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The Walsh Report

                                     CHAPTER 1

                              CONCLUSIONS AND FINDINGS

    1.1 Conclusions

    1.1.1    The relationship of the individual to society is determined by an
    elaborate series of structured and informal arrangements. That our society
    should be an open, pluralist, democratic, ethnically diverse one, eschewing
    discrimination on the grounds of age, gender, religion, race, physical or
    intellectual handicap or any other discriminator which denies dignity is
    universally agreed.

    1.1.2      Individuals living in community cede certain rights and
    privileges to ensure order, equity and good government, even if sometimes
    reluctantly. To this end, a lawful right to conduct intrusive investigations
    has been given to law enforcement and national security agencies and to
    ensure the exercise of those intrusive powers is properly controlled,
    various forms of oversight and a package of administrative law measures have
    been instituted. These have produced a significant increase in public
    accountability, but our time is characterised by a mistrust of all powerful
    institutions which seek to limit the freedoms of ordinary citizens.

    1.1.3      The general availability to the individual of data security,
    whether for storage or communications, will alter the relationship between
    the citizen and the state. It will mark a rare opportunity, in the second
    half of this century, when advantage moves in the citizen's favour. In
    recent years the balance has shifted markedly to the advantage of the state
    and to law enforcement and national security, as technology and computing
    power have provided powerful investigative tools to trace or profile
    individual subjects. 1 As long ago as 1890 the Harvard Law Review decried
    the threat to privacy which 'recent inventions and business methods' posed -
    the invention was black and white photography and the methods invasive
    investigations by brash newspapers! 2 The Review accepts the considerable
    and necessary benefit which cryptography will bring to the citizen, not only
    for confidentiality but also for authenticity, integrity and
    non-repudiation. It is, however, only confidentiality services with which
    this Review is concerned.

    1.1.4      The point is strenuously made by law enforcement and national
    security representatives that loss of access to real-time communications and
    to data stored electronically would have a significant and deleterious
    effect on investigative capability. That effect would be the loss of
    tactical intelligence by which their investigations are directed, the denial
    of evidence which may secure the prosecution of serious criminals,
    significant on-costs and increased risk.

    1.1.5      This Review was commissioned by the Commonwealth and is directed
    to Commonwealth requirements. The terms law enforcement and national
    security have, therefore, a clearly intended Commonwealth application when
    specific matters are addressed. Law enforcement is primarily taken by the
    Review to embrace the Australian Federal Police (AFP) and the National Crime
    Authority (NCA). In a secondary sense, it includes the Australian Customs
    Service (ACS), the Australian Transaction Reports and Analysis Centre
    (AUSTRAC) and the Commonwealth Law Enforcement Board (CLEB). National
    security is taken to refer specifically to the Australian Security
    Intelligence Organization (ASIO). But these matters, law enforcement in
    particular, cannot be isolated in a federal sense. The Review consulted with
    the police services of New South Wales and Victoria as major representatives
    of State and Territory police services. The conclusions at which the Review
    arrived have equal application for the States and Territories and the nature
    of the challenge of encryption dictates that responses and solutions be
    nationally based. There will be a need for complementary, coherent and
    consistent action by the Commonwealth, the States and Territories in this
    matter.

    1.1.6      The public availability of encryption has drawn differing
    responses from governments. This review has confined its study to
    cryptography, of which encryption is the process by which data is
    transformed into an unintelligible form, so the original data cannot be
    obtained or cannot be obtained without using the inverse decryption process.
    It has not concerned it self with other forms of data manipulation, such as
    steganography or data compression, which may cause difficulty in
    understanding the meaning of the data. Some countries, such as France,
    Israel, Belgium and China, have limited the importation of encryption
    systems and products and effectively mandated the escrowing of keys. Burma,
    in late September 1996, banned connections to the Internet. In days of
    cyberspace access, any attempt hermetically to seal borders seems an
    exercise in futility. Other countries, such as the United States and the
    United Kingdom, while proposing voluntary national arrangements which place
    conditions on the use of encryption, have not excluded the prospect of
    mandatory arrangements.

    1.1.7      Recognising the importance of the information and communications
    revolution to Australia's development and to the needs of electronic
    commerce, successive Governments have favoured a process of self-regulation
    to deal with encryption policy, believing competition and consumer demand
    will ensure the interests of all sectors are addressed.

    1.1.8      While the needs of electronic commerce, intellectual property and
    the protection of safety-critical industrial 'processes may be attended by
    self- regulation, the requirements of law enforcement, security and privacy
    stand somewhat apart. It is a paradox that the purposes for which
    cryptographic methods may be used can be mutually conflicting - providing
    the security needed to move vast streams of commercial, financial and
    medical data across open networks and providing impregnable communications
    security for terrorists and organised crime to wreak their havoc on society.
    The challenge for all governments is to secure a balanced policy outcome.

