Out-Law Analysis | 28 Jun 2011 | 12:39 pm | 4 min. read
The data that gambling companies collect is particularly sensitive, meaning a data breach could have a serious adverse impact on their reputation and ultimately on their entire business.
Gambling operators who fail to take data protection seriously or fail to invest in robust data security measures could find several sets of regulators beating a path to their door. Worse, customers will flee and share prices will plummet. If you doubt that, just ask any senior Sony executive.
The company's PlayStation network was hacked and 77 million records were taken. It is one of the biggest data protection breaches ever and has affected the credibility of the organisation, the trust users are likely to place in it in future and, ultimately, its share price. Sony has recently estimated the cost of the hacking and data breaches at a staggering $170 million.
Gambling companies hold even more personal data than Sony would have. As well as names, addresses, passwords and account details, gambling companies hold details of payments and bank accounts and information about a person's gambling history.
Any company which allowed this personal data to be exposed to the world would struggle to regain users' trust. So even before a single regulator or law enforcement agency gets involved a company would be in major trouble. Add the Information Commissioner's Office (ICO), the Gambling Commission and lawyers acting for individuals intent on pursuing civil actions, and you have on your hands a serious threat to a whole company.
So what can companies do to avoid this scenario? The first and most obvious thing to do is to protect all the personal data you collect. Invest in secure systems; ensure your processes are sound; make sure security requirements and restrictions extend to any sub-contractors and anyone else with access to the data.
It is not just companies using portable media which are at risk – operators who are online are vulnerable to attacks including hacking and denial of service attacks. The Data Protection Act 1998 (DPA) requires that the measures put in place must be relative to the sensitivity of the personal data in question and the harm that could be caused by a security breach, taking into account cost and the technology available. You don't have to establish a research and development department to design unhackable code, but you do need comprehensively to consider the risks for your business and pro-actively to implement appropriate security measures.
Make sure all your staff are trained and have the level of data protection expertise appropriate to their role. Update the training so that they know exactly what is expected of them.
But if there is a leak you can still take steps to limit the damage. As part of setting up of your data protection systems, create a plan that can be implemented as soon as a breach is found.
This should involve prompt notification to customers and regulators as well as mobilising the team who will be responsible for managing the breach. Quickly put in place support plans for customers, including compensation if necessary.
If you do not react quickly, if you do not share information with customers and if you do not offer appropriate compensation, you will suffer a major backlash. People understand that mistakes can be made. If you try to hide them or try to avoid responsibility, that is when you will find the public turning against you.
A civil case being brought against Sony in Canada has reportedly argued that the company's failure to notify customers and regulators about the breach exacerbated its non-compliance. As well as considering their regulatory obligations, companies should check their own terms and conditions to see what they have promised they will do in this situation.
If your operation covers many countries, apply the standards of the most rigorous regime. Customers will not welcome seeing other people treated better because of where they live. Again, the biggest risk to your firm is reputational, not regulatory. In a fast-moving competitive market, there are plenty of other operators waiting to pick up disenchanted customers in the wake of a security breach.
That said, the regulators most certainly matter. Gambling is in a different position to most industries because there is an obligation to report any serious data security breach.
The Gambling Commission’s Information Security Code of Practice requires licensed operators regulated in Great Britain to notify the Gambling Commission of any major breach of information security that adversely affects the confidentiality of customer data or prevents customers accessing their accounts for a substantial period.
The DPA does not require businesses generally to notify the ICO of a breach, but significant breaches should be notified: it is far better if an organisation is able to tell the ICO their side of the story rather than the ICO finding out from the press or disgruntled customers.
A review of data protection legislation is now underway at European Union level and a mandatory requirement to notify information security regulators in the wake of high profile security breaches is one of the options being considered.
A gambling operator will have many concerns, and many systems to oversee. Protecting a database of customer details might not seem to be deserving of a place at the top of a priority list, but the consequences of a breach can be truly dire. Just ask Sony.
By Kathryn Wynn, a data protection law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM