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An Online Date Led to an Inquiry into 'Systemic' Failures at American Express

Know How Online Date Led to an Inquiry into 'Systemic' Failures at American Express.

 

Last summer, John Smith* had just returned to Sydney after more than a decade abroad when he met someone online. He began chatting with a man named Tahn Daniel Lee on the dating app Grindr. Lee was undergoing treatment for COVID at the time, so they communicated online for a few weeks before meeting in Sydney's Surry Hills for their first date - a Japanese dinner followed by Messina ice cream. The date would be one of many in a relationship that progressed quickly before taking a dark turn when Smith began to suspect Lee was watching his bank accounts.

The Age and The Sydney Morning Herald can disclose that American Express, one of the world's largest financial companies, would not only dismiss Smith's initial complaint without proper investigation but would also provide misleading information during an external inquiry. It comes after two major ASX-listed companies, Optus and Medibank, revealed sensitive identification and health data to criminals, igniting a national debate about how to best deal with emerging cyber threats.

The "insider threat," according to cybersecurity experts, is a major risk, and the Privacy Commissioner's inability to penalize companies that violate the law has created a culture of impunity among corporate Australia.

“Because, what is the recourse? Businesses just aren’t doing the risk management that’s required. The tone starts from the top, ” says former Australian Federal Police investigator turned cyber expert Nigel Phair.

Smith's first assumption of Lee was that he had a charming smile, and the relationship developed quickly. Lee worked as a relationship manager for American Express Centurion, an exclusive club for black cardholders who spend at least $500,000 per year.

Smith had a platinum American Express card from living in the United States, but Lee suggested he sign up in Australia so he could illustrate how to maximize the benefits. He consented and began using American Express as his primary banking card shortly thereafter. After a series of comments about items Smith had purchased, places he had been, or payments he had made, he became skeptical that Lee was watching his transactions.

“I asked him how he was able to do this without my consent or authority (one-time pin etc), and he replied, ‘because the system is completely open, I have god mode’,” Smith wrote in a complaint later filed with American Express.

Smith has autism, and while he is classified as "high functioning," he occasionally struggles to recognize inappropriate behavior. He noticed "warning signs" about Lee but ignored them while traveling to Hawaii and Hamilton Island with his new partner, he claims.

During one of these trips, Smith became uneasy with the manner in which Lee discussed his clients' affairs, including major food distributor Primo Foods, which he claimed siphoned millions of dollars to the Cayman Islands. Lee later texted, "FYI, everything I tell you about work is highly confidential." 

By April, he had attempted to end the relationship and had warned Lee that he would report his behavior to American Express. Lee reacted negatively to this. He begged Smith to continue the relationship and, at one point, called Smith's close friend out of the blue to persuade her not to file a complaint. This was the breaking point. He was hell-bent on reporting Lee.

Amex: ‘No inappropriate access’

At the same time, another American Express employee noticed unusual activity on Smith's account. Lee was subjected to an internal investigation, which swiftly cleared him of any wrongdoing. On May 26, the company wrote to Smith, claiming Lee was not in a position to access his account and, in any case, there was training and processes in place to protect customer data.

Unconvinced, Smith asked American Express to confirm that Lee's access to his account had been blocked and reported the Primo Foods discussions. Smith claims that the following week, during a phone call, he was told that if Lee had looked at his account, it was no big deal because they were partners, and discussing Centurion's clients was also no cause for concern.

Smith filed a complaint with the Privacy Commissioner, who directed it to the Australian Financial Complaints Authority. AFCA immediately requested a meeting with American Express to verify that Lee had lost the rights to Smith's account.

The company's response was quick, but it turned out to be incorrect.  “We confirm that the employee has no access to [Smith]’s account,” Amex responded.

In subsequent letters between AFCA, Smith, and American Express, the company continued to imply that there had been no inappropriate access or violation of privacy laws. Until the plot shifted. In August, three months after Lee's suspicious activity was discovered, Smith was notified by American Express that Lee had indeed accessed his personal information.  

Lee accessed Smith's private account nine times between February and April of this year, according to digital access logs. American Express then stated that while it was impossible to prevent Lee from accessing the account, he would be disciplined and the account would be monitored to ensure no further intrusions.

“American Express is unable to practically restrict American Express employees from being able to access any specific Card member data. We acknowledge that [Smith] feels uncomfortable with his previous partner access to his personal information and have made every effort to implement controls to further protect his data,” the company wrote in a letter.

In a final decision issued this month, AFCA determined that American Express violated privacy laws by letting Lee to access his accounts without authorization both before and after the relationship. It awarded Smith $2000 in damages but did not order an apology or absolve the company of any wrongdoing.

“I am satisfied the financial firm has investigated the matters raised by the complainant, and in the circumstances, it has responded appropriately,” AFCA found.

American Express declined to answer specific questions about how it investigated Smith's complaint or what action it took against Lee, but stated it maintains the "highest levels of integrity" and has cooperated with AFCA.

“Whilst they made a determination against us, they concluded that American Express had investigated and responded appropriately,” the company said. “We are satisfied that this matter poses no risk to the integrity of our systems. Protecting the privacy of our customers and the integrity of our systems remains our utmost priority.”

Current laws allow for fines of up to $2.2 million for each unauthorized access. The federal government is considering raising the penalty to $50 million per breach, which would mean that American Express could have faced penalties totaling $450 million for the nine breaches.

“Companies need to take this issue around unauthorized access to information more seriously because the penalties are significant,” CyberCX privacy law expert David Batch says. “But in reality, the Privacy Commissioner has historically not handed down those fines.”

Smith was informed in October that AFCA's systemic issues team had agreed to investigate American Express's handling of Smith's case. This team investigates serious violations and systemic issues and has the authority to refer cases to other regulators, such as the Privacy Commissioner, however, its findings are a little transparent. AFCA was unable to comment on whether the promised investigation would be carried out.

According to Nigel Phair, Professor of Cybersecurity at the University of New South Wales, the "insider threat" is a major concern for businesses, where the actions of rogue employees can jeopardize the security of the entire organization.

He claims that the government's failure to implement harsh penalties on companies that mishandle their customers' data fosters a culture of impunity among Australian corporations.

For Smith, American Express and the system designed to hold companies accountable have let him down. He now makes a point of only using the card in ways that do not reveal his location. Requests for comment from Lee and Primo Foods were not returned.

*Not his real name. He asked that his identity be kept confidential.
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