U.K. company fined over laptop theft

Financial institution failed to operate effective security measures to protect customers from data theft, government watchdog agency says.

Nationwide Building Society, a U.K. financial services provider, has been fined $1.9 million after a laptop containing sensitive customer data was stolen from an employee.

The Financial Services Authority (FSA) hit Nationwide with the fine on Wednesday, following an investigation into the theft, which occurred in November 2006 at the employee's house.

According to the FSA, Nationwide was guilty of failing to have effective systems and controls in place to manage its information security risks. The FSA also discovered that Nationwide was not aware that the laptop contained confidential customer information and did not start an investigation until three weeks after the theft.

"Firms' internal controls are fundamental in ensuring customers' details remain as secure as they can be and, as technology evolves, firms must keep their systems and controls up to date to prevent lapses in security," said Margaret Cole, director of enforcement at the FSA.

"The FSA took swift enforcement action in this case to send a clear, strong message to all firms about the importance of information security," Cole added.

Nationwide has apologized for the incident and said it has tightened its security procedures in an attempt to avoid a repeat of the incident.

"We have extensive security procedures in place, but in this isolated incident our systems of control were found wanting," Nationwide's chief executive, Philip Williamson, said in a statement. "We have made changes to fill the gap and improve our procedures further."

It's still unclear exactly what customer data was held on the laptop. Nationwide insists that the information couldn't have been used to commit identity theft and says that no customers have lost money as a result.

Nationwide acknowledged that the employee in question had not been following its existing procedures at the time of the theft. Although it's unclear exactly how procedures weren't followed, it seems likely that the laptop should not have left the company's offices or that the data shouldn't have been stored there at all.

"We can't comment on any action that may have been taken against the employee," a Nationwide representative told ZDNet UK.

Graeme Wearden of ZDNet UK reported from London.

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