What (currently ignored) privacy area might result in early enforcement action when the GDPR is in force?

We have 480 days to go before the General Data Protection Regulation is “in force”.

And then what?

That's the question I’m being increasingly asked these days.

Does it really mean that in 481 days, European privacy regulators will be heralding the first megafine for non-compliance with one of the GDPR’s more obscure requirements?

I think not.

But it will undoubtedly lead to greater unease amongst the audit committees of many firms, particularly those in the (regulated) financial services sector, who will note, from the data protection compliance reports that have been commissioned, the difficulties that are being encountered in ensuring that sufficient evidence is available to demonstrate how the organisation complies with the GDPR.

Many of the organisations I’m currently working with are still trying to understand just what it is that they are supposed to be complying with. And also, what standard of evidence is necessary to be generated, just in case privacy regulators exercise their Article 30(4) right to request it.

Each professional consulting firm I’ve come across carries out data protection audits / health checks in different ways. And, in assessing data controllers through different privacy prisms, I’m confident that some organisations might well “pass” a privacy review that was carried out by one consulting firm, yet “fail” the review that was carried out by another firm. Why? Because the other firm had decided to focus on some obscure GDPR issues that the original firm didn’t think were particularly relevant.   

Does this matter?

Well, it would if it led to the organisation performing poorly in a review that was carried out by a national privacy regulator.

So, what should be done to reduce the likelihood of such an event?

In the UK, the ICO has provided organisations with a great deal of guidance as to precisely what controls they would expect to see in place and operating effectively. I don’t see this degree of guidance readily available in other EU countries. I have not had an opportunity to review all the webpages of each national data protection supervisory authority, but my cursory checks have certainly not unearthed the level of detail that has been published by the ICO. Perhaps this will be a task for the Data Protection Board.

But, in the short term, what new areas of non-compliance might European privacy regulators focus on?

If I were a privacy regulator, I would focus on records management and, in particular, the greatly ignored area of records retention. So many organisations find it hard to develop, let alone implement, comprehensive records retention policies. Are they in for an unwelcome surprise? The GDPR is (apparently) going to require data controllers to be more transparent about their records retention policies.

The potential fine for not informing individuals, as their personal data is being collected, about retention periods is of course significant. But do (even) regulators take the issue of data retention that seriously?  Outside the communications sector, how much interest, or formal enforcement action, has ever been taken against data controllers with regard to breaches of the Fifth Data Protection Principle?

I’m not aware of many cases. Over retention may have been an aggravating factor when the ICO considered the level of a fine for some incidents involving security breaches, but there are very few recorded cases of enforcement action being taken just because a data controller retained data for longer than the regulator considered necessary.

Perhaps this will change.

But, since most data controllers have paid no more than lip service to the difficult issue of the period for which the personal data will be stored, I doubt that many currently feel that the ICO’s attitude will change significantly in 480 days time.

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When does the General Data Protection Regulation not require firms to appoint a Data Protection Officer?

I’m increasingly asked whether particular firms actually need to appoint a Data Protection Officer in order to comply with the requirements of the GDPR. Given that the potential fine for non-compliance (with Article 37) is €10 million Euros or up to 2% of the total worldwide annual turnover, companies quite understandably don't want to get such a basic issue wrong. Many firms that are basically B2B firms, who mainly process personal data for HR purposes, don't want to goldplate their privacy compliance programmes (to the extent they have any) by taking unnecessary action.

The Article 29 Working Party published an opinion on this subject last December. To be frank, it’s only somewhat helpful.

With regard to the private sector, firms that - as a core activity - monitor individuals systematically and on a large scale, or that process special categories of personal data on a large scale, must appoint a DPO.

The meaning of “core activity” has been set out in Recital 97. This relates to ‘primary activities and do not relate to the processing of personal data as ancillary activities’. The A29WP opines that “all organisations carry out certain activities, for example, paying their employees or having standard IT support activities. These are necessary support functions for the organisation’s core activity or main business. Even though these activities are necessary or essential, they are usually considered ancillary functions rather than the core activity.”

So, it would appear that the GDPR does not require firms that simply process personal data for HR purposes to appoint a DPO.

But what about, say, the customer data that's processed by firms – particularly by those in the B2B sector? How much (personal) customer data needs to be processed before the threshold for appointing a DPO is reached?

To answer this question, I’ve looked at the A29WP’s guidance on the meaning of the term “large scale”. Firms that don't process such data on a large scale don’t need to appoint a DPO. Unfortunately, the guidance (and the GDPR) is sketchy on what the term actually means.

Recital 91 explains, in the context of Data Protection Impact Assessments, that “large-scale processing operations” include those “which aim to process a considerable amount of personal data at regional, national or supranational level and which could affect a large number of data subjects and which are likely to result in a high risk’ to individuals. On the other hand, the recital specifically provides that ‘the processing of personal data should not be considered to be on a large scale if the processing concerns personal data from patients or clients by an individual physician, other health care professional or lawyer”.

So, the test appears to focus on the size of the firm, as well as the amount of personal data that is being processed. Accordingly, some types of SMEs – the smaller ones - will not be required to appoint a DPO. This is important, as SMEs account for more than 99% of all UK businesses.

Unfortunately, there is one very large fundamental problem with the SME sector.  That problem is that even within the UK government, there is no single definition of what a small or a medium enterprise is.

According to The Company Warehouse, for the purpose of Research and Development Tax Relief, HMRC defines an SME as a business with not more than 500 employees and an annual turnover not exceeding £100 million.

However, the rest of the UK government does not use this definition.

For the purposes of collecting statistics, the Department of Business, Innovation & Skills defines SMEs as companies with less than 250 employees.

For accounting purposes, Companies House defines a small business as employing less than 50 people and a turnover under £6.5 million and a medium business as less than 250 employees and a turnover under £25.9 million.

To further complicate things other parts of the UK government use the EU definition of an SME:

• Micro Business = less than 10 employees & turnover under £2 million
• Small Business = less than 50 employees & turnover under £10 million
• Medium Business = Less than 250 employees & turnover under £50 million

So depending on which definition you use, an SME could have anywhere between 50 and 500 employees and have a turnover between £6.5 million and £50 million.

One way to encourage SMEs to comply with the GDPR must involve coming up with an easier definition of when they must appoint a Data Protection Officer.

Sources:
http://ec.europa.eu/information_society/newsroom/image/document/2016-51/wp243_en_40855.pd

https://www.thecompanywarehouse.co.uk/blog/2012/07/31/what-is-an-sme/

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