I would like to make a wager on this law being ignored the first time Samsung or another chaebol violates it and is facing a fine equal to 10% of revenue. I can almost guarantee it, it’s a high enough fine to turn some low-margin businesses from profitable to unprofitable for the year and there’s no such thing as a secure computer system. The only way to guarantee compliance is to not store any data which isn’t exactly reasonable for some business models.
Where is your source for this? It is entirely possible to make a secure computer system, though it does require effort. The article specifically mentions "up to" 10% and the fines applying to companies leaking data on purpose or through negligence. I doubt the fines will be nearly as high for a company that tries to secure a system (and thus prevents more leaks) rather than a company that does not try to secure a system (assuming that leaks will occur), if the same breach happens.
Computers are deterministic (excluding cases where practically impossible cosmic ray events occur), so while we have the power to ensure system security, we should ensure system security. Heck, even just encrypting consumer information and protecting just the keys to this data would already decrease the effectiveness of many data breaches.
Wow! :O Finally, a legislator with enough balls to put up something that _might_ (just might) make corporations _actually_ care about security and privacy! I can't wait for this to start being adopted in other countries. It's about time!
You can just do what my university did, hire a small shell firm with 3 employees to hold all your data, and when it got hacked they just went bankrupt and we switched to a new shell firm with similar form and function.
Minimizes money usage and does not require any security investments
It feels better only as long as everybody else cares too. Being the only one competent in a room of imbeciles is a terrible feeling.
Hmm, this is perhaps why we get socially-negative businesses that often have very friendly (and driven, and hard-working, and intelligent) internal cultures. Competency becomes a fault line. When it becomes obvious that a large fraction of humanity just doesn't give a shit, a small group of people who are competent and driven turn their efforts to taking advantage of people who don't give a shit. Thus creating industries like market-makers, cryptocurrency, advertising, and AI.
It feels better only as long as everybody else cares too.
Not sure who “everybody else” is in your statement, but as someone who founded a healthcare tech platform (since sold) [1], I spent 20 years caring about the many millions of patient medical records we held and making sure my team cared too. In my mind it wasn’t optional.
I did it because:
* it’s the right thing to do
* for professional pride
* and so I could sleep at night
And, at least at the beginning, I believed a data breach could be the death knell of the company. Over time the laissez faire attitude to data protection, by the industry as a whole, made it seem like a breach would be survivable, but luckily we never tested that theory.
I still walked away from it a wealthy man. Being competent and caring about your customers (and being able to sleep at night) doesn’t have to mean failure like it seems everyone here thinks.
Every single tool being released since like 2024 is pushing everyone to care less and less and to let agents handle more and more. We are not trending towards increased quality, resilience and reliability - even though we've been obsessing over these things for the past 20 years.
Caring is orthogonal to profits and shareholder value. The one who cares the least wins unless economic incentives change this math, which is what these financial penalties work towards. Humans are tricky.
To defend against the threat OP talks about (intentionally under capitalized corporate entity to avoided liability), insurance should be required, and your cyber insurance underwriter will perform an audit as part of underwriting. It's effectively a bond against fuckery in this context.
You can care and be profitable, but it is usually cheaper to not unless regulatory mechanisms exist to internalize this potential externality. Can't rely on humans to do the right thing, some will not unless they feel pain for doing the wrong thing. Ergo, we build systems (legal, regulatory, technical, people) to encourage the desired target outcome(s).
I've worked with very profitable firms who care very little (and it shows in their systems and how they operate in this regard), and barely profitable firms who do everything right. What's the difference? Their culture, people, and internal incentives.
TLDR Security failures and data breach fines must be more expensive than the happy path and doing the right things. This encourages the happy path and doing the right thing, while discouraging doing not enough or nothing.
There is a lot more than regulations. Reputation is important as well. While you can give up a reputation fairly quickly, it is very hard to get/keep. Many companies are well aware of the value of their reputation - they call it the value of the brand.
Why the middle man? Can't we make the law so that the University is still liable for the data beach because it's "their" data (collected/stored on their behalf) that is breached?
