Is your business worried about data security? Are you asking, “How does GLBA affect businesses?” Well, you’re in the right place.
The GLBA applies to any business that processes, stores or transmits information about consumers if they provide products or services related to banking, insurance, or securities.
In this guide, we will explain what the Gramm-Leach-Bliley Act (GLBA) requires and provide tips on how to comply with its regulations.
Keep reading to discover more about GLBA compliance.
Gramm-Leach-Bliley Act: What Is It?
The Gramm-Leach-Bliley Act (GLBA) is a federal law that was enacted in 1999.
The law’s primary purpose is to protect the personal financial information of consumers. It is regulating the way financial institutions collect, use, and disclose this information.
Under the GLBA, financial institutions must take steps to ensure the security of their customers’ personal data. They must also provide customers with a notice that explains their right to opt out. Consumers can choose to not have their personal information shared with third parties.
The Three Parts of GLBA
The Act has three components: Financial Privacy Rule (FPR), Safeguards Rules (SR), and Pretexting Prohibition (PP).
The FPR requires financial institutions to provide customers with a notice that explains their right to opt out. Their personal information with third parties can be limited from sharing.
The SR requires financial institutions to take steps to ensure the security of their customers’ personal data.
The PP act prohibits companies from using false pretenses. They cannot use them to obtain customer information from financial institutions.
In order to comply with the GLBA, financial institutions must develop and implement written policies. The procedures address the following areas:
- Data security
- Information sharing
- Customer choice/opt-out
One of the most important requirements of the GLBA is that financial institutions must take steps to protect personal data. They must protect their customers from unauthorized access or disclosure.
To do this, businesses must have physical, technical, and administrative safeguards in place. They must be appropriate to the sensitivity of the information they are handling.
Some examples of data security measures that may be required under the GLBA include the following:
- A firewall is a barrier that is designed to prevent unauthorized access to a computer network
- Encryption is a process that scrambles data so that it can only be decoded by someone with the correct key
- Access control measures ensure that only authorized individuals have access to sensitive information
- Physical security measures protect information from being physically accessed by unauthorized individuals
Another key requirement of the GLBA is that financial institutions must provide customers with a notice. It must explain their right to opt out of having their personal information shared with third parties.
This notice must be clear and conspicuous. It must be provided before any information is actually shared.
The opt-out notice must explain how customers can exercise their right to opt out. It must also provide a reasonable amount of time for them to do so.
Customers must also be given the opportunity to opt out of having their personal information shared. It cannot be transferred to affiliates of the financial institution.
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Let’s take a look at how to comply with the Gramm-Leach-Bliley Act.
Step 1: Understand the Act and How It Applies to Your Business
The first step in compliance is understanding the law and how it applies to your business.
The GLBA applies to any business that processes, stores or transmits information about consumers. It applies if they are related to providing the products or services related to banking, insurance, or securities. This includes companies such as banks, credit unions, mortgage lenders, and investment firms.
If you are not sure whether your business is covered by the GLBA, you can contact the Federal Trade Commission (FTC) for more information.
Step 2: Perform a Risk Assessment
The second step is to perform a risk assessment. This will help you identify the specific areas of your business that are covered by the GLBA and what steps you need to take to comply with the law.
When performing a risk assessment, you should consider the following questions:
- What type of information does your business collect?
- How is this information used?
- Who has access to this information?
- How is this information stored?
- What are the potential risks if this information were to fall into the wrong hands?
These are just some examples of a risk assessment. Of course, you can choose to use any type of assessment model or ask different questions. The list is not meant to be exhaustive.
Step 3: Mitigate Risks With Effective Controls
Once you have identified the risks associated with your business, you need to put in place effective controls to mitigate these risks.
The specific controls that you will need will vary depending on the nature of your business and the type of information you are handling.
However, all businesses should have physical, technical, and administrative safeguards in place that are appropriate to the sensitivity of the information they are handling.
The previously mentioned security measures are adequate for effective controls.
Step 4: Secure Yourself From Internal Threats
In addition to external threats, you also need to be aware of the potential for internal threats.
Employees, contractors, and other insiders can pose a serious security risk. This is true if they are not properly supervised or if they have access to sensitive information that they should not have.
