The Home Office is to suspend its three-year contract with PA Consulting following the loss of a memory stick containing data on 84,000 criminals.
PA Consulting was contracted by The Home Office last year to track prolific offenders through the criminal justice system.
The JTrack programme (PDF) is aimed at providing law enforcement agencies with tools to compare offenders' data.
PA Consulting provided application support and trained users on the system.
"The transfer of data on this assignment to the external contractor has been suspended," said a Home Office spokesperson.
"It was downloaded onto a memory stick for processing purposes which has since been lost."
The data, relating to all prisoners in England and Wales, was not encrypted and contained names, birth dates, prison release dates and home detention curfew dates.
PA Consulting refused to comment on the data loss or the suspended contract even though it is also the body helping the government to implement its National ID Card scheme.
Security experts have argued that PA Consulting clearly lacks adequate security processes.
Matthew Brown, director of product management at security firm Workshare, said: "We can protect and manage that information as it flows inside and outside of an organisation so that risks are stopped before they have a chance to happen."
Greg Day, security analyst at software provider McAfee, added: "Had the data on the memory stick been encrypted, its loss would have posed no risk.
"As a result of insufficient security procedures, this information could provide valuable information to those who may misuse it."
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