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Financial services law firm The Fold has outlined the key points accountants must consider when outsourcing work to ensure they meet their legal obligations around privacy and avoid substantial penalties.
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Lawyer outlines accountants' outsourcing obligations
20 February 2015
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9 minute read
Lesley Thorne, senior lawyer at The Fold, told AccountantsDaily there are two main things accountants need to think about before passing any client information to a third party.
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Firstly, Ms Thorne said, an accountant must notify clients where they are going to send the information at the time of collecting the information. Secondly, an accountant can only disclose information to another entity if the disclosure is being made for the same purpose for which the information was collected.
“Who the accountant can make the disclosure to is very much dependent on why they collected the information in the first place and whether there was an inherent need for them to disclose it to a third party, and whether that was essentially obvious to the client, ” Ms Thorne said.
“If the accountant can’t meet that test, then they can only disclose information to a third party if either they have got the consent of the client or they can demonstrate that they are making the disclosure for a purpose that is related to the purpose that they collected the information for - and also that the client would reasonably expect them to do that.”
Ms Thorne warned that accountants who outsource work still carry the overall responsibility for that function and must ensure the third party complies with Australian privacy laws. As such, she warned accountants to choose their outsourcing partners wisely.
“Go through a due diligence process when making the selection; also make sure you have contractual agreements in place with these providers and that these specifically oblige the provider to comply with the Privacy Act,” she said.
Outsourcing work overseas also requires specific action by accountants since the law requires the client to be informed to which countries their information will be sent.
This rule came into force last year with the implementation of the Australian Privacy Principles, which replaced the National Privacy Principles, Ms Thorne said.
“In the interest of making sure clients have a true understanding of what’s going to happen to their information, disclosing where you’re going to send information enables them to have a better idea of what the risk is associated with the service they’re about to get,” she explained.
Finally, Ms Thorne said accountants who fail to meet their legal obligations when outsourcing could face substantial penalties.
“If they’re not complying with the Privacy Act then essentially they’re breaching their privacy obligations under federal legislation, which would be an offence, and it may be something that, for example, the privacy commissioner could take action against them for,” she warned.
"The privacy commissioner would undertake an investigation and could potentially impose fairly significant fines, and obviously there are also reputational issues that could cause unlimited financial loss to the accountants themselves."
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