To protect yourself from internal threats, you should consider implementing the following measures:
All employees should be trained on the importance of data security. They should know the specific measures that your business has in place to protect customer information.
You should monitor employee access to sensitive information and take steps to limit access to only those who need it.
If you are hiring new employees, you should consider doing background checks. This is to ensure they are trustworthy and will not pose a security risk.
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Step 5: Ensure Service Providers Are Compliant
If you use service providers to help you with your business, you need to make sure that they are in compliance with the GLBA. This includes companies such as data storage providers, cloud computing services, and payment processors.
You should carefully vet all service providers before doing business with them. Make sure to ask about their data security measures and what steps they take to protect customer information.
In addition, you should have a written contract in place that requires the service provider to comply with the GLBA. This contract should specify what measures the service provider is required to take and what will happen if they fail to meet these requirements.
Step 6: Follow All Privacy-Rule Requirements
In addition to the security measures required by the GLBA, you also need to follow all of the requirements of the Privacy Rule. This rule requires businesses to give customers notice. It explains their privacy rights and how their information will be used.
Customers must be given this notice when they first become customers and on an annual basis thereafter. The notice must be clear and conspicuous, and it must be written in plain language.
You can find more information about the Privacy Rule on the FTC website.
Step 7: Update Your BCP & DR Planning
You need to make sure that your business continuity planning (BCP) and disaster recovery (DR) planning are up to date. These plans should address how you will protect customer information. Specifically in the event of a natural disaster, power outage, or another emergency.
Your BCP and DR plans should be reviewed and updated on a regular basis to ensure that they are still effective.
Step 8: Create a Security Plan for Information In Written Form
In order to comply with the GLBA, you must also have a plan in place for protecting customer information that is stored in written form. This includes paper records as well as electronic files that are stored on your computer.
Your security plan should include security measures, such as locked filing cabinets and encryption of electronic files. You should put in place a document destruction policy to ensure information is not left exposed.
This is usually already commonplace within any business. However, it’s often overlooked by new businesses. Many simply forget that they need to dispose of sensitive customer information at a certain time period passing.
Step 9: Perform Annual Reports to the Board
You are required to perform an annual report to the board of directors or other governing body. This report must include a review of your compliance with the GLBA and any recommendations for improvements.
The report should also include a summary of your data security measures and how they are working. You should discuss any incidents that have occurred. Also, discuss steps you have taken to prevent them from happening again in the future.
Step 10: Improve, Review, Revise
It is important to continually review your compliance with the GLBA and make improvements as needed. You should also revise your security measures on a regular basis to ensure that they are effective. The onus is on you and your team to pursue compliance, it’s not up to any other party.
The best way to stay in compliance with the GLBA is to have a team of people who are responsible for monitoring your compliance and making sure that all required steps are being taken. This team should meet on a regular basis to discuss any changes that need to be made.
You don’t necessarily have to hire a specific team for the job. You can certainly train your best performers vigorously and give them the freedom to operate with their new capacities. This is often a better thing to do because you have already established a working rapport with your staff.
Common Mistakes Made With GLBA Compliance
One of the most common mistakes made with GLBA compliance is failing to properly vet service providers.
Make sure that you ask about a service provider’s data security measures and what steps they take to protect customer information. In addition, you should have a written contract in place that requires the service provider to comply with the GLBA.
Another common mistake is not following all of the requirements of the Privacy Rule. This rule requires businesses to give customers a notice that explains their privacy rights and how their information will be used. Customers must be given this notice when they first become customers and on an annual basis thereafter.
There are also mistakes of not having proper security measures in place for information stored in written form.
Failing to perform an annual report to the board of directors or other governing body is another mistake businesses make. This report must include a review of your compliance with the GLBA and any recommendations for improvements.
The best way to avoid these mistakes is to educate yourself about the GLBA and learn what steps you need to take to comply with it.
Your Business In Compliance
Now that you know everything important about Gramm-Leach-Bliley Act compliance, you are well on your way to ensuring data security within your business.
Remember that your compliance team should meet on a regular basis to discuss any changes that need to be made. By taking these steps, you can help protect your customers’ information and keep your business in compliance with the law.
If you’re interested in a mobile-compliant service for your business, get in touch with us now to learn how we can help you.