Investors in offshore financial centers increasingly require and demand data privacy. Obligations to collect personal data resulting from new international data sharing regimes combined with cybersecurity concerns and innovative technology deployments are making the regulation of personal data more complex than ever before.
The latest addition to the data protection legislative canon is the EU’s General Data Protection Regulation (GDPR) which will come into effect from May 25, 2018. The GDPR is designed to allow individuals to better control their personal data and to establish one single set of data protection rules across the EU, making it simpler and cheaper for organizations to do business across the union. So far, so sensible. The sting in the tail however, is that organizations outside the EU may also be subject to the GDPR. With fines of up to 10 million euros or 4 percent of the entity’s global gross revenue, organizations in Cayman need to understand their obligations under the GDPR – reputations and criminal liability will soon be at stake.
The good news for organizations in Cayman comes in the form of the new Data Protection Law (DPL). Due to come into effect in January 2019, the DPL will regulate the future processing of all personal data in the Cayman Islands. As many of the compliance obligations under the DPL and the GDPR dovetail to a large extent, achieving compliance with the DPL – which is obligatory for all organizations handling personal data in the Cayman Islands – puts an organization well on the way to also achieving compliance under the GDPR.
Am I caught by the GDPR?
The GDPR will extend to data controllers located outside the EU who offer goods and services to EU citizens or who monitor their behavior. Monitoring would include, for example, the tracking of individuals on the internet to profile them for the purposes of analyzing them or predicting their personal preferences. The GDPR therefore extends the scope of current EU data protection regulation.
DPL and GDPR – compliance similarities
“Personal data” is defined in both the DPL and the GDPR to mean any information relating to an individual who can be identified, directly or indirectly, from that data. So in many cases online identifiers including IP addresses, cookies and other anonymized data sets may now be personal data if they can be (or are capable of being) linked back to the data subject.
“Data controller” means the person who, alone or jointly with others, determines the purposes, conditions and means of the processing of personal data. “Data subject” means an individual who is the subject of the data and “data processor” means any person who processes personal data on behalf of a data controller.
Rights of data subjects
Under both the GDPR and the DPL, data controllers are required to provide a significant amount of information to data subjects at the time of collection of their data including the purposes behind the processing, details of transfers of data outside Cayman and any security and technical safeguards in place to protect the data subject’s personal data. The expectation under both laws is that this information will be provided in a separate privacy notice.
Both laws give data subjects the right to obtain confirmation that their data is being processed and to access that personal data. Data controllers have one month (GDPR) or 30 days (DPL) in which to respond to a subject access request, although this time period can be extended where necessary, taking into account the complexity of the request and the number of requests. Under the GDPR a copy of this information must be provided free of charge. The DPL permits a reasonable fee to be charged.
Under both the DPL and GDPR, personal data should not be kept for longer than is necessary for that purpose. Prescribed data retention periods are not set out in either law but an analysis will need to be undertaken to determine how long different types of personal data should be kept for. Under the GDPR controllers must inform subjects of the period of time (or reasons why) data will be retained on collection. This is not a requirement under the DPL but as the retention analysis is also obligatory a notification to data subjects would be easy to achieve.
Both the DPL and GDPR permit transfers outside of the Cayman Islands/the EU. Contracts can be put in place to control data transfers with third party processors or between members of the same group of companies.
The DPL was drafted with the specific aim of achieving adequacy status in the eyes of the EU to allow personal data to flow freely between EU member states and Cayman without additional mechanisms being put in place. The GDPR now provides that adequacy decisions made by the European Commission can apply to specific processing sectors or territories within a country, as well as to a country as a whole. This could result in future adequacy decisions finding specific industry sectors or states to provide adequate protection for data.
Cayman has already confirmed its intention to apply for adequacy status in due course.
The DPL requires that “appropriate” technical and organizational measures are taken to prevent unauthorized or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data.
The GDPR is slightly more prescriptive than the DPL about what organizations need to have in place from a security perspective but not overly so, and certainly not as prescriptive as earlier drafts had suggested. However, it is worth noting that under the GDPR the security requirements are now legally extended to data processors as well as data controllers, putting processors on the hook for the first time for regulatory liability. There is no similar liability for processors under the DPL.
Data breach notification
Under the DPL, in the event of a personal data breach, the data controller must, without undue delay, but no longer than five days after the data controller should have been aware of that breach, notify the Ombudsman and any affected data subjects of the breach.
