Incoming Central Bank governor ‘told leak was not a hack’

Incoming Central Bank of Ireland governor, Gabriel Makhlouf, claimed publicly that New Zealand's treasury systems had been hacked, despite advice to his department from the Government Cyber Security Bureau (GCSB) that no such hack took place.

Mr Makhlouf is facing an inquiry during his final weeks as a senior official in New Zealand’s finance ministry and as head of treasury after he claimed budget details had been hacked and published by opposition politicians.

It later transpired that treasury had mistakenly published the information itself, which meant the opposition could access the data through a search engine without breaching any laws. The matter has been the subject of significant controversy in New Zealand.

Minister for Finance Pascal Donohoe has approved the appointment of Mr Makhlouf as the head of the Republic's financial services regulator following the departure of Philip Lane who has been appointed chief economist of the European Central Bank.

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However, there have been calls for Mr Makhlouf’s appointment to be suspended as more details in relation to the controversy have emerged.

According to a report in the New Zealand Herald, the cyber security branch of New Zealand’s government warned treasury that its categorisation of the leak as a hack was incorrect.

Andrew Little, minister in charge of the New Zealand GCSB, was told by the body’s director-general about the matter, the report states. However, a spokesman for Mr Little declined to comment.

GCSB confirmed it advised treasury staff that no hack took place: “The incident did not involve a compromise of the treasury computer network,” it said.

Despite this, Mr Makhlouf went ahead and said his department had “gathered sufficient evidence to indicate that its systems been deliberately and systematically hacked”. He also called in police, without clarifying what advice his department had already been given by GCSB.

Misled

Mr Makhlouf’s conduct and the question of whether he misled the government and the public is already the subject of an official investigation by the State Services Commission.

The commission expects to report before June 27th when Mr Makhlouf is scheduled to leave his post ahead of his move to Ireland. He remains at work, pending the inquiry’s outcome.

The Opposition National Party, which used treasury’s own web search tool to uncover the data, was accused of using illegally-acquired information by deputy prime minister Winston Peters.

The minister of finance, Grant Robertson, a close ally of prime minister Jacinda Ardern, also characterised the data loss as the result of a "systemic hack".

A spokeswoman for Mr Robertson said the minister “denied any knowledge” of the GCSB’s assertion that no hack had taken place.

However, the opposition’s deputy leader Paula Bennett said it was “inconceivable that the GCSB minister didn’t immediately phone finance minister Grant Robertson and the prime minister to give them that information”.

The opposition contends that a co-ordinated effort was made to cover-up mistakes by Mr Makhlouf and Mr Robertson, as well as to smear the opposition.

Ms Ardern refused to answer questions on Friday about when she was informed of GCSB’s warnings.

The State Services Commission, as Mr Makhlouf’s employer, is investigating whether his conduct met the terms demanded in his employment contract.

It is working to “establish the facts in relation to Mr Makhlouf’s public statements about the causes of the unauthorised access; the advice he provided to his minister at the time; his basis for making those statements and providing that advice; and the decision to refer the matter to the police”.

State services commissioner Peter Hughes said the investigation into Mr Makhlouf’s actions was “making good progress”.