I think that still aligns the incentives, and University in this case has interest to make sure the data is stored properly.
This is already the law, but the shell company signs the ownership of the data and the security responsility. The university in this case is just using APIs to load and store stuff to someone else's servers.
If this is not possible no cloud storage would ever be possible to be liable for anything. Your Google drive got hacked? Your responsibility.
Perfect isn’t required. The bar is “gross negligence”. Perfect is impossible, but proper compliance procedures, proper process, and a commitment to following industry best practice will always see you on the right side of the negligence bar, even if something slipped through the net.
It’s the difference between being a professional and an amateur (or worse, a ‘cowboy’).
Again this is not priced in. Every rational(in terms of revenue) business would rather be a highly profitable "amateur" compared to a barely profitable "professional".
There is no capitalist incentive for the latter, and you will lose market share to firms that can undercut you because of their lower costs.
4% of revenue in the EU, 4% of revenue in the UK, and 10% of revenue in Korea should be enough of an incentive to start caring about how you deal with your customer’s privacy and personal data.
One assumes the rest of the world won’t be far behind, apart from the the corrupt land of the USA which is going backwards right now.
It's only an incentive to start caring if it's cheaper than circumventing the law. In other words it won't work unless the aforementioned liability loophole is closed.
To rephrase the comment you replied to, if being a cowboy is more profitable (by whatever shady means) then that will generally be preferred by the market. Despite whatever sensibilities you or I might have there is no escaping that simple truth of capitalism.
It's not that easy. Companies are required to do due diligence on stuff like this. If they know (or should have known) that they are outsourcing something to an incompetent provider, they could still be liable.
That’s not how it works. Especially with compliance schemes like ISO27001, Hippa, etc. they require an audit chain through the supply line. Obviously it depends on what data you’re managing to whether your customers care about whether you’re audited, or not, but if you’re selling enterprise software then this is all part of your compliance process. You can’t offload that responsibility, you have to make sure your suppliers comply too.
You can't just absolve yourself of responsibility by saying "I hired a contractor". You are still responsible for doing your due diligence in picking your contractor.
The hope is they levy few fines. When you want to make money you set the fines such that they are "a cost of doing business". Most often you don't even call them fines, you call them a permit/license fee (though fines are also common). When you want to prevent a behavior you make the costs high enough that it is worth the effort to not pay them in the first place.
(I'm assuming here that 10% is high enough that nobody would call it a cost of doing business - I could be wrong)
It's childish of me I know, but if this actually goes through I will feel a twinge of delight at the refutation of all the HN commenters who have argued that such enforcement is unrealistic.
I would like to make a wager on this law being ignored the first time Samsung or another chaebol violates it and is facing a fine equal to 10% of revenue. I can almost guarantee it, it’s a high enough fine to turn some low-margin businesses from profitable to unprofitable for the year and there’s no such thing as a secure computer system. The only way to guarantee compliance is to not store any data which isn’t exactly reasonable for some business models.
Maybe those specific business models shouldn't exist, if they consistently risk harm to 3rd parties.
You legally have to hold transactions for years yk as a business
Probably a law targeted at foreign companies
I especially hope this holds true, because I don't want my information being leaked by anyone.
Where is your source for this? It is entirely possible to make a secure computer system, though it does require effort. The article specifically mentions "up to" 10% and the fines applying to companies leaking data on purpose or through negligence. I doubt the fines will be nearly as high for a company that tries to secure a system (and thus prevents more leaks) rather than a company that does not try to secure a system (assuming that leaks will occur), if the same breach happens.
Computers are deterministic (excluding cases where practically impossible cosmic ray events occur), so while we have the power to ensure system security, we should ensure system security. Heck, even just encrypting consumer information and protecting just the keys to this data would already decrease the effectiveness of many data breaches.
Wow! :O Finally, a legislator with enough balls to put up something that _might_ (just might) make corporations _actually_ care about security and privacy! I can't wait for this to start being adopted in other countries. It's about time!