The GDPR also introduces a requirement for data controllers to notify the regulatory authority of personal data breaches without undue delay and, where feasible, not later than 72 hours after having become aware of a breach. The only exception to this rule is in cases where the breach is “unlikely to result in a risk for the rights and freedoms of individuals.”
Right to be forgotten
There has been much confusion around about the new “right to be forgotten” under the GDPR. The broad principle underpinning this right is to enable an individual to request the deletion or removal of personal data where there is no compelling reason for its continued processing. The right is not absolute. Individuals have a right to have personal data erased and to prevent processing in specific circumstances, for example when the individual objects to the processing and there is no overriding legitimate interest for continuing the processing.
The DPL contains a similar right, although this is expressed as a general right of “erasure.”
Under the U.K.’s Data Protection Act, from which the right of erasure in the DPL was drawn, the right is limited to processing that causes unwarranted and substantial damage or distress. Under the DPL this threshold is not present. As with the GDPR, if there is no compelling reason for a data controller to retain personal data, a data subject can request its secure deletion.
Navigating the differences
Direct marketing and consent
Under both the DPL and GDPR a data subject has the right at any time to require a data controller to stop processing their personal data for the purposes of direct marketing. There are no exemptions or grounds to refuse. A data controller must deal with an objection to processing for direct marketing at any time and free of charge.
Under the GDPR, the controller must inform individuals of their right to object “at the point of first communication” and in a privacy notice. There is no such requirement under the DPL, but this would be recommended best practice.
Where things get slightly complicated is the issue of consent. Under the DPL, consent can be implied from the actions of the data subject. With the GDPR, for any consent to be valid it needs to be obvious to the data subject what their data is going to be used for at the point of data collection and the controller needs to be able to show clearly how consent was gained and when it was obtained.
In particular for marketers, there has been much debate about the type of consent that might be required under the GDPR. In the context of financial and professional services many businesses currently rely on the data protection clauses within their terms and conditions of business as the basis upon which consent has been given. Existing consents will therefore need to be reviewed to understand if they remain valid. Where personal data is held on a marketing database, it is questionable now whether that would be considered “freely given” so a separate marketing notice should be issued seeking explicit consent for marketing purposes directed at EU citizens.
The other point for marketers targeting EU citizens is the requirement to comply with a number of other EU regulations. Some of these apply to unsolicited electronic messages sent by telephone, fax, email or text, while others apply to marketing material sent by post.
Treatment of data processors
The GDPR sets out more detailed statutory requirements to apply to the controller/processor relationship, and to processors in general. The GDPR also makes data processors directly subject to regulation for the first time and directly prohibits data processors from processing personal data except on instructions from the data controller. The GDPR also extends data security obligations to data processors. Under the DPL, recommended best practice would always be to put in place a contract between a controller and processor to ensure that any personal data is processed only for authorized purposes, that all data is stored and transmitted securely and that disaster recovery practices are in place in the event of a data breach. Essentially, the contract should require the data processor to level-up its policies and procedures for handling personal data to ensure compliance with the DPL. Use of subcontractors by the service provider should be prohibited without the prior approval of the controller.
Appointment of a data protection officer
The DPL does not require the appointment of an official data protection officer (DPO) within an organization, although this is recommended best practice. The GDPR provides that the appointment of a DPO will only be mandatory where the data controller is a public authority or the core activities of the data controller consist of processing operations which require: (i) regular and systematic monitoring of data subjects on a large scale; or (ii) processing on a large scale of sensitive personal data. For all other organizations, the appointment of a DPO will be voluntary.
Fines and penalties
The GDPR will provide for two tiers of sanctions, with maximum fines of up to 20 million euro or 4 percent of annual worldwide turnover, whichever is greater.
Under the DPL, refusal to comply or failure to comply with an order issued by the Ombudsman is an offence. The data controller is liable on conviction to a fine of CI$100,000 or imprisonment for a term of 5 years or both. Monetary penalty orders of an amount up to CI$250,000 may also be issued against a data controller under the DPL.
As personal data develops into an increasingly valuable business asset, data protection and cybersecurity are now board level issues. Although questions remain regarding the effective enforceability of the GDPR against non-EU controllers, there is no doubt that the long arm of EU data protection law is seeking to reach beyond EU borders.