Forced landing: an overview of Chilean legislation on financial cybersecurity
November 15, 2018
State of legislation and policy before the cyber attacks
Chile is a country that, at first glance, seems to have a fairly complete legislation on data protection. A few months ago, the protection of personal data was enshrined as a constitutional guarantee, complementing the guarantee of privacy and intimacy that already existed in the Constitution, which allows for a constitutional action when this guarantee is violated. Moreover, Chile has one of the first laws in Latin America concerning the processing of personal data, a law on computer crimes, and various regulatory bodies that regulate other matters of interest, like electronic signature, a special statute on health data and special provisions on consumer protection regarding electronic contracting.
Although it may seem that Chilean legislation is quite complete, however, when we look outside of the constitutional consecration, the normative bodies concerned with data processing and computer crime matters have become partially obsolete or outright unused because failures to update the framework. Of course, part of the reason for the phenomenon focuses on the constant evolution of information and communication technologies and the new demands posed by a connected world.
For this reason, the Government of Chile announced the implementation of the Digital Agenda 2020 (‘the Digital Agenda’), in November 2015.
The Digital Agenda is intended to be the guide for the development and evolution of various issues related to information technologies in Chile. These initiatives relate to the rights for digital development, digital connectivity, digital government, digital economy and digital competences. Among the initiatives in the digital government section, it includes the update of the rules on the processing of personal data and on computer crimes.
Initiatives and key areas of development in cybersecurity regulation
The National Cybersecurity Policy and National Cyber Defense Policy
The elaboration of the National Cybersecurity Policy, which was officially published on 27 April 2017 and of the National Cyber Defense Policy, published on 9 March 2018 were the key steps taken in making the concern for the security of information a matter of national interest in Chile.
Both policies specify the concrete measures that Chile must take in these matters, in many occasions reaffirming the commitments established in the Digital Agenda, and in others, detailing new, specific obligations. However, these documents are not cybersecurity policies as commonly understood, since Chile does not have advanced legislation in these matters. Rather, they are programmatic proposals, a set of political and legislative measures that must be implemented to establish an effective cybersecurity and cyber defense policy through the development of bills, educational policies and general development goals of the country.
Financial Stability Board and operational continuity
Certain public sectors also began to take action to modernise their matters on cybersecurity. In terms of financial cybersecurity, it is worth referring to the measures taken by the Financial Stability Board (‘FSB’). The FSB, made up of the Treasury, Superintendent of Securities and Insurance, now the Financial Market Commission, the Superintendent of Banks and Financial Institutions (‘SBIF’) and the Superintendent of Pensions, was created in 2011 to ensure the integrity and soundness of the financial system, providing the necessary coordination and information exchange mechanisms to carry out preventive management of systemic risk and to resolve critical situations that involve the exercise of the functions of the Superintendencies of the economic area.
On 12 June 2018, the FSB reactivated its Working Group on Operational Continuity (‘the Working Group’), composed of the same institutions that made up the FSB, and having cybersecurity as one of its main concerns. One of the measures of this reactivation was the signing of a memorandum of understanding between the authorities of the Working Group that seeks to harmonise their operational continuity. Along with this, it was agreed that the Working Group would engage in an international evaluation of the current institutional framework on cybersecurity that would allow for the harmonisation of Chilean regulations with international standards. This task was entrusted to the International Monetary Fund, following which, a preliminary report was issued. The delivery of the final report is still pending.
Cyber-attacks on the banking sector and exposure of deficiencies
Until May 2018, the legislative landscape in Chile in terms of cybersecurity looked clear and uniform, with well-defined development policies, objectives and a timeframe set by the National Cybersecurity Policy, and with competent organisations that were beginning to carry out the necessary operations to update the current legislation. But this steady progress was reevaluated due to a series of cyber-attacks that affected Chilean banks and businesses, calling for urgency.
A group of hackers called ‘The ShadowBrokers’ obtained access and published on 24 July 2018, and then on 27 August 2018, information related to the bank accounts of Chilean clients. This series of attacks revealed deficiencies in the Chilean legislation concerning the protection of personal data, cybersecurity, banking, and financial sector regulation.
For instance, the current data protection law, Law No. 19.628 on the Protection of Private Life 1999 (‘the Law’), does not set forth any obligation to implement security measures in the systems, nor an obligation to report the violation of security measures (obligations that are considered in a bill being discussed in Congress that seeks to structurally modify the Law); and sectoral regulation only required the notification of the operational incident to the SBIF.
As a consequence, most of the clients of the affected banking institutions were informed of the breach, and the exposure of their data, by unofficial means, such as press media or social networks, and in some cases by private communications from banks. Most of the communications referred to the occurrence of the computer attack, and gave recommendations to block their accounts, but did not refer to the type of attack, the possible consequences of the exposure, or what kind of data was compromised. It was recently revealed that the most likely source of the leak of banking information was not the banks, but a virtual box of the state postal company.
These attacks on the country’s financial institutions constituted a clear warning to the authorities of the urgent need to accelerate the process to update the regulations, which led to the institutions in charge of the supervision of the financial industry to act on the matter.
The SBIF’s reaction
At the time of the attacks, the SBIF had regulations on cybersecurity in force, which had been modified in January 2018. These are found in the SBIF’s Updated Compilation of Regulations (‘the RAN’), in chapters 20-8 on Information on Operational Incidents and Database of Cybersecurity Incidents and 1-13 on the Classification of Management and Solvency.
After the attacks, in 31 August 2018, the SBIF issued amendments to Chapter 1-13 and 20-8 of the RAN.
Chapter 1-13 was reformed to include the consideration of cybersecurity issues within the bank’s board of directors’ responsibilities.
Chapter 20-8 on incident reporting was amended as follows:
- The current obligation to notify the SBIF of the occurrence of an operational incident was modified, setting a very short term, 30 minutes from the occurrence of the incident. The previous obligation only required that the communication be made ‘as soon as the incident was identified.’ In addition, the content of the communications made to the SBIF is detailed with greater precision.
- A new obligation to communicate the occurrence of the incident to users or customers of the affected financial institution was introduced, as well as a new obligation regarding communication between industry members.
Moreover, the establishment of new requirements regarding the monthly report to be made to the SBIF on operational incidents was submitted for consultation. It is predicted that this modification will establish a more demanding obligation regarding the detail of the report, and that it will cover a greater number of incidents than the ones previously reported to the SBIF.
Thus, the SBIF has amended current obligations and has begun to consecrate new ones for the organisations under its supervision.
Proposed bills on the matter
Consistent with the objectives set by the Digital Agenda, on 16 November 2016 Chile ratified the Budapest agreement, the international treaty that seeks to harmonise the legislation on computer crimes. Consequently, the Government announced the prompt presentation in Congress of a bill to amend and update Law No. 19.223 of 1993 on computer crimes, which is seriously outdated.
After the July 2018 visit of a delegation of the International Monetary Fund, the Treasury Minister announced the prompt submission to Congress of a financial cybersecurity bill (‘the Cybersecurity Bill’), which aims to generate new competencies for organisations that supervise the functioning of the financial system.
Recently, the Government also announced a future bill for a base law of cybersecurity, and the presentation, possibly in early 2019, of a bill that seeks to regulate the critical infrastructure of the country. These last two bills were already contemplated in the plan drawn up in the National Cybersecurity Policy.
It is still yet to be determined with certainty the way in which these normative, regulatory and legal bodies will be coordinated, and how cohesiveness with the initiatives that were already in process in terms of data protection, the initiatives and measures set out in the National Cybersecurity Policy, and those recently announced by the Government, will be achieved.
The future landscape
The Cybersecurity Bill wasn’t specifically contemplated in the Digital Agenda nor in the National Cybersecurity Policy. The financial system was only mentioned with reference to the critical infrastructure that should be considered in the development of the country’s new policies. After the attacks, however, the financial cybersecurity project was announced, and changes were made to the regulation of the SBIF.
The landscape for cybersecurity legislation, undoubtfully, had to redraw itself in a rather urgent and accelerated way. Chile is a newcomer to the cybersecurity regulation arena and is taking its first steps rather late.
It will be interesting to observe the development of this scenario, which will hopefully use this delay to its advantage, taking note of the experiences and lessons learned in other jurisdictions.
This article was first published in Data Protection Leader in October 2018.Back to main
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