    1.1.9      Law enforcement and national security need to be able to collect
    the tactical intelligence and evidence critical to the effective prosecution
    and coordination of their inquiries. There was an understandable concern
    mentioned by some that government may be seeking to enhance the powers of
    law enforcement and security under the guise of a paradigm shift in
    technology. That is not so. The objective of the review was to ensure
    investigative capability was maintained, while privacy and civil liberties
    were preserved. The Review was satisfied the availability of real-time
    decrypted communications is central to the investigative capability of law
    enforcement agencies and the national security service.

    1.1.10      It was not clear, at the time the Review concluded, what public
    form of key management infrastructure would be required in Australia. There
    was a period, not so much earlier, when it was automatically accepted that
    independent entities would generate and archive keys. Developments in
    technology see individuals capable of generating their own keys reliably,
    but it remains likely that many will rely on a commercial independent entity
    to assist in data retrieval. The notion of 'trust' will be central to any
    system of electronic commerce or third parties. It is difficult to imagine
    all individuals will be able or inclined to establish themselves the
    networks of trust necessary to engage in business with confidence. In view
    of the premium to be placed on trust and the high potential for corruption
    in the third party service provider area, a system of integrity screening
    and registration for providers is indicated. The process adopted by casino
    authorities should prove a useful model.

    1.1.11      The need for certification facilities (affording a level of
    authentication or confidence in a person's private key) is clear and the
    sort of structural and procedural model provided in the Public Key
    Authentication Framework (PKAF) seems widely to be accepted. Clear
    indication of government support by, for instance, an announcement of
    intended usage of the system, would be timely and provide an urgently
    required planning base. For the purposes of electronic commerce, there will
    be a need for legislation to give digital signatures the equivalent force
    and effect of a witnessed hand-written signature. As in the case of third
    party service providers, a form of vetting and registration of those who
    would offer certification authority services is indicated.

    1.1.12      A certification authority is neither an escrow agency nor a
    trusted third party; it will not retain or archive key materials unless
    specifically requested by customers to do so and then only under contractual
    conditions that remove any liability which may flow from compliance with
    lawful orders to produce such materials to instrumentalities of the state.
    Its function relates to certifying to the integrity or personal ownership
    for both authentication and confidentiality purposes, to authenticating
    digital signatures for commercial, legal, evidentiary and similar purposes.

    1.1.13      Some may argue the more organised, or 'professional', criminal
    elements would be unlikely to rely on any service providers, too easily
    risking becoming hostages to fortune - a view recited by all law enforcement
    agencies consulted by the Review. But convenience, lethargy and a lack of
    discipline repeatedly prove themselves capable of overcoming such caution,
    at least among the less professional strata. In such circumstances, they may
    be few or many, government agencies could seek search warrants to obtain
    'keys' where these were held either by the subject of the investigation or
    the registered third party service provider.

         [para 1.1.14 not available]

    1.1.15      In light of this situation, the Review does not recommend
    mandatory third party arrangements. Some form of voluntary third party
    service seems an inevitable development, however, for electronic commerce
    and intellectual property reasons, as well as interoperability and
    international agreements. It is likely to prove of limited assistance to law
    enforcement and national security investigations.

    1.1.16      Any attempt to prohibit the importation of cryptographic
    materials would be misguided and harsh to the privacy rights of all
    citizens. Strong commercial encryption is in the national interest and a
    role can be argued for government to advise the community about the
    integrity/vulnerability of systems and products. On this note, the national
    interest strongly suggests Australia should not be dependent on products
    originating in one country. The risk of national dependence on the United
    States, which manufactures the majority of the world's software, would at
    least be reduced by diversification of supply and there is scope for
    government to take a lead here. There is, of course, some hope that the
    technology which passes through generations in the blink of an eye [a Web
    year was described to the Review as 90 days and going down!] may provide
    some comfort to law enforcement and national security. In the meantime, some
    practical suggestions are made.

    1.1.17      Changes should be made to strengthen focussed investigations of
    the AFP, the NCA and ASIO, to review the sanctions for non-compliance with
    directions to produce and to protect more effectively sensitive operational
    methods used by these agencies to acquire access to encryption keys or
    systems. There should be no change to the tests to be satisfied before
    warrant requests are approved - they should remain as stringent as they are
    today. Nor should there be any change to oversight arrangements.

    1.1.18      The wide and easy availability of cryptography will enhance the
    privacy of citizens, where they have control over the use to which data is
    being put. It should allow some protection against the data-matching,
    profiling and peddling of personal information for commercial gain which
    have become endemic, through ignorance or obfuscation of the need for
    informed consent. 3 It will adversely impact on the capability and
    investigative approach of law enforcement agencies and the security service
    and may, consequently, provoke some redefinition of that fundamental
    relationship between citizen and state. To presage the imminent end to
    civilisation, however, which some foreign law enforcement advocates assert
    will ensue should their favoured approach not be adopted, is neither a novel
    prophecy nor lends substantial assistance to the debate.