Sounds great if all the following is true.
* Before Tax Revenue
* If the company is owned by another company, the revenue is the total of all companies owned by the highest level parent.
* Includes Worldwide Revenue
* Includes companies based in all other Countries.
I would have went for 20%, but if he above applies I wish the US would do the same.
You can just do what my university did, hire a small shell firm with 3 employees to hold all your data, and when it got hacked they just went bankrupt and we switched to a new shell firm with similar form and function.
Minimizes money usage and does not require any security investments
Or … and hear me out on this one … care?
Sounds like something that costs money, if a university doesn't care I don't think most companies will.
Yes, being competent requires effort.
It certainly feels much better being an proactive member of society rather than a self-serving arsehole though.
So, there is that.
It feels better only as long as everybody else cares too. Being the only one competent in a room of imbeciles is a terrible feeling.
Hmm, this is perhaps why we get socially-negative businesses that often have very friendly (and driven, and hard-working, and intelligent) internal cultures. Competency becomes a fault line. When it becomes obvious that a large fraction of humanity just doesn't give a shit, a small group of people who are competent and driven turn their efforts to taking advantage of people who don't give a shit. Thus creating industries like market-makers, cryptocurrency, advertising, and AI.
Not sure who “everybody else” is in your statement, but as someone who founded a healthcare tech platform (since sold) [1], I spent 20 years caring about the many millions of patient medical records we held and making sure my team cared too. In my mind it wasn’t optional.
I did it because:
* it’s the right thing to do
* for professional pride
* and so I could sleep at night
And, at least at the beginning, I believed a data breach could be the death knell of the company. Over time the laissez faire attitude to data protection, by the industry as a whole, made it seem like a breach would be survivable, but luckily we never tested that theory.
I still walked away from it a wealthy man. Being competent and caring about your customers (and being able to sleep at night) doesn’t have to mean failure like it seems everyone here thinks.
[1] https://www.meddbase.com/
A university which doesn't care to protect its students, deserves to get its whatever-license/accredited status checked/audited.
Every single tool being released since like 2024 is pushing everyone to care less and less and to let agents handle more and more. We are not trending towards increased quality, resilience and reliability - even though we've been obsessing over these things for the past 20 years.
Caring is orthogonal to profits and shareholder value. The one who cares the least wins unless economic incentives change this math, which is what these financial penalties work towards. Humans are tricky.
To defend against the threat OP talks about (intentionally under capitalized corporate entity to avoided liability), insurance should be required, and your cyber insurance underwriter will perform an audit as part of underwriting. It's effectively a bond against fuckery in this context.
(cyber consultant and practitioner)
That's not what orthogonal means. Saying they are orthogonal means that you can care and be profitable.
You can care and be profitable, but it is usually cheaper to not unless regulatory mechanisms exist to internalize this potential externality. Can't rely on humans to do the right thing, some will not unless they feel pain for doing the wrong thing. Ergo, we build systems (legal, regulatory, technical, people) to encourage the desired target outcome(s).
I've worked with very profitable firms who care very little (and it shows in their systems and how they operate in this regard), and barely profitable firms who do everything right. What's the difference? Their culture, people, and internal incentives.
TLDR Security failures and data breach fines must be more expensive than the happy path and doing the right things. This encourages the happy path and doing the right thing, while discouraging doing not enough or nothing.
There is a lot more than regulations. Reputation is important as well. While you can give up a reputation fairly quickly, it is very hard to get/keep. Many companies are well aware of the value of their reputation - they call it the value of the brand.
Why the middle man? Can't we make the law so that the University is still liable for the data beach because it's "their" data (collected/stored on their behalf) that is breached?
I think that still aligns the incentives, and University in this case has interest to make sure the data is stored properly.
Insurance only pays for damages, up to the limit of coverage. It does not do anything to remove liability.
This is already the law, but the shell company signs the ownership of the data and the security responsility. The university in this case is just using APIs to load and store stuff to someone else's servers.
If this is not possible no cloud storage would ever be possible to be liable for anything. Your Google drive got hacked? Your responsibility.
