Did you know FTC non-compliance fines can cost millions of dollars depending on the size of your business? Keep reading to learn how to stay compliant with new Safeguard security regulations in the financial industry.
What Is the SafeGuards Security Rule?
The Standards for Safeguarding Customer Information, or SafeGuards Rule, took effect in 2003 and ensures covered institutions maintain processes that protect sensitive customer information.
The 2021 Amendments
Last year, the FTC amended the SafeGuards Rule to align its standards with new technology and forms of payment. With the increase in popularity of Venmo, PayPal, chip readers, card readers attached to mobile devices, and other modern payment tools, it was time to update the Rule to reflect new trends and changes.
How Does This Affect Financial Corporations and Businesses?
The Federal Trades Commission (FTC) decided to strengthen the Safeguard security rules for financial institutions after major data breaches spread across the industry. The updated FTC regulations affect the following business types:
- Finance companies
- Mortgage businesses and brokers
- Motor vehicle dealers
- Small-dollar and payday lenders
- Account servicers
- Check cashers
- Wire transferers
- Credit counselors and financial advisors
- Tax firms
- Credit unions
- Investment advisors
- Debt collection agencies
If your organization falls under any of the above categories, keep reading to learn more about:
- New financial Safeguard regulations and how they relate to your company
- How to stay compliant with Safeguard rules
- Fines associated with Safeguard non-compliance
What Are the Safeguard Security Updates for Financial Businesses?
The FTC updated Safeguard security measures for financial institutions because these businesses collect and store sensitive customer information, such as credit card numbers, SSNs, and financial records.
“The updates adopted by the Commission to the Safeguards Rule detail common-sense steps that these institutions must implement to protect consumer data from cyberattacks and other threats,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.
The new FTC regulations for financial industries include:
- Limiting who can access consumer information
- Encrypting data to increase security
- Detailing data sharing practices, specifically administrative, technical, and physical safeguards to access, collect, send, process, protect, store, use, transmit, and handle customer data
- Designating a single qualified person to oversee information security processes
- Periodically reporting processes to a company’s board of directors
- Informing clients about an institution’s information sharing practices
- Allowing customers to opt out of having their information shared with specific third parties
- Developing, implementing, and maintaining a robust security system to keep customers’ information secure from unauthorized parties
All organizations in the financial industry must be compliant with the new Safeguard security measures by December 9, 2022. If your business is non-compliant, you will receive significant fines that depend on your company’s size.
Staying Compliant With FTC Regulations
You must comply with FTC regulations to avoid expensive penalties. Your organization can stay compliant through the following actions:
- Designate a qualified individual to implement and oversee your organization’s security processes
- Conduct a risk assessment of your organization’s network
- Based on the results of your risk assessment, implement new security measures
- Install and regularly review your access control systems
- Encrypt customer data while you’re storing and transferring it
- Evaluate the security of your applications
- Implement multi-factor authentication (MFA) for accessing customer information
- Securely dispose of customer data
- Regularly monitor and assess the effectiveness of your security measures
- Provide security training for your employees
- Stay up to date with new security technologies
- Develop a robust incident recovery and response plan
- Require your qualified individual to report to a board of directors
Financial Safeguard Non-Compliance Fines and Penalties
If your financial organization fails to meet these requirements and implement these processes, you’ll receive a fine. This fine depends on the size of your business. For example, when Twitter was non-compliant with safeguards, they received a fine of $150 million, which is typical for a large corporation. If you run a small business, violations can be anywhere from $1,000 to a few million dollars.
Stay Compliant With Safeguard Security Rules by Partnering With an MSP
An outsourced MSP like Virtual-Q helps you stay compliant with FTC regulations, protect your customer data, and avoid fines and penalties. Our expert team implements the proper cybersecurity measures, provides employee training, and performs risk assessments.
Partner with us today to ensure your financial organization is compliant with financial safeguards.