    1.1.19      The work of the sub-group of the Organisation for Economic
    Cooperation and Development (OECD), tasked with developing draft guidelines
    on cryptography, is important. The aim is a framework of principles
    addressing the needs of the global village. 4 Electronic commerce
    requirements, if nothing else, will likely dictate some common
    infrastructure to guarantee interoperability. If the European Union, the
    United States or Japan, for example, or any combination of these, was to
    muster sufficient support for a particular model, Australia would be foolish
    not to follow suit. At this stage, however, there is no such agreement and,
    hence, no need to take an independent policy position on this issue.

    1.1.20      The conundrum for government is the encryption genie is out of
    the bottle: a genie with the potential to enhance data security and personal
    and corporate privacy but also to provide a shield of invisibility for
    criminals and others. While the pace of change continues relentlessly, the
    most appropriate policy response remains to watch developments closely, to
    reinforce and protect the investigative capacity of law enforcement and the
    security service, to maintain the requirement that telecommunications
    services provided by carriers be susceptible to interception, to progress
    the development of the OECD guidelines on cryptography, to ensure
    appropriate arrangements for the screening, performance standards and
    registration of third party service providers and certifying authorities are
    put in place, to coordinate policy and technical development which may
    provide a solution to public safety needs and to stimulate public discussion
    of and involvement in the search for a truly balanced solution.

    1.1.21      The implications for law enforcement and national security of
    encryption, though significant, appear dwarfed by the potential fiscal
    consequences, particularly when allied to more powerful processing and the
    progressively increasing capacity for individuals to engage in anonymous
    transactions. They are matters, however, outside the Terms of Reference.

    1.2     Findings

    1.2.1      The main finding of the Review is that major legislative action
    is not advised at this time to safeguard national security and law
    enforcement interests in the face of the challenge presented by
    cryptography, though a range of minor legislative and other actions are
    indicated.

         [remainder of para 1.2.1 not available]

    1.2.2      The option recommended by the Review to cater for national
    security and law enforcement interests in the face of the encryption
    challenge is to strengthen and further protect the investigative capability
    of those agencies, to recast the relevant statutory provisions in clear
    purpose terms to prevent premature aging and to consider the introduction of
    a new statute (the Aid to Public Safety Act is proposed) which would
    aggregate the various intrusive investigative powers, or at least those in
    the Attorney-General's portfolio, into one place. This would facilitate the
    process of review, as indicated by changes in technology or circumstance,
    and likely engender a more controlled public discussion.

    1.2.3      Australia has not been disadvantaged by the absence of policy
    decisions on the issue of key management infrastructure. Many foreign
    governments have moved early, but not necessarily to advantage. The rate of
    technological change, developing public knowledge and expectation of the
    Global Information Infrastructure and the reaction to the control mechanisms
    attempted by some governments suggest, generally, a continuation of this
    course. The immediate exception, on public administration grounds rather
    than anything else, would be the introduction of screening and registration
    procedures for third party service providers and certifying authorities. The
    third quarter of 1996 saw more intensive global engagement on this issue
    than any comparable earlier period. The greater risk for Australia, in the
    short term, is the lack of certainty about who is directing government
    policy and who, therefore, is coordinating the work progressing across a
    range of fronts. That is an issue which needs urgently to be addressed.

    1.2.4      The Review's findings are set out against each term of reference.
    Those of a broader nature, which do not specifically relate to a particular
    term of reference, have been aggregated under term number 2.

     Term of Reference 1. The Review is to examine whether legislative or
                          other action should be taken to safeguard national
                          security and law enforcement interests in the light
                          of the rapid development of the Global Information
                          Infrastructure and the continuing need to safeguard
                          individual privacy.

    Findings:

    1.2.5      The Review does not support legislative action at this stage to
    prescribe a form of key management infrastructure accessible by government
    for purposes of national safety, but overseas proposals and developments
    will need to be kept under close watch. The effort within the OECD to
    develop draft guidelines on cryptography is worthwhile and should provide a
    useful framework for national and international approach to this issue. A
    further Review is recommended late in 1997, when technology will have
    advanced further, any early impact of deregulated communications will be
    apparent, the position of other countries such as Britain and the United
    States will be clearer (both plan to introduce legislative measures), the
    OECD work will be largely concluded and the position Australia might best
    adopt to balance its national security and law enforcement interests with
    its support for electronic commerce, privacy and continuing access to the
    communications and information revolution, might be clearer. (paragraphs
    3.4.1-3; 3.7.1-7; 4.5.11-16; 4.6.1-2; 5.1.5-9 refer)

    1.2.6      The Review found a lack of clarity as to which Minister and which
    department had responsibility for cryptography policy and the consequent
    danger of a lack of coordination in policy development. These deficiencies
    need to be overcome. (paragraphs 2.3.1-2; 3.4.3-5; 6.1.1-4 refer)

    1.2.7      The Review identified a number of areas where legislative action
    might be taken to ensure Australia's national security and law enforcement
    interests. These are set out at term 3(c).

     Term of Reference 2. The objective of the Review will be to present
                          options for encryption policies and legislation
                          which adequately address national security, law
                          enforcement and privacy needs while taking account
                          of policy options being developed to address
                          commercial needs.

    Findings:

    1.2.8      The Review does not recommend specific options for encryption
    legislation at this time. The policy options being developed to address
    commercial needs are as yet inchoate. The process of developing guidelines
    on the use of cryptography by the OECD Ad Hoc Group of Experts is still 6
    months from conclusion and international agreements based on such a
    framework would seem to represent the only basis for trusted third party
    encryption of telecommunications. 5 (paragraph references as per 1.2.5)

    1.2.9      There is no draft proposal at large which meets well the
    competing demands of law enforcement/national security, privacy and
    commercial needs. (paragraphs 4.5.1 1; 4.6.2; 4.7.1-6 refer)

    1.2.10      The conceptual difficulty in resolving those tensions in one set
    of arrangements is exacerbated by the requirements of law enforcement and
    national security being predicated on access, while privacy and commercial
    needs are predicated on protection.

    1.2.11      There seems no compelling reason or virtue to move early on
    regulation or legislation concerning cryptography. Law enforcement and
    national security agencies have certainly experienced difficulty where
    subjects of investigation have refused access to encrypted stored data and
    it has not been possible for them or other agencies to decrypt this
    material. It is questionable, though, whether any range of policy decisions
    concerning key management would have altered this situation materially. For
    the present, the investigative capability of the agencies is not
    significantly affected. (paragraphs 3.2.1-4; 3.5.3-4; 4.1.2 refer)

    1.2.12      To ensure policy positions are properly coordinated and reflect
    the interests of the different parts of government, it would be preferable
    if these followed decisions by Ministers on policy responsibility, were
    coordinated by a standing inter-departmental committee and that the
    committee was constituted at an appropriate level. (paragraphs 3.4.2-5
    refer)

    1.2.13      For reasons of electronic commerce and international cooperation
    in the law enforcement and national security areas, Australia's policy
    positions must mesh with those of her major trading and cooperating
    partners. While a few countries have made public policy commitments, these
    are likely further to change. International acceptance of the OECD draft
    guidelines on cryptography, the drafting of which is due to conclude early
    in 1997, may provide a basis for that consistency in national approach
    essential for the GII. (paragraphs 4.6.1-4 refer)

     Term of Reference 3(a). Key factors to be addressed include Australia's
                             national security and defense interests;

    Findings:

    1.2.14      While national security and defense interests provided the
    framework within which the other terms of reference in paragraph 3 were
    examined, the injunction in the first term of reference of the Review to
    have regard for the continuing need to safeguard individual privacy and a
    reminder of that at term 3(d) provided some tension when different
    requirements were to be served. The approach of the Review was to seek to
    strike a balance, leaving the privacy advantage with the community as a
    whole when the security or defense interests, taken at their broadest, were
    unable to demonstrate an impediment to the performance of their functions
    and model mechanisms of control either failed or were oppressive.

     Term of Reference 3(b). an assessment of the present state of encryption
                             technology and prospective developments in
                             encryption technology over the next few years
                             likely to impact on Australia's national security
                             and law enforcement interests;

    Findings:

         [paras 1.2.15 and 1.2.16 not available]

    1.2.17      The likely trend will be from software encryption applications
    with separate keys generated by the individual's computer system or an
    independent entity to primarily hardware solutions where random keys are
    rapidly generated and changed by the equipment itself and recognized and
    understood by those to whom data transmissions are directed (paragraphs
    3.6.1-7 refer)

         [para 1.2.18 not available]

    1.2.19      The AFP should chair an inter-agency group tasked with the
    preparation of an assessment of the impact which the loss of real-time
    access to voice and data communications would have for law enforcement and
    national security. The assessment should be submitted to the Secretary of
    the Attorney-General's Department for presentation to the Secretaries
    Committee on National Security. (paragraph 4.1.3 refers)

    1.2.20      The future direction of encryption technology depends largely on
    advances in the field of pure mathematics and computing power which
    increases, on average, by the power of 10 every five years. We will likely
    see dedicated microchips able to work faster and process more complex
    algorithms. at reasonable speed. Secure faxes will become more common.
    Remote banking facilities will become available. Local area computer
    networks (LANs) will use encryption for communication between workstation
    and file server or mail server. This encryption will be transparent to the
    user. Each computer or user on the network will have its own public/private
    key pair, used to generate random session keys. Further ahead, quantum
    computing and, perhaps, quantum cryptography are mentioned, as are molecular
    memories, but none is predicted to cause major change to the projected trend
    line of development. (paragraphs 3.1.1-4 refer)

    1.2.21      The availability of an encryption function on major software
    applications or as a service to telecommunications users would likely be
    taken up quickly by the community, but particularly the more significant
    targets of law enforcement and national security agencies. Microsoft, for
    example, recently indicated it would soon offer such an application.
    (paragraph 3.4.6 refers)

         [para 1.2.21 and 1.2.22 not available]

     Term of Reference 3(c) whether Australia's present laws are adequate to
                            ensure Australia's security and law enforcement
                            interests in an environment of rapidly emerging
                            new technologies;

    Findings:

    1.2.23      The Telecommunications (Interception) Act 1979 is considered
    adequate by national security and law enforcement agencies, though a range
    of issues such as the continuing capacity to trace calls; the test of
    reasonableness (as applied) under which law enforcement and national
    security agencies may seek such action; access to call record information
    and caller identification from carriers and service providers; the legal
    status and, therefore, obligations of service providers after 1 July 1997;
    the impact of satellites (eg systems are being launched by Asian countries
    which will cover significant parts of Australia); and some jurisdictional
    matters in relation to the Internet loom as issues which the Law Enforcement
    Advisory Committee (LEAC) and the Attorney-General's Department will need to
    pursue. (paragraphs 3.4.1-2; 3.6.7; 4.8.4; 6.2.4 refer)

    1.2.24      The Telecommunications Act 1991 would become inadequate if the
    license condition on carriers first to obtain approval from the Minister for
    Communications and the Arts, who is required to consult with the
    Attorney-General, before marketing any telecommunications service not
    susceptible to interception should be varied. 6 (Paragraph 6.2.18 refers)

    1.2.25      The Telecommunications Act 1991 should establish a requirement
    for all communications service providers to be registered, which would
    facilitate the service of warrants and access to customer data bases by law
    enforcement and national security agencies. The purpose is not to restrict
    entry to the sector but to meet these requirements and ensure service
    providers may be kept informed of changes affecting their functions.
    (paragraphs 6.2.4-5; 6.2.18; 6.2.21 refer)

    1.2.26      The ability to trace calls will continue to be of major
    importance to the AFP, NCA and ASIO (and the State police services), even in
    situations where interception or access to communication content is denied.
    The application of the 'reasonableness' principle by communications carriers
    or service providers will need to extend beyond life-threatening situations.
    The containment of consequential costs might best be managed by limiting,
    more than currently, those agencies authorised to make such requests.
    (paragraphs 3.6.7; 6.2.4 refer)

    1.2.27      Invocation of the principle of non self-incrimination is likely
    to prove an obstacle to efforts by law enforcement agencies to obtain
    encryption keys by search warrants or orders made by courts and tribunals.
    (paragraphs 3.2.4; 3.5.1-4; 3.7.10-11 refer)

         [para 1.2.28 not available]

    1.2.29      Consideration should be given to establishing a further and more
    serious category of offence where encryption is used to obstruct
    investigation by law enforcement or national security agencies into the
    preparation for or commission of a criminal offence and to give the
    Commissioner of the AFP authority, analogous to the ss. 28/29 powers
    provision available to the Chairman of the NCA, to require production of
    information or material which would render seized encrypted data
    intelligible. (paragraphs 3.7.10; 3.7.11; 6.2.22 refer)

    1.2.30      The narrow definition of a listening device in the Australian
    Federal Police Act 1979 should be amended to reflect the purpose of such
    devices, namely to transmit data. The current wording restricts transmission
    to voice only. (paragraphs 4.3.5; 6.2.1; 6.2.20; 6.4.4 refer)

    1.2.31      The criteria of Class 2 offences as set out in section 12(B) of
    the AFP Act should be widened so that listening devices might be deployed in
    the investigation of computer and information crime. The use of computers as
    communications devices is much more common than when the Act was drafted and
    that trend is only likely to become more prevalent. (paragraphs 6.2.2;
    6.2.20 refer)

    1.2.32      Authority needs to be created in the AFP Act, subject to the
    normal warranting processes for the exercise of intrusive powers, for the
    agency to install tracing or tracking devices which transmit data, to enter
    premises or perform this remotely, to do so without seeking or obtaining the
    permission of the owner or user of the equipment or premises, to transit
    other premises necessary to reach the nominated premise and to re-enter such
    premises as are necessary to maintain, replace or remove devices. Removal of
    devices, under the same warrant conditions, would be permitted after the
    expiration of the warrant, if secure circumstances do not obtain in the term
    of the warrant. Call-tracing should not be a facility confined in its
    application to life- threatening situations but available for the
    investigation of serious crime or security, intelligence subjects.
    (paragraphs 6.2.6; 6.2.9; 6.2.20 refer)

         [para 1.2.33 not available]

    1.2.34      All amendments and suggestions made in relation to the AFP Act
    should be mirrored by amendment to the ASIO Act, both for its security
    intelligence and its foreign intelligence investigation obligations.

    1.2.35      There will need to be integration between federal, state and
    territory law enforcement agencies as Commonwealth investigations frequently
    cover several jurisdictions, the State and Territory police forces operate
    in the same areas of criminal investigation and the latter police forces
    employ the same core technology and encounter the same problems. These
    issues might usefully be explored at a meeting of the Standing Committee of
    Attorneys-General and the Australian Police Ministers Conference. (paragraph
    6.2.28 refers)

    1.2.36      Statutory protection needs to be afforded those sensitive
    operational and technical methods employed by law enforcement agencies in
    the course of their investigations. The process of establishing a public
    interest immunity claim may implicitly reveal sufficient of a conceptual and
    operational approach as to destroy the integrity of such a method. Where
    high personal risk and damage to the investigative capability of the agency
    may result, should protection of the operational methods employed in a
    particular investigation not be absolute, agency heads should be empowered
    to issue a certificate, pursuant to the proposed provision, identifying the
    operationally sensitive information protected from disclosure, discovery by
    legal process or access under the FOI Act. (paragraphs 6.2.12-17; 6.2.20
    refer)

    1.2.37      Consideration be given to incorporating all intrusive
    investigative powers, or at least those of the agencies in the
    Attorney-General's portfolio such as the AFP, ASIO, AUSTRAC and the NCA,
    into one statute with an aim and title like 'the Aid to Public Safety Act'.
    The various powers should be expressed in terms of their purpose, not the
    means by which those purposes may be achieved. The benefit would rest in
    common approaches across Commonwealth agencies, a clearer over-arching
    purpose, a positive encouragement to inter-agency cooperation and the
    greater speed and political ease with which necessary amendments may be
    effected to ensure the statute remains relevant to developing technology and
    practice. (paragraphs 6.4.1-8 refer)

    1.2.38      Instead of the current four or more types of warrant for
    intrusive investigative activities by law enforcement and national security
    agencies, to which further types are proposed at 1.2.28, 1.2.32 and 1.2.33,
    all warrant types should be reduced to one of two: the interception of
    communications or entry into property. (paragraph 6.4.8 refers)

     Term of Reference 3(d) measures to safeguard individual privacy including
                            an examination of the warranting provisions that
                            may be required to enable law enforcement and
                            national security authorities to gain access to
                            encrypted material, whether in the form of stored
                            data or a message transmitted over a
                            telecommunications network;

    Findings:

    1.2.39      The ready availability of strong encryption, with no requirement
    to escrow or register keys, nor to entrust them to any independent entity,
    is the most effective safeguard of individual privacy. (paragraphs 3.4.8;
    4.5.7; 4.5.10; 4.6.3; 4.8.4 refer)

    1.2.40      The current regime of stringent warranting provisions for the
    exercise of intrusive investigative powers should continue and apply to any
    change to the range of those powers. (paragraphs 2.2.6; 5.1.7; 5.1.9 refer)

    1.2.41      To ensure the privacy rights and civil liberties of those
    subjects of investigation by law enforcement and national security agencies
    are preserved, where a court or tribunal is prevented from examining any
    circumstances surrounding covert investigations because a statutory
    protection against involuntary disclosure has been invoked by an agency,
    such cases or a sample of these cases should be examined by a senior,
    independent official experienced in the conduct and handling protocols of
    sensitive matters. As the Inspector- General of Intelligence and Security
    has the function to inquire into matters referred to the Inspector-General
    by the Human Rights and Equal Opportunity Commission in respect of the
    intelligence community, the sole aspect to be reviewed here, this function
    would be caught within existing responsibilities. In the case of
    Commonwealth law enforcement agencies, the function might be given to the
    proposed National Integrity and Investigations Commission. (paragraphs
    6.2.24-27 refer)

     Term of Reference 3(e)  an assessment and evidence of the benefits of
                             access by law enforcement and national security
                             agencies to encrypted data;

    Findings-

    1.2.42

    Law enforcement agencies and ASIO made a cogent case for access to data
    concerning subjects of investigation, whether voice or data communication,
    computer communication or stored data, whether concealed by speed,
    compression or encryption. The assessed benefits are the capacity to conduct
    investigations and the performance of their statutory functions. (paragraphs
    4.1.1-2; 4.2.1-2; 4.3.1 refer)

         [para 1.2.43 not available]

    1.2.44      Real-time access by law enforcement and national security
    agencies to the voice and data communications of their subjects of
    investigation is essential to core capability. The loss of that access would
    seriously impair capability, increase the risk factor in their operations
    and entail a range of staffing, budgetary, legislative and political
    consequences. (paragraphs 4.3.1-6 refer)

    1.2.45      The lack of reliable national statistics on attacks on computer
    and communications systems will hamper policy development in areas such as
    electronic commerce and cryptography. The proposed IDC on Cryptography
    should consider the matter in the light of the review of AUSCERT
    commissioned by DOCA and its impact. (paragraphs 3.3.4-5)

     Term of Reference 3(f)  an assessment of the most appropriate means
                             offending the development, implementation and
                             maintenance of a decrypting capability for
                             existing and emerging technologies;

    Findings:

    1.2.46      No cogent reason was presented to the Review which suggested an
    independent cryptanalytical capability should be established for law
    enforcement and national security interests. (paragraphs 4.4.1-5 refer)

    1.2.47      While general support for an independent decryption capability
    was evident among law enforcement agencies, the limited opportunities and
    expectations with which decryption would be approached would not justify the
    significant establishment and recurrent budgetary allocation required.
    (paragraphs 4.4.6-7 refer)

