The fine "sends a clear signal that I consider this a significant issue, especially when you look at the scale and the impact of this kind of data breach", said Information Commissioner Elizabeth Denham.
"We have been working closely with the ICO in their investigation of Cambridge Analytica, just as we have with authorities in the United States and other countries", Facebook's chief privacy officer Erin Egan added in a statement reported by the Post.
Facebook will address the proposed penalty before the watchdog makes a final ruling.
Cambridge Analytica, which was hired by Donald Trump in 2016, has denied its work on the US president's successful election campaign made use of data. Had the breach occurred after May this year, Facebook may have faced a far greater fine under the new data protection law, a maximum of 4pc of global turnover or €20m (£18m), whichever was highest.
"Trust and confidence in the integrity of our democratic processes risk being disrupted because the average voter has little idea of what is going on behind the scenes", she said. The U.K.'s investigation found "evidence that copies of the data/parts of it also seem to have been shared with other parties and on other systems beyond", which "potentially brings into question the accuracy" of Cambridge Analytica's assertion that it wiped the data from its stores.
The UK's data protection watchdog said the social media giant has failed to ensure Cambridge Analytica had deleted users' data.
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Since its entanglement with Cambridge Analytica became public, Facebook has pledged to review all third-party apps on the platform while introducing new transparency measures, including an online repository of all political ads that run on the site.
The revelations that data belonging to as many as 87 million Facebook users and their friends may have been misused is a "game changer" in the world of data protection, Denham said.
Denham also called for the government to introduce a statutory code of practice for the use of personal data in political campaigns, adding that "this can not be at the expense of transparency, fairness and compliance with the law".
The report also initiates the prosecution of SCL Elections Ltd, which is Cambridge Analytica's parent company, "for failing to properly deal with the ICO's Enforcement Notice".
"This can not by left to a secret internal investigation at Facebook".
It said it would work with Slattery Lawyers to investigate whether the claim for compensation was possible.
A Russian Internet company with links to the Kremlin was among the firms Facebook gave an extension allowing them to collect data on unsuspecting users - even after the practice was supposedly stopped, CNN reported Tuesday.