[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2472 Introduced in Senate (IS)]

  2d Session
                                S. 2472

 To require that notices to consumers of health and financial services 
     include information on the outsourcing of sensitive personal 
 information abroad, to require relevant Federal agencies to prescribe 
 regulations to ensure the privacy and security of sensitive personal 
 information outsourced abroad, to establish requirements for foreign 
                 call centers, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 20, 2004

  Mr. Nelson of Florida introduced the following bill; which was read 
          twice and referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
 To require that notices to consumers of health and financial services 
     include information on the outsourcing of sensitive personal 
 information abroad, to require relevant Federal agencies to prescribe 
 regulations to ensure the privacy and security of sensitive personal 
 information outsourced abroad, to establish requirements for foreign 
                 call centers, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Increasing Notice of Foreign 
Outsourcing Act''.

SEC. 2. HEALTH PRIVACY.

    (a) Foreign-Based Business Associate.--In this section, the term 
``foreign-based business associate'' means a business associate, as 
defined under the regulations promulgated pursuant to section 264(c) of 
the Health Insurance Portability and Accountability Act of 1996 (42 
U.S.C. 1320d-2 note), whose operation is based outside the United 
States and that receives protected health information and processes 
such information outside the United States.
    (b) Notices.--
            (1) In general.--The Secretary of Health and Human Services 
        (referred to in this section as the ``Secretary'') shall revise 
        the regulations prescribed pursuant to section 264(c) of the 
        Health Insurance Portability and Accountability Act of 1996 (42 
        U.S.C. 1320d-2 note) to require a covered entity (as defined 
        under such regulations and referred to in this section as a 
        ``covered entity''), that outsources protected health 
        information (as defined under such regulations and referred to 
        in this section as ``protected health information''), outside 
        the United States to include in such entity's notice of privacy 
        protections the following:
                    (A) The following information in simple language:
                            (i) Notification that the covered entity 
                        outsources protected health information to 
                        foreign-based business associates.
                            (ii) Any risks and consequences to the 
                        privacy and security of protected health 
                        information that arise as a result of the 
                        processing of such information outside the 
                        United States.
                            (iii) Additional measures the covered 
                        entity is taking to protect the protected 
                        health information outsourced for processing 
                        outside the United States.
                    (B) A certification that the covered entity has 
                taken reasonable steps to ensure that the handling of 
                protected health information will be done in compliance 
                with applicable laws in all instances where protected 
                health information is processed outside the United 
                States, including the reasons for the certification.
            (2) Effective date.--A covered entity shall be required to 
        include in such entity's notice of privacy protections the 
        information and certification described in paragraph (1) for 
        notices issued on or after the date on which the Secretary 
        prescribes regulations pursuant to this section or the date 
        that is 365 days after the date of enactment of this Act, 
        whichever date is earlier. Nothing in this subsection shall be 
        construed to require a covered entity to reissue notices issued 
        before the date on which the Secretary prescribes regulations 
        pursuant to this section or the date that is 365 days after the 
        date of enactment of this Act, whichever date is earlier, to 
        include in such notices the information and certification 
        described in paragraph (1).
    (c) Rulemaking.--
            (1) In general.--
                    (A) Regulatory authority.--The Secretary shall--
                            (i) prescribe such regulations consistent 
                        with paragraph (2) as may be necessary to carry 
                        out this section with respect to foreign 
                        outsourcing; and
                            (ii) determine the appropriate penalties to 
                        impose upon a covered entity for a violation of 
                        a provision of this subsection or subsection 
                        (b).
                    (B) Procedures and deadlines.--The regulations 
                described in subparagraph (A) shall be prescribed in 
                accordance with all applicable legal requirements and 
                shall be issued in final form not later than 365 days 
                after the date of enactment of this Act.
            (2) Necessary regulations.--The Secretary shall prescribe 
        regulations--
                    (A) requiring that a contract between a covered 
                entity and such entity's foreign-based business 
                associate contain a provision that provides such entity 
                with the right to audit such associate, as needed, to 
                monitor performance under the contract; and
                    (B) requiring that foreign-based business 
                associates and subcontractors of covered entities be 
                contractually bound by Federal privacy standards and 
                security safeguards.
    (d) Breach of Security.--
            (1) Breach of security of the system.--In this subsection, 
        the term ``breach of security of the system''--
                    (A) means the compromise of the security, 
                confidentiality, or integrity of computerized data that 
                results in, or there is a reasonable basis to conclude 
                has resulted in, the unauthorized acquisition of and 
                access to protected health information maintained by 
                the covered entity, foreign-based business associate, 
or subcontractor; and
                    (B) does not include good faith acquisition of 
                protected health information by an employee or agent of 
                the covered entity, foreign-based business associate, 
                or subcontractor for the purposes of the entity, 
                associate, or subcontractor, if the protected health 
                information is not used or subject to further 
                unauthorized disclosure.
            (2) Database security.--
                    (A) Covered entity.--A covered entity--
                            (i) that owns or licenses electronic data 
                        containing protected health information shall, 
                        following the discovery of a breach of security 
                        of the system containing such data, notify the 
                        Secretary of such breach; or
                            (ii) that receives a notification under 
                        subparagraph (B) of a breach, shall notify the 
                        Secretary of such breach.
                    (B) Other parties.--
                            (i) Third party.--The Secretary shall 
                        require that a contract between a covered 
                        entity and such entity's foreign-based business 
                        associate contain a provision that if the 
                        foreign-based business associate (or any 
                        subcontractor of such associate) owns or 
                        licenses electronic data containing protected 
                        health information that was provided to the 
                        associate through the covered entity, the 
                        associate (or subcontractor) shall, following 
                        the discovery of a breach of security of the 
                        system containing such data--
                                    (I) notify the entity from which it 
                                received the protected health 
                                information of such breach; and
                                    (II) provide a description to the 
                                entity from which it received the 
                                protected health information of any 
                                corrective actions taken to guard 
                                against future security breaches.
                            (ii) Notification process.--Each entity 
                        that receives a notification under clause (i) 
                        shall notify the entity from which it received 
                        the protected health information of such breach 
                        until the notification reaches the foreign-
                        based business associate who shall, in turn, 
                        notify the covered entity of such breach.
                    (C) Timeliness of notification.--All notifications 
                required under subparagraphs (A) and (B) shall be made 
                as expediently as possible and without unreasonable 
                delay following--
                            (i) the discovery of a breach of security 
                        of the system; and
                            (ii) any measures necessary to determine 
                        the scope of the breach, prevent further 
                        disclosures, and restore the reasonable 
                        integrity of the data system.
            (3) Effective date.--This subsection shall take effect on 
        the expiration of the date that is 365 days after the date of 
        enactment of this subsection.

