Op-Ed: What the Brydens Lawyers data breach reveals about data protection in law firms

The vulnerabilities exposed in such incidents, coupled with the rising consumer concern regarding data privacy – with 76 per cent of consumers expressing apprehension about how their data is collected and used – necessitate a paradigm shift in how law firms approach data protection.

So, what can law firms do to ensure that client data is kept secure, and how does this factor in for customers choosing a law firm to work with?

Data protection must be a top priority

The digital economy, while offering unparalleled efficiencies, has amplified the risks associated with data handling. The average cost of a data breach in 2023 reached $4.45 million, and global fraud losses exceeded $5 trillion annually. These figures underscore the vulnerability of even the most established law firms, highlighting the necessity for proactive and comprehensive security measures.

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Furthermore, the operational strain imposed by complex regulatory landscapes, including evolving AML/CTF (anti-money laundering) reforms in Australia, adds another layer of complexity. Law firms must navigate these intricate requirements while maintaining operational efficiency, a challenge that can lead to increased costs and potential reputational damage if not addressed effectively. The need for streamlined, secure, and automated solutions has never been more critical.

How law firms can mitigate data risks

To mitigate these risks and ensure the integrity of client data, law firms must adopt best practice strategies that address the full spectrum of data protection. Here are some key principles, derived from successful implementations, that firms should consider:

• Secure digital onboarding. Implementing a secure digital platform for client onboarding not only replaces time-consuming manual processes but also ensures data is protected more effectively. Clients should be able to upload and verify their information securely through user-friendly interfaces, reducing the risk of data loss or unauthorised access.
• Dynamic consent management. Providing clients with control over their data-sharing preferences through dynamic consent tools fosters transparency and trust. Clients should have clear insights into how their data is used and shared, ensuring compliance with privacy regulations.
• Verification automation. Automating document verification processes reduces manual errors and frees up staff to focus on high-value legal work. This includes automated checks on identity documents and financial details, minimising the risk of fraud and compliance breaches.
• Integrated compliance workflows. Integrating preconfigured workflows aligned with relevant regulations, such as AML/CTF requirements, automates key compliance checks. This includes identity verification, document expiry tracking, and transaction monitoring.
• Real-time compliance measures. Utilising real-time compliance measures such as dashboards enables firms to monitor risk exposure and maintain audit readiness. This proactive approach allows for the timely identification and mitigation of potential vulnerabilities.
• Proactive adaptation to regulatory changes. Staying ahead of evolving regulatory requirements through continuous monitoring and adaptation ensures that the firm remains compliant and avoids potential penalties.
• Encryption. Encrypting all client data and storing it in secure digital vaults, accessible only by authorised personnel, minimises the risk of unauthorised access and data breaches.
• Comprehensive audit trails. Maintaining comprehensive audit trails enhances accountability and data governance. This allows for the tracking of all data access and modifications, ensuring transparency and facilitating compliance audits.
• Secure data sharing practices. Implementing secure data-sharing protocols, including encrypted communication channels and controlled access permissions, ensures that sensitive information is protected during transmission and collaboration.
• Comprehensive staff training. Providing thorough training to staff on the firm’s data protection policies and procedures ensures that everyone understands their responsibilities and adheres to best practices.
• Dedicated customer support. Offering dedicated customer support for both staff and clients facilitates the smooth implementation and use of data protection systems. This includes addressing technical issues and providing guidance on data privacy matters.

What should customers consider?

For end customers seeking a law firm with robust data protection policies, they should inquire about the firm’s:

• Data encryption and security measures;
• Compliance with relevant data protection regulations;
• Staff training and data handling protocols;
• Incident response plans in case of a data breach; and
• Transparency regarding data usage and sharing.

The ability to safeguard sensitive client information is not just a regulatory obligation; it is a fundamental aspect of maintaining trust and ensuring a law firm’s long-term success. By adopting best practice strategies and prioritising data security, law firms can mitigate risks, enhance efficiency, and build lasting client relationships.

Rolf Howard is the managing partner of Owen Hodge Lawyers.