Tuesday, July 17, 2007

Safe Harbor: the verification problem

A company that signs up to comply with the provisions of the Safe Harbor Agreement for the transfer of personal data from Europe to the US must have a process to verify its compliance. There’s very little in the way of “official” guidance on this question. I’ve spent some time trying to figure out how companies can verify compliance. Here are three options, and companies should choose the model that fits best with their corporate culture and structure.

Traditional Audits

A company can conduct a traditional audit of privacy practices company-wide. The problem with company-wide audits based on traditional checklists, however, is that no two people read the checklist the same way; and all the incentives are to be brief and forgetful when filling out a form. If the checklist is used by an interviewer, the return on investment of time goes up in terms of quality of information, but only so much as the interviewer has the knowledge of the product and the law to ask the right questions. The bigger and more diverse the company, the more daunting the task and the less consistent the information collected.

The traditional auditor approach to verification usually includes massive checklists, compiled and completed by a large team of consultants, usually driven by outputs that require formal corrective action reporting and documented procedures, and cost a fortune. To an auditor, verification means proof, not process; it means formal procedures that can be tested to show no deviation from the standard, and corrective action steps for procedures that fail to consistently deliver compliance.

Alternative Model – Data Flow Analysis

An alternative model involves a more simple procedure focusing on risk. It shows that a company is least at risk when it collects information, and that the risk increases as it uses, stores and discloses personal information to third parties. The collection risk is mitigated through notice of the company’s privacy practices; IT security policies that include authorizations for access and use of information mitigate the risks associated with storage and use; and strong contractual safeguards mitigate the risk on disclosure of personal information.

A sound privacy policy is built around understanding how data flows through an organization. Simply put, you ask the following four questions:

What personal information do you collect
What do you use it for
Where is it stored and how is access granted to it
To whom is it disclosed

The results must then be compared to the existing privacy policy for accuracy and completeness. The best way to do that is on the front-end of the interview, not after the fact. In other words, preparation for each interview should include a review and analysis of the product and the accompanying policy.

A disadvantage with the above approach is that it is somewhat labor intensive and time consuming. Note however that this procedure is not a traditional audit, which can take far longer, cost much more and generally is backward looking (i.e., what did you do with data yesterday?). Instead, the data flow analysis identifies what the company does with data on an ongoing basis and armed with that knowledge, permits the company to continuously improve its privacy policies – it is a forward-looking approach that permits new internal tools or products to be developed around the output. For example, one side benefit of this approach is that every service would yield up the data elements captured and where they are stored.

Sub-Certification Method

There is yet one more alternative – the use of SoX-like sub-certifications to verify the accuracy and completeness of product or service privacy statements. Sarbanes-Oxley requires the company CFO and CEO certify that the information provided to the public regarding the company’s financial matters is true. In order to make the certification, most companies have established a system of sub-certifications where those officers and employees with direct, personal knowledge of the underlying facts certify up that the information is correct.

The same could be done in regard to privacy. There is a two-fold advantage from this approach. First, it emphasizes the importance of the information collection by attaching to it the formality of a certification. Second, it can inform a training program as it forces periodic review of the policy and therefore attention to its existence and relevance.

How granular should the inquiry be at the product level? In a distributed model of verification, the manner and means of confirming the accuracy of the content can be left to the entrepreneurial talents of the managers. The key is to ensure that the information provided is complete and accurate, and that the product lead and/or counsel are willing to certify the results.

There is very little guidance publicly available that informs the process of an in-house review, but it is hard to criticize the very same process accepted for validation of a company’s financial statements upon which individual consumers and investors rely for financial decision-making.

Monday, July 16, 2007

Safe Harbor Privacy Principles

Some privacy advocacy groups have made the claim (and others have repeated it) that Google doesn’t comply with any "well-established government and industry standards such as the OECD Privacy Guidelines." That’s just plain incorrect. Google complies with the robust privacy requirements of the US-EU Safe Harbor Agreement, as disclosed in its Privacy Policy. http://www.google.com/intl/en/privacy.html

The Safe Harbor privacy principles are generally considered to exceed the requirements of the OECD Privacy Guidelines, since they were designed to provide an equivalent level of privacy protection to the laws of the European Union. http://www.export.gov/safeharbor/
As a reminder, here are the privacy principles of the Safe Harbor Agreement:


Organizations must comply with the seven safe harbor principles. The principles require the following:

