DeepSeek’s rapid expansion has raised alarms over its potential threats to national sovereignty. In January 2025, according to Wiz Research, DeepSeek experienced a significant data breach, exposing over one million sensitive records, including user prompts and API keys, due to an unsecured database. This breach highlights the vulnerabilities associated with DeepSeek’s data handling practices, raising concerns over potential exploitation by malicious actors and government surveillance.
This case, and indeed, the Australian Government’s decision to ban DeepSeek from all federal government systems and the subsequent controversy, serves as a catalyst for broader discussions between CISOs, technology executives and IT decision-makers on AI security governance, data sovereignty, and the need for robust compliance measures.
What is DeepSeek and Why is it Disrupting the AI Sector?
DeepSeek is a rapidly emerging AI platform developed in Hangzhou, China, in July 2023. It is gaining significant attention due to its cost-effectiveness and performance. Unlike traditional AI providers, DeepSeek offers open-source large language models (LLMs) at a fraction of the cost of competitors like OpenAI and Anthropic.
However, its widespread adoption has raised major concerns among governments and enterprises globally due to:
- Low-Cost AI Accessibility: DeepSeek’s pricing model makes AI technology more accessible but also raises questions about the sustainability of security investments.
- Data Processing in China: All user interactions with DeepSeek are stored in China, which creates potential national security risks.
- Censorship and Compliance: Unlike Western AI models, DeepSeek operates under China’s strict data governance laws, leading to concerns about information filtering and lack of transparency.
- Competitive Disruption: DeepSeek’s rapid market penetration challenges the dominance of Western AI giants, prompting regulatory scrutiny and national security debates.
- Data Privacy and Security Risks: DeepSeek collects extensive user data, including chat history, device identifiers, and IP addresses, with all data stored in China, raising concerns about potential exposure to foreign government surveillance.
- Security Breaches: The platform recently suffered a major data breach, exposing user data, API keys, and backend operations. This underscores the risks of inadequate security controls in AI systems.
- Regulatory Compliance Issues: DeepSeek’s data collection practices conflict with Australia’s Privacy Act 1988 and the Australian Privacy Principles (APPs), particularly regarding consent, breach notifications, and data sovereignty.
- Adversarial Attacks and Data Poisoning: Open-source AI models like DeepSeek are susceptible to manipulation, where attackers can introduce biases or security flaws into models.
The Australian Government’s Response to DeepSeek
On 4th February 2025, the Department of Home Affairs Secretary Stephanie Foster issued PSPF Direction 001-2025, requiring all Australian Government entities to block access to, prohibit the use of, and prevent the installation of DeepSeek products, including web services and applications. The directive also mandated the removal of any existing instances of DeepSeek from all government systems and devices.
In her statement, Secretary Foster highlighted the security risks associated with DeepSeek, stating: “After considering threat and risk analysis, I have determined that the use of DeepSeek products, applications, and web services poses an unacceptable level of security risk to the Australian Government.”
AI Security and Compliance: Why Governance Matters More Than Ever
Australia’s regulatory framework provides clear guidelines on AI security and compliance. The Australian Cyber Security Centre (ACSC) and the Office of the Australian Information Commissioner (OAIC) have outlined best practices for AI governance.
Key considerations include:
- Cross-Border Data Risks: The Australian Privacy Act requires organisations to ensure that overseas recipients of personal data comply with local privacy standards, a requirement DeepSeek fails to meet.
- AI Security Frameworks: The Essential Eight and the ISO/IEC 42001:2023 AI Management System Standard establish structured approaches for secure AI deployment, continuous monitoring, and risk mitigation against data poisoning and adversarial attacks.
- Government Directives: The Australian Government’s ban on DeepSeek underscores the importance of robust AI risk assessments and compliance with national security standards.
- Ethical AI Development: AI transparency, fairness, and accountability are critical for ensuring compliance with Australian regulatory expectations.
AI Breaches and National Security: Learning from DeepSeek
DeepSeek’s rise has been met with bans in multiple countries, with governments citing national security threats. Reports indicate that data stored within China’s jurisdiction can be accessed under the country’s cybersecurity laws, a primary concern for Australian businesses handling sensitive data.
Key takeaways include:
- Increased AI Oversight: The global regulatory landscape is tightening, with frameworks like the EU AI Act and Australia’s Privacy Act enforcing stricter controls.
- Need for Secure AI Development: Enterprises must ensure AI tools align with Australian security frameworks to avoid risks similar to DeepSeek’s.
- Risk Mitigation Strategies: Businesses should incorporate continuous risk assessments and security audits to protect their AI environments.
- Understanding AI Supply Chains: Companies should evaluate AI providers’ security and compliance credentials before integrating AI solutions.
AI Security in Australia: What This Means for Businesses
For CIOs, CISOs, and compliance leaders, the DeepSeek ban should be viewed as a broader call to action for enhancing AI security and compliance.
Key strategies include:
- Secure AI Deployment: Organisations must adopt stringent AI security measures, including sandboxing AI models, restricting access to AI components, and continuously monitoring AI systems for vulnerabilities.
- Proactive Risk Management: Enterprises should conduct regular AI security audits, implement breach response protocols, and engage cybersecurity professionals to assess potential risks.
- Data Protection Strategies: Businesses must ensure that AI models comply with Australian privacy laws, using local data storage solutions and limiting third-party data sharing.
- Developing AI Incident Response Plans: Companies should establish protocols for responding to AI-related security incidents to prevent data leaks and breaches.
The Industry Speaks: Experts React to AI Risks
Industry leaders have voiced concerns about AI privacy risks, calling for enhanced security measures and governance frameworks.
- Sarah Sloan (Palo Alto Networks): Advocates for strengthening cyber resilience and risk mitigation strategies for AI deployments.
- Satnam Narang (Tenable): Highlights the challenge of blocking AI tools that can be run locally, reinforcing the need for proactive security approaches.
- Legal and Regulatory Experts: Stress the importance of adapting compliance strategies as AI governance laws evolve.
AI Compliance and Security: DeepSeek and Global Standards
Our Whitepaper on using DeepSeek and the global ramifications of this open-source AI provides a deep dive into the growing concerns around AI security and compliance. This essential guide explores the risks associated with DeepSeek, government responses, and actionable strategies for businesses to safeguard their AI operations.
In this whitepaper, you’ll learn:
- How DeepSeek’s AI models challenge data sovereignty and compliance laws
- The regulatory risks Australian businesses face with AI tools
- Best practices for secure AI deployment under the latest government guidelines
- Proven strategies to protect your business from AI-driven threats using case studies and expert insights
Conclusion
The recent bans worldwide on DeepSeek highlight the urgent need for technology executives and IT decision-makers in Australian businesses to prioritise AI security and compliance. Rather than focusing solely on restrictions, Australian organisations should implement comprehensive security measures aligned with national and international standards. By taking proactive steps to secure AI environments, businesses can mitigate risks, maintain regulatory compliance, and foster trust in AI-driven operations.
Netier Can Help Safeguard Your AI Security and Compliance
As your trusted technology partner, Netier helps businesses navigate AI security challenges by implementing compliance frameworks, conducting security audits, and aligning AI strategies with industry standards. Want the full breakdown of AI security risks and compliance strategies? Our latest whitepaper dives deep into DeepSeek’s rise, the Australian Government’s response, and what businesses must do to protect themselves.
