British ISP TalkTalk has received a record £400,000 (USD $510,000) fine for a breach that exposed personal data of over 155,000 customers.
The UK’s Information Commission’s Office (ICO) announced the fine against the UK’s fourth largest ISP on Wednesday. The watchdog hasn't issued a fine this large since its cap was raised in 2010 to £500,000 from just £50,000.
It’s also the first high profile punishment of a major UK firm Elizabeth Denham, a Canadian data protection veteran who replaced former information commissioner Christoper Graham in July.
Denham said the hackers breached the ISP’s systems “with ease” and warned UK organizations that security should be a “boardroom issue”.
“TalkTalk’s failure to implement the most basic cyber security measures allowed hackers to penetrate TalkTalk’s systems with ease,”said Denham.
“Yes hacking is wrong, but that is not an excuse for companies to abdicate their security obligations. TalkTalk should and could have done more to safeguard its customer information. It did not and we have taken action.”
“Today’s record fine acts as a warning to others that cyber security is not an IT issue, it is a boardroom issue. Companies must be diligent and vigilant. They must do this not only because they have a duty under law, but because they have a duty to their customers,” she added.
TalkTalk discovered in October 2015 that a hacker had used an SQL injection attack to breach its databases. It exposed personal data of 157,000 customers and bank details of 15,600 customers.
SQL injection attacks are not sophisticated and can be mitigated by blocking SQL queries in public-facing input field, such as a search box, on a website.
TalkTalk’s breach was the focus of a parliamentary inquiry to answer questions about how companies were protecting customer data. The committee leading the inquiry recommended CEO compensation be linked to “effective cyber security” to ensure CEOs responded adequately to major breaches.
While the ICO’s record fine could help push cybersecurity to TalkTalk’s boardroom, the bigger question is whether maximum fines are enough to address a market failure that necessitates regulatory intervention. That is, the cost of a breach to an organization that is hacked is small compared to the costs borne by third-parties affected by a breach.
This phenomenon was illustrated in an analysis of high-profile credit card breaches at US firms, including Target and Home Depot, that costs the firms less than one percent of revenues while banks and consumers faced sizable costs.
A more recent study of 12,000 breaches by RAND Corporation found that firms's cybersecurity spend of $200,000 matched the average cost of a data breach. That figure didn't include so-called "externalities" or costs borne by others affected by the breach.