SEC. 3. FINANCIAL PRIVACY.

    (a) Foreign-Based Business.--Section 509 of the Gramm-Leach-Bliley 
Act (15 U.S.C. 6809) is amended by adding at the end the following:
            ``(12) Foreign-based business.--The term `foreign-based 
        business' means a nonaffiliated third party whose operation is 
        based outside the United States and that receives nonpublic 
        personal information and processes such information outside the 
        United States.''.
    (b) Financial Notices.--
            (1) In general.--Section 503(b) of the Gramm-Leach-Bliley 
        Act (15 U.S.C. 6803(b)) is amended--
                    (A) in paragraph (3), by striking ``and'' after the 
                semicolon;
                    (B) in paragraph (4), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(5) if the financial institution outsources nonpublic 
        personal information outside the United States--
                    ``(A) information informing the consumer in simple 
                language--
                            ``(i) that the financial institution 
                        outsources nonpublic personal information to 
                        foreign-based businesses;
                            ``(ii) of any risks and consequences to the 
                        privacy and security of an individual's 
                        nonpublic personal information that arise as a 
                        result of the processing of such information 
                        outside the United States; and
                            ``(iii) of the additional measures the 
                        financial institution is taking to protect the 
                        nonpublic personal information outsourced for 
                        processing outside the United States; and
                    ``(B) a certification that the financial 
                institution has taken reasonable steps to ensure that 
                the handling of nonpublic personal information will be 
                done in compliance with applicable laws in all 
                instances where nonpublic personal information is 
                processed outside the United States, including the 
                reasons for the certification.''.
            (2) Effective date.--A financial institution shall include 
        in such institution's disclosure the information and 
        certification described in the amendment made by paragraph 
        (1)(C) for disclosures provided on or after the date on which 
        the regulatory agency that has jurisdiction over such 
        institution pursuant to section 505 of the Gramm-Leach-Bliley 
        Act (15 U.S.C. 6805) prescribes regulations pursuant to the 
        amendments made by this section or the date that is 365 days 
        after the date of enactment of this Act, whichever date is 
        earlier. Nothing in this subsection, or the amendments made by 
        this subsection, shall be construed to require a financial 
        institution to reissue disclosures provided before the date on 
        which the regulatory agency that has jurisdiction over such 
        institution pursuant to section 505 of the Gramm-Leach-Bliley 
        Act (15 U.S.C. 6805) prescribes regulations pursuant to the 
        amendments made by this section or the date that is 365 days 
        after the date of enactment of this Act, whichever date is 
        earlier, to include in such disclosures the information and 
        certification described in the amendment made by paragraph 
        (1)(C).
    (c) Rulemaking.--Section 504 of the Gramm-Leach-Bliley Act (15 
U.S.C. 6804) is amended by adding at the end the following:
    ``(c) Rulemaking on Foreign Outsourcing.--
            ``(1) In general.--
                    ``(A) Regulatory authority.--The Federal banking 
                agencies, the National Credit Union Administration, the 
                Secretary of the Treasury, the Securities and Exchange 
                Commission, and the Federal Trade Commission (referred 
                to in this subsection as the `regulatory agencies') 
                shall--
                            ``(i) prescribe such regulations consistent 
                        with paragraph (2) as may be necessary to carry 
                        out this subtitle with respect to foreign 
                        outsourcing, with respect to the financial 
                        institutions subject to their jurisdiction 
                        under section 505; and
                            ``(ii) determine the appropriate penalties 
                        to impose upon financial institutions for a 
                        violation of a provision of this subsection.
                    ``(B) Coordination, consistency, and 
                comparability.--The regulatory agencies shall consult 
                and coordinate with each other for the purposes of 
                assuring, to the extent possible, that the regulations 
                prescribed by each such agency are consistent and 
                comparable with the regulations prescribed by the other 
                such agencies.
                    ``(C) Procedures and deadlines.--The regulations 
                described in subparagraph (A) shall be prescribed in 
                accordance with all applicable legal requirements and 
                shall be issued in final form not later than 365 days 
                after the date of enactment of this subsection.
            ``(2) Necessary regulations.--The regulatory agencies shall 
        prescribe regulations--
                    ``(A) requiring that a contract between a financial 
