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The Information Commissioner's Office (ICO) deemed that Scottish Borders Council had been guilty of a serious breach of the Data Protection Act. The watchdog said the organisation had failed to manage the outsourcing of the personal data processing properly.

The Council had arranged for a man, known only as 'GS', to "digitise" its employees' paper pension records. However, in September last year a member of the public discovered that 676 files had been dumped in a supermarket's "overfilled" paper recycling bank. GS had dumped a further 172 files in another paper recycling bank on the same day, although this information was "likely to have been recycled following a completely mechanical process," the ICO said.

Among the information contained in 676 files were the Council employees' names, addresses, national insurance numbers and, in just fewer than half the cases, individuals' salary and bank account details.

The ICO said the Council failed to have a written contract with GS to govern the scope of his processing activities and set out his data security requirements.

"[Scottish Borders Council] failed to choose a data processor providing sufficient guarantees in respect of the technical and organisational security measures governing the processing to be carried out, and take reasonable steps to ensure compliance with those measures," the watchdog said in its civil monetary penalty notice. (12-page/1.68MB PDF). "Such security measures might have provided for the secure disposal of the files after scanning and stipulated that the data processor would either return the documents to the data controller in person, or securely destroy them, providing the data controller with a certificate of destruction."

The ICO said that GS had digitised approximately 8,000 pension records for Scottish Borders Council, some of which would have contained "details of ill health benefits". GS would provide the Council with "unencrypted discs" containing the information, but the local authority was unaware that GS had been recycling the paper records during a "potential seven year period".

Under the DPA, data controllers are required to take "appropriate technical and organisational measures" to ensure against the "unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data".

When outsourcing personal data processing to others, data controllers are required to select processors that can provide "sufficient guarantees" that they can properly meet the "technical and organisational measures" requirement and that they will "take reasonable steps" to "ensure compliance".

The data controllers must establish a written contract with data processors specifying that the processor may only undertake processing activities that the controller tasks them with, while the contract must also hold the processors to meeting the "technical and organisational measures" requirement of the DPA. The data controller is also responsible for those personal data security standards being met by the processors to which they outsource.

Further rules apply to outsourcing of personal data processing where processing takes place outside the European Economic Area.

The ICO said that the Council should have regularly monitored GS to ensure he was complying with the DPA and should have had a written contract in place with him. This failure meant that the Council "failed to ensure a level of security appropriate to the harm that might result from the accidental loss of the documents and the nature of the data to be protected.

"This is a classic case of an organisation taking its eye off the ball when it came to outsourcing," Ken Macdonald, the ICO's assistant commissioner for Scotland, said in a statement. "When the Council decided to contract out the digitising of these records, they handed large volumes of confidential information to an outside company without performing sufficient checks on how securely the information would be kept, and without even putting a contract in place.

"It is only good fortune that these records were found by someone sensible enough to call the police. It is easy to imagine other circumstances where this information could have exposed people to identity fraud and possible financial loss through no fault of their own. If one positive can come out of this, it is that other organisations realise the importance of properly managing third parties who process personal data. The Data Protection Act is very clear where the responsibility for the security of that information remains, and what penalties await those who do not comply with the law," Macdonald added.

Tracey Logan, chief executive of Scottish Borders Council, said it was "very disappointing" that the body had been issued with a £250,000 fine but said the Council does "acknowledge the seriousness" of the breach.

"All contracts with suppliers are now established and monitored by our specialist central procurement staff and we will continue to train, support and raise awareness among staff and contractors on the importance of data protection," Logan said in a canned statement.

The ICO said companies should only choose "reputable" organisations to outsource personal data processing which has "appropriate data security measures in place". In addition, firms must hold "a clear, enforceable contract" with those being contracted which should require those contractors to "report any security breaches or other problems" to them. Firms should themselves "have procedures in place" on how to respond to issues that are flagged, the watchdog advised.

Copyright © 2012, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

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