Organizations must notify individuals about the purposes for which they collect and use information about them. They must provide information about how individuals can contact the organization with any inquiries or complaints, the types of third parties to which it discloses the information and the choices and means the organization offers for limiting its use and disclosure.
Organizations must give individuals the opportunity to choose (opt out) whether their personal information will be disclosed to a third party or used for a purpose incompatible with the purpose for which it was originally collected or subsequently authorized by the individual. For sensitive information, affirmative or explicit (opt in) choice must be given if the information is to be disclosed to a third party or used for a purpose other than its original purpose or the purpose authorized subsequently by the individual.
Onward Transfer (Transfers to Third Parties)
To disclose information to a third party, organizations must apply the notice and choice principles. Where an organization wishes to transfer information to a third party that is acting as an agent(1), it may do so if it makes sure that the third party subscribes to the safe harbor principles or is subject to the Directive or another adequacy finding. As an alternative, the organization can enter into a written agreement with such third party requiring that the third party provide at least the same level of privacy protection as is required by the relevant principles.
Individuals must have access to personal information about them that an organization holds and be able to correct, amend, or delete that information where it is inaccurate, except where the burden or expense of providing access would be disproportionate to the risks to the individual's privacy in the case in question, or where the rights of persons other than the individual would be violated.
Organizations must take reasonable precautions to protect personal information from loss, misuse and unauthorized access, disclosure, alteration and destruction.
Data integrity
Personal information must be relevant for the purposes for which it is to be used. An organization should take reasonable steps to ensure that data is reliable for its intended use, accurate, complete, and current.
In order to ensure compliance with the safe harbor principles, there must be (a) readily available and affordable independent recourse mechanisms so that each individual's complaints and disputes can be investigated and resolved and damages awarded where the applicable law or private sector initiatives so provide; (b) procedures for verifying that the commitments companies make to adhere to the safe harbor principles have been implemented; and (c) obligations to remedy problems arising out of a failure to comply with the principles. Sanctions must be sufficiently rigorous to ensure compliance by the organization. Organizations that fail to provide annual self certification letters will no longer appear in the list of participants and safe harbor benefits will no longer be assured.

While the Safe Harbor Agreement principles were designed as a framework for companies to comply with European-inspired privacy laws, the OECD Guidelines from the year 1980 were designed as a framework for governments to create privacy legislation. http://www.oecd.org/document/18/0,2340,en_2649_34255_1815186_1_1_1_1,00.html
The US has chosen to not (yet) implement those principles into its Federal legislation. As a public policy matter, in the US, Google is working with other leading companies to encourage the development of robust Federal consumer privacy legislation. http://googleblog.blogspot.com/2006/06/calling-for-federal-consumer-privacy.html
I’ll come back to the issue of US Federal and global privacy standards again soon. The global nature of data flows on the Internet requires renewed focus on the need for global privacy standards. I hope privacy advocates will work with us on that.

Monday, July 9, 2007

I know people who spent their entire childhood hiding from the German government

Governments around the world are asking whether they should restrict anonymity on the Internet in the name of security. Take Germany as an example. Should Internet service providers be required to verify the identity of their users? Germany recently proposed – and then retreated – on requiring that providers of email services must verify the identity of their account holders. However, Germany is on the path to require that providers of VoIP services must verify the identity of their users. The debates about the proper limits of anonymity on the Internet are profound. In case you’re interested in the details, here is a history of the proposals in Germany, from the drafts of the telecommunicationsurveillance act. German outside counsel summarized these for me.

* 8. Nov. 2006 - First draft submitted to the GovernmentThe German Ministry of Justice put together the first draft of law designed to reform telecommunications monitoring and to implement the directiveadopted by the European Union on the retention of traffic and location data.This draft contained the proposal that email service providers should be obliged to COLLECT and to STORE account data, name, address, date of birth,start date of the contractual relationship (proposed changes to §111 TKG).

* 18 April 2007 - First Draft of the German Government - "Regierungsentwurf" The draft of the German Government did not include an obligation for emailservice providers to COLLECT personal information. It contained, however,the obligation to STORE a personal identifier as well as name and address of the account holder IF the provider collects such data (proposed changes to§111 TKG).
Text: http://www.bmj.bund.de/files/-/2047/RegE%20TK%DC.pdf

* 29. May 2007 - Recommendation ("Empfehlung") of different working groupsto the German Federal Assembly (Bundesrat)The text did not proposed additional requirements for email serviceproviders to collect or to store personal data. However, it recommended that telecommunication service providers should be obliged to verify via theofficial ID card if the telecommunication user is the person who signed upfor the service (proposed changes to § 95 sec. 4 sent. 1 TKG). German legal experts expressed the opinion that this might also be applicable for email services.

* 8. June 2007 - Statement of the German Federal Assembly (Bundesrat) -"Stellungnahme des Bundesrates" The Bundesrat did not follow the recommended wording and did not suggest anychanges to the First Draft of the German Government as of 18 April 2007 with regard to email services.

So, in conclusion, anonymous use of Internet services is very much up in the air, in Germany, as regards certain services, such as VoIP services like Google Talk, even if the proposal to limit anonymity for email users appears to be off the table. Fundamental rights are in play. The age-old trade-offs between government security and privacy is being re-debated. I know people who spent their entire childhood hiding from the German government.