What is GLBA compliance?
Gramm-Leach-Bliley Act (GLBA) is also regarded as the 1999 Financial Modernization Act. It’s a regulation that requires institutions in the United States to explain how they handle and offer protection to the information regarding their customers. To be GLBA compliant, institutions (financial companies) disclose to their clients how they handle their sensitive information, informing their clients the liberty to opt-out in case they want their information (customers’) never be shared with another party, and applying particular protection approaches to sensitive information of the clients against a properly constituted security plan that the organization has established. The main implications for information protection of GLBA are stated in the Safeguards Rule. In contrast, extra privacy and protection demands are issued by the Federal Trade Commission’s (FTC) Privacy of Consumer Financial Information Rule (Privacy Rule), which is constituted under GLBA to force the execution of the requirements of GLBA. FTC enforces GLBA, the federal banking agency, and different federal regulatory agencies together with state-owned insurance oversight authorities.
GLBA Compliance Benefits
GLBA compliance reduces risks of penalties, reputational destruction of financial institutions caused by irresponsible/unauthorized transfer, or loss of sensitive customer information (s). Also, numerous privacy and security advantages come with GLBA compliance due to the following demands:
- Personal data is protected from unauthorized access.
- Customers are notified when their private sensitive information is shared between their entrusted financial institution and a third party.
- The activity of the user is tracked, including the attempts to make access to secured records.
GLBA generally secures both the customer and their records and thus helps to create strong customer reliability and trust. Clients have the assurance that their sensitive data is securely and well-kept by the financial institution(s), leading to reputation boost, repeat businesses, and various advantages that come with an entrusted relationship.
Working principle
One requirement of GLBA is that financial institutions must consider the confidentiality and security of their customers’ non-personal information (NPI). Examples of NPIs include social security card numbers, credit and income records, bank account numbers, mobile phone numbers, email and physical addresses, and all confidential information affiliated with the customers received by the financial company. The Safeguard Rule requires that the financial agencies draft an information security plan that describes the programs protecting their clients’ data from compromise. The plan for information security is customized particularly to the size of the institution, sophistication, and operations of the organization. The requirements of the Safeguard Rule to the financial instructions are:
- Designating at least one expert employee for coordinating the company’s information security program.
- Identifying and assessing the risks to customer’s information in all the relevant areas of operation within the company and evaluating the efficacy of the present Safeguards required to control risks.
- Designing and implementing safeguard programs, conducting routine checkups and testing
- Choosing the best service provider to maintain the safeguards, ensuring that the contract mandates them to conduct regular maintenance, and always overseeing how they handle customer data.
- Evaluating and adjusting the program when necessary, like introducing changes in the business operations or the outcomes of security inspection and testing.
For financial institutions to achieve compliance with GLBA, as per the Safeguards Rule, they must pay close attention to their staff management and training, data systems, and security management in data security plans and execution.
GLBA penalties
Once/when an allegation of non-compliance to GLBA is established, the penalties can result in ramifications or change of business. Penalties associated with non-compliance to GLBA include:
- The financial institution can be fined up to $100,000 for every single violation committed.
- The person found to cause the violation can be fined up to a tune of $10,000 for every single violation committed.
- A person found guilty can be sentenced to up to 5 years imprisonment.
Best GLBA compliance practices
GLBA is mainly focused on the expansion and toughening of safeguards and restrictions of consumer data privacy. The main concern regarding GLBA and IT experts and, most important, financial institutions in securing and ensuring the confidentiality of customers’ private and financial data. The maintenance of GLBA compliance is vital for all financial institutions because any violation results in costly penalties and can destroy their operations and reputation. Nevertheless, by taking a right step-by-step process to protect NPI and be GLBA compliant, the organization will benefit from improved security and prevention of penalties and increased consumer trust and, thereby, loyalty.
Some of the best practices include:
- Involving the board: Most financial institutions, particularly banks, satisfy this requirement by having a clearly set board whose major topics revolve around offering security and protection to their customers. The board convenes briefings at different levels of formality.
- Assessing the risk: the tactics affiliated with the assessment of risk for the compliance of GLBA was formally murky but came to be illuminated in the following years with the guidance of the Information Technology Risk Management Program (IT-RMP). For sure, IR-RMP was responsible for eliminating ambiguity that often occurs when evaluating customer information risks.
- Management and control of risks: the main objective is to evaluate the ability of the bank to execute following the implementation of risk assessment of customer data. Particularly, the examiner is looking for the financial institution’s success in implementing the appropriate mitigation tactics.
- Overseeing service providers: for sure, the popularity of buying services and technology has completely changed the financial industry. Financial institutions are keen on establishing competence in management and oversight of vendors and recurring evaluation and certification procedures.
- Establish a proper method for adjusting the risk management program: Finally, the ability of a financial institution to change its management response to both external and internal changes is very critical. This involves modification brought by merging, acquisitions, technology modifications/upgrades, and outsourcing. Financial institutions have adopted a particular adjustment process at different levels of formality.
Conclusion
GLBA compliance is essential for the proper protection of customers’ information. With the current state of innovations and cyber-attacks, financial institutions must acquire the latest technology to stay updated and minimize information loss, damage, modification, or compromise risks.