Lets be honest here, this is a business risk which is crazy high. As stupid as this is, I care but i can't guarantee it.
I might suggest a construct like this too.
What do you think how much it cost to do it perfect?
Perfect isn’t required. The bar is “gross negligence”. Perfect is impossible, but proper compliance procedures, proper process, and a commitment to following industry best practice will always see you on the right side of the negligence bar, even if something slipped through the net.
It’s the difference between being a professional and an amateur (or worse, a ‘cowboy’).
Again this is not priced in. Every rational(in terms of revenue) business would rather be a highly profitable "amateur" compared to a barely profitable "professional".
There is no capitalist incentive for the latter, and you will lose market share to firms that can undercut you because of their lower costs.
4% of revenue in the EU, 4% of revenue in the UK, and 10% of revenue in Korea should be enough of an incentive to start caring about how you deal with your customer’s privacy and personal data.
One assumes the rest of the world won’t be far behind, apart from the the corrupt land of the USA which is going backwards right now.
So we get to a very easy formula for companies to do in the EU and UK:
If (4% of your revenue * risk_of_breach_with_your_security < cost of outsourcing storage to a 3rd party cloud) {
Roll your own security solution
} Else {
Outsource to 3rd party
}
It's only an incentive to start caring if it's cheaper than circumventing the law. In other words it won't work unless the aforementioned liability loophole is closed.
To rephrase the comment you replied to, if being a cowboy is more profitable (by whatever shady means) then that will generally be preferred by the market. Despite whatever sensibilities you or I might have there is no escaping that simple truth of capitalism.
Perhaps they should read https://en.wikipedia.org/wiki/Piercing_the_corporate_veil
That's legal?
similarly, most AI datacenters aren't directly owned by the frontier labs
guess who holds the bag if capacity needs collapse
Sure, but the real question is, "Will a judge not immediately see through this and punish them accordingly in any realistic case?"
Sort of like EULA's a lot of the "value" is incredibly theoretical.
That's like blaming Seagate when your harddisk fails.
No judge will fall for that. You should have made backups. And you are responsible for the data of your clients.
Not really, the shell company is the owner of the data and is responsible for the security of it by contract, that's the whole point.
Seagate will not in a million years sign anything like this when you buy a HDD.
It's not that easy. Companies are required to do due diligence on stuff like this. If they know (or should have known) that they are outsourcing something to an incompetent provider, they could still be liable.
That’s not how it works. Especially with compliance schemes like ISO27001, Hippa, etc. they require an audit chain through the supply line. Obviously it depends on what data you’re managing to whether your customers care about whether you’re audited, or not, but if you’re selling enterprise software then this is all part of your compliance process. You can’t offload that responsibility, you have to make sure your suppliers comply too.
You can't just absolve yourself of responsibility by saying "I hired a contractor". You are still responsible for doing your due diligence in picking your contractor.
That sounds risky
"through intent or gross negligence"
I'm not familiar with Korean law but that seems a rather high bar. I don't think we'll see many fines actually levied.
The hope is they levy few fines. When you want to make money you set the fines such that they are "a cost of doing business". Most often you don't even call them fines, you call them a permit/license fee (though fines are also common). When you want to prevent a behavior you make the costs high enough that it is worth the effort to not pay them in the first place.
(I'm assuming here that 10% is high enough that nobody would call it a cost of doing business - I could be wrong)
It's childish of me I know, but if this actually goes through I will feel a twinge of delight at the refutation of all the HN commenters who have argued that such enforcement is unrealistic.
The EU AI Act already levies 7% global annual turnover penalties for prohibited AI practices.
This feels like a really odd way to incentivize data breaches and/or not reporting data breaches.
Um, I think it does the opposite of what you are suggesting - this aims to reduce data breaches and incentivize people to prevent these breaches.
Higher.
Imagine 10% of Samsung!
Edit: "That'll be $23B. Cash or card?"
Huge fines but reasonable. Especially now with all the people doing blind vibe coding