    1.2.48      A 'closed' forum at a senior technical and operational level
    involving law enforcement, national security and the Defence Signals
    Directorate should be established to discuss and share attack methodologies
    against encryption, the covert acquisition of keys, agree possible research
    projects and review cooperation arrangements. Such a forum would provide a
    means for keeping the Secretaries Committee on National Security informed of
    any significant change to the investigative capability of law enforcement or
    national security agencies as a result of encryption. 8 Because of the
    protocols surrounding this field, it would be sensible for such a forum to
    be covered by memoranda of understanding agreed by the heads of the various
    agencies. (paragraphs 4.4.7- 12; 6.3.2 refer)

    1.2.49      The cost of enhancing in-house facilities to produce a modest
    decryption capability should not necessitate New Policy Proposals, but the
    Commissioner of the AFP, the Chairman of the NCA and the Director-General of
    ASIO should ensure investment in staff training, development and secondments
    and minor capital expenditure on decryption facilities are planned and
    implemented in a coordinated fashion. The proposed inter-agency forum may
    provide the vehicle to coordinate that investment and development.
    (paragraphs 4.4.7; 6.3.1-3; 6.3.5 refer)

     Term of Reference 3(g) whether Australia should seek to negotiate
                            agreements with any other country or countries
                            governing access to encrypted data where public
                            keys (under a 'Commercial key Escrow' or 'Trusted
                            Third Party' system of encryption) are held
                            outside Australia;

    Findings:

    1.2.50      It would be premature to enter formal negotiations with other
    countries on access to encrypted data, where public keys are held in those
    countries, until there is some certainty as to likely key management
    infrastructures. Reciprocity is a standard feature of such access
    agreements. Caution against entering formal negotiations is not intended to
    preclude substantive discussions on the issues. Indeed, the US has intimated
    that a condition of easing export controls may be the existence of a form of
    certified key management. (paragraphs 4.6.1-2 refer)

    1.2.51      Such agreements should reflect the arrangements which national
    security and law enforcement agencies have in place to handle the exchange
    of sensitive tracing and operational matters. Those arrangements, properly,
    have regard for the legal, political and human rights record of the
    requesting country and the likely use which may be made of the information
    sought. (paragraph 4.6.4 refer)

     Term of Reference 3(h) whether legislation is desirable to:

                            (i) regulate the availability of 'Commercial Key
                            Escrow' or 'Trusted Third Party' encryption; or

                            (ii) facilitate the development of 'Commercial Key
                            Escrow' or 'Trusted Third Party' systems of
                            encryption;

         [para 1.2.52 not available]

    1.2.53      There is a high risk of corruption in the third party service
    provider sector and the Government would be prudent to require integrity
    screening and registration of those who seek to offer such services to the
    public. The testing process employed by casino authorities should prove a
    useful model. (paragraphs 4.7.6-7 refer)

    1.2.54      Some licensing or registration arrangement, together with a
    requirement to meet minimum performance standards (as proposed by Standards
    Australia) is indicated for Certifying Authorities providing authentication
    services. This may depend on the outcome of the Wallis Inquiry into the
    effects of deregulation of the finance system 9 or government may wish to
    consider it cognately with the recommendations from the working groups of
    officials examining a range of electronic commerce issues. The separation of
    the authentication from the confidentiality key is a matter where clear and
    early statement of government's position would assist. (paragraph 4.5.15
    refers)

     Term of Reference 3(i) the impact of overseas initiatives associated with
                            encryption technology, particularly in relation to
                            the extent to which international cooperation and
                            proactive specification of desirable
                            characteristics for encryption products and
                            'Commercial Key Escrow' or 'Trusted Third Party'
                            services is desirable and recommendations as to
                            how such international cooperation might best be
                            achieved,.

    Findings:

    1.2.55      Considerable variation exists in the approach of foreign
    governments to cryptography policy issues, ranging from banning, to
    registration, to the promotion of voluntary systems of key management which
    may meet some of the needs of law enforcement and security, to the
    deliberate decision not to take decisions on these matters while the
    technology continues to develop at a rapid rate and offers new approaches
    for dealing with the issue. (paragraphs 4.5.1-13 refer)

    1.2.56      There seems to be little popular support in or outside the
    United States for a 'Commercial Key Escrow' system involving government
    agencies creating as it would significant vulnerability outside of the
    control of the person or corporation. 10

         [para 1.2.57 not available]

    1.2.58      The issue of international cooperation would best be addressed
    frommid-1997 when there has been more developmental work, the position of a
    number of countries will be clearer, legislative proposals will have been
    introduced by some and the work. of the OECD Ad Hoc Group of Experts will
    have concluded. (paragraphs 4.6.1-4 refer)

     Term of Reference 3(j) the effectiveness of Australia's export controls
                            on encryption technology.

