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Stop Hacks and Improve Electronic Data Security Act (SHIELD Act) Introduced by NY AG

The Stop Hacks and Improve Electronic Data Security Act (SHIELD Act) has been introduced into the legislature in New York by Attorney General Eric T. Schneiderman. The aim of the act is to protect New Yorkers from needless breaches of their personal information and to ensure they are notified when such breaches occur.

The program bill, which was sponsored by Senator David Carlucci (D-Clarkstown) and Assembly member Brian Kavanagh (D-Manhattan), is intended to improve protections for New York residents without placing an unnecessary burden on businesses.

The introduction of the SHIELD Act comes weeks after the announcement of the Equifax data breach which impacted more than 8 million New Yorkers. In 2016, more than 1,300 data breaches were reported to the New York attorney general’s office – a 60% increase in breaches from the previous year.

Attorney General Schneiderman explained that New York’s data security laws are “weak and outdated” and require an urgent update. While federal laws require some organizations to implement data security controls, in New York, there are no obligations for businesses to implement safeguards to secure the personal identifying information of New Yorkers if the data held on residents does not include a Social Security number.

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The SHIELD Act will require all businesses, regardless of where they are based, to adopt reasonable administrative, physical, and technical safeguards for if they hold the sensitive data of New Yorkers. The laws will also apply if entities do not do business in the state of New York.

While many states have introduced data breach notification laws that require individuals impacted by breaches of information such as username/password combos and biometric data to be notified of the incidents, in New York, there are no such requirements. The Shield Act will change that and bring state laws in line with many other U.S. states.

Breach notification requirements will be updated to include breaches of username/password combos, biometric data, and protected health information covered by HIPAA laws. Breach notifications will be required if unauthorized individuals are discovered to have gained access to personal information as well as in cases of data theft.

Attorney General Schneiderman is encouraging businesses to go above and beyond the requirements of the SHIRLD Act and receive independent certification of their security controls to make sure they exceed the minimum required standards.

A flexible standard is being introduced for small businesses to ease the regulatory burden. Safeguards can be appropriate to the organization’s size for businesses employing fewer than 50 members of staff if gross revenue is under $3 million or they have less than $5 million in assets.

HIPAA-covered entities, organizations compliant with the Gramm-Leach-Bliley, and NYS DFS regulations will be deemed to already be compliant with the data security requirements of the SHIELD Act.

The failure to comply with the provisions of the SHIELD Act will be deemed to be a violation of General Business Law (GBL § 349) and will allow the state attorney general to bring suit and seek civil penalties under GBL § 350(d).

Author: Steve Alder is the editor-in-chief of HIPAA Journal. Steve is responsible for editorial policy regarding the topics covered on HIPAA Journal. He is a specialist on healthcare industry legal and regulatory affairs, and has several years of experience writing about HIPAA and other related legal topics. Steve has developed a deep understanding of regulatory issues surrounding the use of information technology in the healthcare industry and has written hundreds of articles on HIPAA-related topics.