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As the severity and frequency of data breaches increase, so do the regulations governing data privacy and security.
With the majority of data breaches affecting small businesses, it’s only a matter of time before you and your business are impacted. Don’t get caught unexpectedly and unprepared, instead take action to ensure compliance to mitigate your risk and liability.
Data privacy laws and regulations are designed to protect consumers’ data and sensitive information and data security regulations aim to protect the systems that store and manage data from unauthorized access or attacks.
Some of the primary regulations addressing data privacy and security include GDPR, CCPA & CPRA, HIPAA, SOX, SEC & FINRA, and the Shield Act
22 billion records were exposed in over 4,100 publicly disclosed data breaches in 2022
There are three main factors in determining what privacy regulations apply to your business.
Each of these factors can have an impact on what regulations apply to your business. For example, if you are a financial services firm operating in the United States, you may be subject to certain regulations and not others.
The General Data Protection Regulation (GDPR) is a set of European Union regulations implemented to protect consumers’ privacy and personal data in the E.U. Companies must now be more transparent about how they use an individual’s data, giving user the right to know what data is being collected, the “right to be forgotten,” and other more. Even though the intent is to safeguard consumers’ data privacy in the E.U., it also applies to companies outside that region that collect consumer data from individuals residing within the region.
The California Consumer Privacy Act (CCPA) and the California Privacy Rights Act (CPRA) are a set of privacy laws that provide California residents with certain rights over their personal data. The CCPA requires companies to provide consumers privacy notices and the right to opt out of certain data processing. The CPRA expands on the laws set out in the CCPA. Both apply to any company that does business in California and collects or processes the data of any California residents.
The Shield Act is a set of state laws to protect and secure the data of New York residents. The Act applies to companies that conduct business in N.Y. or collect data from N.Y. residents. It requires organizations to implement reasonable cybersecurity measures that include technical, administrative, and physical safeguards to protect nonpublic information. Other states have implemented or are planning to implement data privacy laws that businesses must comply with if they do business in those states or collect and process data from residents.
The Sarbanes-Oxley Act (SOX) is a federally-mandated law that requires publicly traded companies in the U.S. to establish financial reporting standards, including safeguarding data, tracking attempted breaches, logging electronic records for auditing, and proving compliance. It also requires companies to set up internal controls to help protect against fraud and data manipulation, including ensuring that any personal data collected for business purposes is secure.
The Securities and Exchange Commission (SEC) is a U.S. agency responsible for overseeing and regulating the securities markets and protecting investors. Among the many areas the agency oversees, the SEC enforces laws like the Sarbanes-Oxley Act as well as implements and enforces its own compliance standards for SEC-registered investment companies via the Division of Examinations.
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization in the U.S. that oversees broker-dealers and their activities, including ensuring the security of customer data. Broker-dealers are companies that engage in the business of trading securities for their account or on behalf of their customers. FINRA has outlined what it expects from firms to protect customers’ personal information and guard against cyber threats.
The Health Insurance Portability and Accountability Act (HIPAA) is a U.S. federal law designed to protect the privacy of patients’ protected health information (PHI). HIPAA requires healthcare providers, insurance companies, and companies that collect PHI to implement specific security standards and procedures for protecting such data from unauthorized access or use. The HIPAA Privacy and Security Rules are enforced by the Office for Civil Rights (OCR).
The regulations for data collection guide businesses on when and how they can collect information about consumers. These regulations may also require businesses to notify individuals if their data is being collected.
Businesses are required to follow specific actions in case of a data breach, which include informing relevant agencies and customers, keeping a record of details related to the breach, and implementing measures to prevent a similar breach from occurring again.
The regulations for data access provide instructions on how to manage internal access to information and determine the levels of access for consumers.
Data storage regulations define the requirements for securely storing data. The regulations vary in specificity and address aspects such as the duration of data retention and the security measures necessary for your storage system.
Businesses are required to provide training to employees in order to protect data. Typically, all employees must undergo ongoing training to comply with the regulations.
Data privacy and data security are closely related concepts, but there is an important distinction between the two.
Data privacy focuses on how data is collected, used, shared, and protected by organizations. It includes laws like the General Data Protection Regulation (GDPR) that protect personal information.
Data security is a set of strategies and measures that businesses use to protect their data from unauthorized access or misuse. It includes technologies like authentication and processes such as data backup and user access controls. The NY Shield Act addresses both data privacy and security.
In short, data privacy concerns the handling of data while data security details the methods used to safeguard it.
As data continues to be the primary currency of the digital environment, the risk of data breaches and other malicious activity grows. With the advent of new technologies, like generative AI, and as cybercriminals become more sophisticated, businesses can expect data privacy and security laws to strengthen.
Businesses need to regularly review and update their data policies and security measure or risk hefty consequences. Companies must ensure they have proper security in place to protect customer information — failure to do so could lead to costly losses that could impact their bottom line. The stakes are extremely high when it comes to data privacy and security–there is no room for complacency if you want to remain competitive in the future.
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