    Findings:

    1.2.59      Any judgement as to effectiveness depends on the aspect from
    which the issue is approached. As the Review was enjoined to consider
    Australia's national security and defence interests as key factors, it may
    be argued Australia's export controls were effective, though American export
    controls may have had greater influence on the limited proliferation of
    'strong' forms of encryption in the region. (paragraphs 5.2.1-4 refer)

         [para 1.2.60 not available]

    1.2.61      From a commercial perspective, the purpose and impact of those
    export controls was questioned. There was criticism that Australian
    cryptographic products did not always meet customer requirements and
    suffered in comparison with American products on the counts of convenience,
    comparability and cost. (paragraph 5.2.6 refers)

    1.2.62      The abolition, or even an amelioration, of United States export
    controls will likely prompt a rapid extension of key lengths as an argued
    talisman of data security. (paragraph 5.2.11 refers)

     Term of Reference 4. The Review is to have regard to the Government's
                          existing encryption policies, the work of the OECD
                          Committee of Experts on Security, Privacy and
                          Intellectual Property Protection in the Global
                          Information Infrastructure on the development of
                          international cryptography guidelines and the work
                          of the Information Policy Task Force on the
                          implementation of open encryption standards which
                          address commercial needs.

    Findings:

    1.2.63      The Review examined and took account of the Government's
    approach outlined in Australia Online 12 and by officials of the Department
    of Communications and the Arts. It examined the 1980 OECD Guidelines on
    Trans-Border Flows of Personal Data 13 and the 1992 OECD Guidelines on
    Information Systems Security and informed itself of their antecedents. It
    had the benefit of many discussions and meetings with representatives of all
    interested agencies on the draft guidelines on cryptography currently being
    developed and was invited to participate in inter-departmental discussions
    chaired by the Attorney-General's Department. The Information Policy Task
    Force had not been established in the period of this Review but a retitled
    Information Policy Advisory Council was due shortly to meet. 14

    Footnotes:

    1 Technologies include DNA analysis, fibre analysis, improved electronic
    surveillance methods across public agencies such as Immigration, Social
    Security, Taxation, Customs. financial institutions. communications camera,
    transport companies and regulators, etc.

    2 Samuel D Warren & Louis D Brandeis, The Right To Privacy, 4 Harv. L Rev.
    193, 195 (1890)

    3 Prof Greg Tucker notes the possibility that an unregulated GII environment
    could lead to a loss of control by individuals over their personal data,
    running the risk of creating a surveillance society. From his paper titled
    'Security, Privacy and Intellectual Property Rights in the Information
    Infrastructure' presented to the OECD, May 1996, p 143.

    4 Not only is the relationship between the individual and the state likely
    to he affected by cryptography and its consequences but Michael Nelson
    argues we will see less powerful governments in relation to trans-national
    criminal organisations because traditional notions of sovereignty, national
    security and warfare will be undermined by 2020 when the whole world will be
    'wired' and e-cash is the norm. Michael Nelson, Special Assistant,
    Information Security, Executive Office of the President, quoted in BNA Daily
    Report for Executives, 6 September 1996, Washington, DC. A view offered also
    in a Technology Issue Note published by the National Security Agency titled
    'NSA and the Cyberpunk Future', 3 June 1966, pp 4-5.

    5 This group is Co-chaired by a Deputy Secretary of the Attorney-General's
    Department and is scheduled to complete its work by February 1997.

    6 The US Administration is proposing legislation requiring each
    telecommunications carrier to increase its capacity to meet assistance
    capability requirements (the capacity simultaneously to undertake call
    tracing and communications interceptions) equal to 0.5% - 1% of the
    engineered capacity of the equipment, facilities or services that provide a
    customer or subscriber with the ability to originate, terminate or direct
    communications. The Congress has enacted the Communications Assistance for
    Law Enforcement Act (CALEA) and authorised funding support of $500 ml. Under
    the Omnibus Consolidated Appropriations Bill signed by President Clinton on
    September 30, 1996, the permanent Telecommunications Compliance Fund may
    receive money from any US Government agency with law enforcement or
    intelligence responsibilities. Carriers have raised significantly the
    charges levied on law enforcement agencies for special assistance.

    7 Inspector-General of Intelligence and Security Act 1986. s.8 (1)(a)(v).

    8 Both the Commissioner of the AFP and the Director-General of ASIO may be
    invited to attend meetings of the Committee and the Secretaries of the
    Defence and the Attorney-General's Department, which embrace the portfolio
    interests, are members.

    9 The Financial Systems Inquiry, commissioned by the Treasurer under the
    chairmanship of Mr Stan Wallis, is due to report to the Australian
    Government by May 1997.

    10 The US Administration issued two statements on July 12, 1996, one
    entitled Administration Statement on Commercial Encryption Policy (shown at
    Annex C); the other, US Cryptography Policy: Why We Are Taking the Current
    Approach.

    12 Policy statement on media issues published by the Coalition parties prior
    to the 1996 federal election. The section immediately relevant to this
    Review (personal Privacy and Commercial Security) is shown at Annex B.

    13 Attached at Annex F of this report.

    14 The Information Policy Task Force was a specific proposal in Australia
    Online. p 10 et seq and is specified as a relevant parameter for this
    Review. See Terms of Reference, attached as Annex A to this report, para 4.

    Chapter 2

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