                institution and such institution's foreign-based 
                business contain a provision that provides such 
                institution with the right to audit such business, as 
                needed, to monitor performance under the contract; and
                    ``(B) requiring that foreign-based businesses and 
                subcontractors of financial institutions be 
                contractually bound by Federal privacy standards and 
                security safeguards.''.
    (d) Breach of Security.--Section 502 of the Gramm-Leach-Bliley Act 
(15 U.S.C. 6802) is amended by adding at the end the following:
    ``(f) Breach of Security.--
            ``(1) Breach of security of the system.--In this 
        subsection, the term `breach of security of the system'--
                    ``(A) means the compromise of the security, 
                confidentiality, or integrity of computerized data that 
                results in, or there is a reasonable basis to conclude 
                has resulted in, the unauthorized acquisition of and 
                access to nonpublic personal information maintained by 
                the financial institution, foreign-based business, or 
                subcontractor; and
                    ``(B) does not include good faith acquisition of 
                nonpublic personal information by an employee or agent 
                of the financial institution, foreign-based business, 
                or subcontractor for the purposes of the institution, 
                business, or subcontractor, if the nonpublic personal 
                information is not used or subject to further 
                unauthorized disclosure.
            ``(2) Database security.--
                    ``(A) Financial institution.--A financial 
                institution--
                            ``(i) that owns or licenses electronic data 
                        containing nonpublic personal information 
                        shall, following the discovery of a breach of 
                        security of the system containing such data, 
                        notify the entity under which the institution 
                        is subject to jurisdiction under section 505 of 
                        such breach; or
                            ``(ii) that receives a notification under 
                        subparagraph (B) of a breach, shall notify the 
                        entity under which the institution is subject 
                        to jurisdiction under section 505 of such 
                        breach.
                    ``(B) Other parties.--
                            ``(i) In general.--The Federal banking 
                        agencies, the National Credit Union 
                        Administration, the Secretary of the Treasury, 
                        the Securities and Exchange Commission, and the 
                        Federal Trade Commission shall require, with 
                        respect to the financial institutions subject 
                        to their jurisdiction under section 505, that a 
                        contract between a financial institution and 
                        such institution's foreign-based business 
                        contain a provision that if the foreign-based 
                        business (or any subcontractor of such 
                        business) owns or licenses electronic data 
                        containing nonpublic personal information that 
                        was provided to the business through the 
                        financial institution, the business (or 
                        subcontractor) shall, following the discovery 
                        of a breach of security of the system 
                        containing such data--
                                    ``(I) notify the entity from which 
                                it received the nonpublic personal 
                                information of such breach; and
                                    ``(II) provide a description to the 
                                entity from which it received the 
                                nonpublic personal information of any 
                                corrective actions taken to guard 
                                against future security breaches.
                            ``(ii) Notification process.--Each entity 
                        that receives a notification under clause (i) 
                        shall notify the entity from which it received 
                        the nonpublic personal information of such 
                        breach until the notification reaches the 
                        foreign-based business who shall, in turn, 
                        notify the financial institution of such 
                        breach.
                    ``(C) Timeliness of notification.--All 
                notifications required under subparagraphs (A) and (B) 
                shall be made as expediently as possible and without 
                unreasonable delay following--
                            ``(i) the discovery of a breach of security 
                        of the system; and
                            ``(ii) any measures necessary to determine 
                        the scope of the breach, prevent further 
                        disclosures, and restore the reasonable 
                        integrity of the data system.
            ``(3) Effective date.--This subsection shall take effect on 
        the expiration of the date that is 365 days after the date of 
        enactment of this subsection.''.

