lead to prosecution by the Attorney General of Canada and hefty fines. As of November 1, 2018, organizations subject to PIPEDA are required to:

  • report to the Privacy Commissioner of Canada breaches of security safeguards involving personal information that pose a real risk of significant harm to individuals
  • notify affected individuals about those breaches that pose a real risk of significant harm, and
  • keep records of all breaches.

Counsel can assist you in determining whether the data breach is significant enough to require reporting...

Counsel can assist you in determining whether the data breach is significant enough to require reporting, what to include in the report, and how to maintain adequate records. The definition of "significant harm" is new and quite broad. It includes bodily harm, humiliation, damage to reputation or relationships, loss of employment, business or professional opportunities, financial loss, identity theft, negative effects on the credit record and damage to or loss of property.

Limit Your Risk

Preventing and minimizing cyber-attacks requires good planning, effective monitoring, and comprehensive responses. Effective systems management is the first line of defence against hacking. Strong internal policies regarding email communication, USBs, work phones, and other devices/data will help protect you against socially engineered attacks or accidental disclosure. Review and update policies frequently and foster a culture of cybersecurity within your workplace.

Ultimately, in the event of a data breach, take reasonable steps to prevent further damage or remedy the breach and consult legal counsel as soon as possible to ensure that you comply with the disclosure and notification requirements set out in PIPEDA.

  1. Lozanski v The Home Depot, Inc., 2016 ONSC 5447.
  2. At the time of writing, the Equifax Canada class action has been certified but not settled.
  3. S.C. 2000, c. 5.
  4. PIPEDA in Brief - Office of the Privacy Commissioner of Canada


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