Every financial institution of any size must adhere to local laws and regulations. These safeguards are put in place to protect against illegal activity and enforce a responsible mindset for financial professionals. After all, these institutions deal with money, so they need a strict and comprehensive security policy to ensure nothing happens to the hard-earned profits.
One such set of rules is the Gramm-Leach-Bliley Act (GLBA), which came into being in 1999. Although following GLBA law requires the input of experts, there’s importance in understanding what it means and how to set your business on the path to compliance.
What is GLBA?
The Gramm-Leach-Bliley Act is an act of the United States government that not only reformed the financial professional industry but also clarified the rules of consumer financial privacy practices. Banks, lenders, and debt collectors have access to the financial records of every customer, and the GLBA law ensures that data doesn’t become publicly available. Financial institutions must be transparent about their information-sharing practices and offer clients the option to “opt out”.
These restrictions are in place to protect consumers from threats to their financial well-being. Stolen data could lead to serious crimes like fraud and identity theft. Consumer trust would disintegrate, and the financial institution responsible could face fines of up to $100,000 per violation and even jail time for the individuals responsible.
What is Non-Public Information?
Non-Public Personal Information (NPI) refers to the information collected by financial institutions that should not be made publicly available. Any information a customer gives to a financial institution is confidential, from applications to transactions. The only exceptions are when said information is lawfully available to the public or if the customer directly consents to disclose certain information.
Examples of publicly available information include federal agencies, state, and local government records like mortgages or information publicly available online with the customer’s consent. The safest path for any financial institution is to assume all information given is NPI. Even telephone numbers may be unlisted, or names and addresses hidden by law to avoid unauthorized access.
Moreover, the Federal Trade Commission (FTC) Safeguards Rule, which is part of the GLBA, mandates that financial institutions develop, implement, and maintain a comprehensive information security program to protect customer information. This rule requires institutions to assess risks to customer information and ensure appropriate safeguards are in place to protect this data. Compliance with the FTC Safeguards Rule is crucial to preventing unauthorized access and ensuring the confidentiality and security of NPI.
What are the Basic Requirements?
With a deeper understanding of GLBA, it’s time to delve into what financial services institutions must do to ensure GLBA compliance. It’s important to note the article simplified these requirements for education purposes. Although all the information to be shared is accurate, a thorough reading of the GLBA’s requirements is needed to ensure total compliance. Always consult a financial lawyer or security expert when applying these GLBA compliance requirements and practices into effect.
Give Customers a Clear Privacy Requirement Notice
Institutions must provide a clear and conspicuous privacy policy notice to their customers. This notice should explain what information is collected, its usage, and who receives the customer’s information. It should also outline the customer’s rights regarding their personal information.
Ensure Customers Know Their Right to “Opt-Out”
From the first transaction, financial institutions must inform customers of their right to opt out of having their nonpublic personal information shared with nonaffiliated third parties. Institutions must provide a simple and accessible process for customers to exercise this right.
Establish a Comprehensive Information Security Program
Financial institutions must be able to protect themselves against security breaches. The financial institution must hire a qualified professional to create a robust information security program to protect customer data from threats and vulnerabilities. Integrate safeguards against threats on administrative, technical, and physical safeguards levels into the security program’s policies.
Conduct Regular Risk Assessments and Security Tests
While there are many threats to financial data, fraud is one of the most common issues because of security oversights. Fraud prevention for financial institutions requires a proactive security measure, and that’s exactly what risk management assessments are for. Periodic risk assessments are essential to identify potential vulnerabilities in the institution’s information systems before they become liabilities. In addition, regular security tests of the safeguards made in response to potential risks found during the assessment ensure their effectiveness.
Train Staff on Proper Data Security Practices
Train every employee on the importance of data security and the specific practices they must follow to protect customer information. Implement data security practices directly into workplace policy to ensure compliance. Hold seminars informing staff of the importance of data security. Remember, even the strongest doors can be left unlocked by a single individual.
Regularly Monitor Third-Party Partners
Financial institutions must ensure third-party service providers also comply with GLBA requirements. Regular monitoring and due diligence are necessary to verify that third parties have adequate security measures. Even if the third party bears fault for a potential breach, the blame will still fall on the institution for trusting the provider with sensitive data.
Here are some tips for maintaining proper vendor management.
Keep Security Programs Updated
Review Information security programs and update them regularly to address new threats against data security. Hackers and other malicious actors always find ways to bypass security programs. It is the financial institution’s responsibility to stay updated against security threats.
Create a Recovery Plan
Developing a recovery plan is crucial for responding to a security breach. This plan should outline the steps to contain and mitigate the impact of a breach and recover any compromised information. Remember, even tech giants like Sony and Microsoft have fallen victim to security breaches, so always have a plan for the worst-case scenario.
Submit Annual Reports to the Board of Directors
Finally, the person responsible for the security program must send annual reports to the board of directors. In addition to ensuring compliance, the data within could provide insights for more effective data protection. The Board of Directors has the power, and thus, the responsibility, to implement massive changes to an institution’s policies.
Need a Partner to Help You?
Partnering with a Managed Security Service Provider (MSSP) like Nerds Support can greatly simplify the complexities of maintaining GLBA compliance for financial and accounting firms. They can offer expert guidance and support measures such as:
- Conducting thorough risk assessments to identify vulnerabilities in your information systems, ensuring tailored security measures are in place.
- Implementing comprehensive security programs encompassing administrative, technical, and physical safeguards to protect customer data from unauthorized access and breaches.
- Continuous 24/7 monitoring and real-time incident response services ensure any suspicious activity is quickly identified and mitigated, reducing the risk of data breaches and non-compliance.
- Extensive staff training and awareness programs to foster a security-conscious culture, ensuring all employees understand their roles in protecting sensitive information.
- Managing and monitoring third-party vendors to ensure they comply with GLBA requirements, mitigating risks associated with third-party data handling.
- Regular security audits and updates keep your security measures current and effective against evolving threats.
Additionally, an MSSP like Nerds Support helps develop and implement incident response and recovery plans tailored to your firm’s needs, ensuring swift recovery and minimal operational disruption in the event of a breach. By leveraging the expertise and resources of an MSSP like Nerds Support, your firm can achieve and maintain GLBA compliance, protect client information, and safeguard your reputation.
Are You Ready for GLBA Compliance?
Ensuring GLBA compliance is crucial for every financial institution, including accounting and tax firms. The Gramm-Leach-Bliley Act mandates stringent privacy and data protection measures to secure consumer financial information. Financial institutions must provide clear privacy notices, offer opt-out options for data sharing, and implement robust information security programs.
Regular risk assessments, staff training, and third-party monitoring are essential to identify and mitigate vulnerabilities. Institutions must keep security programs updated to counter new threats and establish a recovery plan to address data breaches. Annual reports to the board of directors ensure ongoing compliance and improvement. Proper GLBA compliance not only protects sensitive information but also enhances the institution’s reputation and operational integrity.
Ready for the next steps? You can partner with an MSSP like Nerds Support can provide the necessary expertise and resources. Contact Nerds Support for a free consultation and see if your security measures are up to industry standards.