SEC. 4. FOREIGN CALL CENTERS.

    (a) Foreign Call Center Defined.--In this section, the term 
``foreign call center'' means a foreign-based service provider or a 
foreign-based subcontractor of such provider that--
            (1) is unaffiliated with the entity that utilizes such 
        provider or subcontractor; and
            (2) provides customer-based service and sales or technical 
        assistance and expertise to individuals located in the United 
        States via the telephone, the Internet, or other 
        telecommunications and information technology.
    (b) Requirement.--A contract between a foreign call center and an 
entity that utilizes such foreign call center to initiate telephone 
calls to, or receive telephone calls from, individuals shall include a 
requirement that each employee of the foreign call center disclose the 
physical location of such employee upon the request of such individual.
    (c) Certification Requirement.--An entity described in subsection 
(b) shall submit an annual certification to the Federal Trade 
Commission on whether or not the entity and its subsidiaries, and the 
foreign call center employees and its subsidiaries, have complied with 
subsection (b). Such annual certifications shall be made available to 
the public.
    (d) Noncompliance.--An entity described in subsection (b) or its 
subsidiaries that violates subsection (b) shall be subject to such 
civil penalties as the Federal Trade Commission prescribes under 
subsection (e).
    (e) Regulations.--Not later than 365 days after the date of 
enactment of this Act, the Federal Trade Commission shall prescribe 
such regulations as are necessary for effective monitoring and 
compliance with this section. Such regulations shall include 
appropriate civil penalties for noncompliance with this section.
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