Why is being compliant with data protection laws necessary?

Data is a valuable asset, and in today’s digital economy, gathering and sharing data has become inevitable. And with cloud-based solutions becoming the preferred model for data storage, the need to secure data has only amplified. However, for a company to benefit from the data it collects, it must ensure that it is fully secured and not subject to unwanted surveillance.

As corporations amass more significant amounts of data on their consumers, those customers have begun to recognize the potential drawbacks of this data collection. As a result, data protection and privacy are more important than ever before, and businesses should pay close attention to their data protection regulations and privacy policies and processes for various reasons.

Before complying with the data security regulations, one must understand what kind of data they own and which compliance to choose. For example, businesses pertaining to the healthcare industry must choose the compliance policy accordingly and follow the industry best practices to comply with them.

Governments and professional organizations are developing regulatory guidelines worldwide to avoid data breaches and exploitation of consumer data. HIPAA, GDPR, CCPA, and SOC 2 are currently some of the most important rules and regulations.

Compliance Policies and Procedures

Businesses need robust data protection policies and laws that prevent ransomware assaults at the enterprise level, supply chain hacks, and crypto-jacking cloud-server databases. But unfortunately, data breaches are getting sophisticated with dynamic, detection-evasive exploits. At least once a week, new tales regarding data breaches appear. For example, Marriott revealed in March 2020 that a data breach had exposed the personal information of 5.2 million users. At least eight million credit card numbers and five million unencrypted passport numbers were among the data.

Learning the compliance standards and principles related to the industry will reduce the risk profile for businesses.

HIPAA

HIPAA or Health Insurance Portability and Accountability Act is a data protection USA policy. It has various privacy and security requirements to safeguard medical patients’ personal information. Businesses or Companies associated with the healthcare industry, such as healthcare providers, insurance companies, or vendors, must follow physical, administrative, and technical measures to protect data.

  1. Administrative Protections: Vetting security personnel, controlling the amounts of access employees have to patient data, and conducting periodic evaluations that can identify privacy concerns are all examples of administrative measures.
  2. Physical Protections: Physical precautions require healthcare companies to restrict physical access to patient data. Healthcare organizations also need to develop and implement desktop and mobile device policies. For example, a corporation might define geographic limits to prevent mobile devices from accessing records outside of the facility.
  3. Technical Protections: While HIPAA mandates that healthcare institutions to not divulge Protected Health Information (PHI) without a patient’s agreement, complying with the rules necessitates far more than merely refusing to share PHI. It also implies that businesses require technological precautions that make stealing PHI extremely difficult.

End-to-end encryption hides data as it travels from a database to its final destination. With field-level encryption, several top data protection services meet these criteria. Data is encrypted at the field level before entering the pipeline using field-level encryption. The information isn’t encrypted until it reaches its desired target, like another healthcare service’s database or an analytics platform that helps medical researchers identify health trends can lead to better diagnostics and health outcomes. This type of compliance is used in western countries where the country’s government ultimately governs the healthcare system. Each data is highly confidential and protected.

Any healthcare organization can comply with HIPAA guidelines by implementing these data protection and security policies and programs. In addition, the data is so highly encrypted at the field level that not even the administrators can see it as it goes from one place to another.

SOC 2

The American Institute of CPAs (AICPA) established SOC 2, the data protection law in the US, to protect individuals’ data who engage CPAs and other accountants. The standard also applies to financial institutions’ data centers, analytics providers, SaaS providers, and document creators.

Compliance with SOC 2 entails:

  1. Unauthorized personnel won’t have access to information due to security measures.
  2. Between service providers and clients, there is a level of trust.
  3. Organizations’ data collection, retention, use, disclosure, and disposal are all covered by privacy criteria.
  4. A section on security must be included in every SOC 2 report. The remaining characteristics are suggested but not essential.

Many of the best data protection solutions follow SOC 2 standards, which allow financial institutions and CPAs to transport, modify, and load data without revealing personal information to other parties.

PCI-DSS and GDPR

With the increase in contactless transactions and digitalization, the Payment Card Industry Data Security Standards (PCI-DSS) has brought in enhanced safeguards to protect sensitive Personal Identifiable Information (PII) such as credit card and debit card pins. However, PCI-DSS is not maintained by any government like HIPAA. Instead, PCI-DSS is managed by the PCI-DSS council itself established in 2006.

The main objective is to protect the cardholders’ data and build a secure transaction network. There are various levels of PCI-DSS compliances and two validation processes for any merchant to go through for adapting PCI-DSS.

  • Quarterly Vulnerability Scan
  • Annual Assessment

SISA offers all of the compliance services under PCI-DSS compliance and helps the organization maintain the compliance policy and procedures. The PCI compliance journey with SISA has four stages such as:

  • Pre-assessment and Post-assessment
  • Remediation Phase
  • Onsite Audit and
  • PCI DSS Certification

GDPR or General Data Protection Regulation of the European Union, implemented in 2016, is similar to PCI-DSS is many ways but broader in scope. Therefore, any organization that collects customer data should consent to manage them. If the collected data is used for any other purpose than mentioned, that will be considered non-compliance.

The individuals whose collected data are subjected to know why it’s being collected and how it’s processed and where it is used. They have all the right to object and correct the data at any point.

The GDPR strives to provide EU citizens more control over their data, although slightly different than the CCPA. The following are some of the GDPR’s important points:

  1. After data breaches, users are required to get mandatory notifications.
  2. Companies that utilize personal data to profile or track customers must hire a data protection officer (DPO) responsible for strengthening data security.
  3. Keeping meticulous records of the data collection process
  4. Allowing customers to agree/ disagree with user contracts is a good idea.

Situations that may lead to Compromising Compliances

  1. Shadow IT: The use and expansion of shadow IT (technologies operating within the enterprise outside the IT management’s purview) is the most common condition in this regard. A failure to record or impose compliance processes, and a lack of visibility into managing, collecting, and storing data are the most common conditions that can jeopardize a compliance program.
  2. Change: Even the most stringent compliance processes will have loopholes, especially as compliance is a dynamic, ever-evolving undertaking. Laws change, technology advances, and the threat environment shifts, necessitating process adjustments. Security policies, awareness and training initiatives, technical maintenance, and frequent system and reaction testing are all required for data management. It’s not possible to “set it and forget it.”
  3. Non-compliance: The immediate and indirect result of non-compliance can be harsh.

Significant Risks of not being Compliant with Data Protection laws

Every year, non-compliance with regulatory standards costs billions of dollars to businesses worldwide. As data laws and regulations get more stringent, organizations must ensure compliance. The losses are not confined to penalties and fines. Non-compliant firms face significant security risks, lost productivity, damaged reputation, and other issues.

Non-compliance is predicted to be more than three times more expensive than compliance. Therefore, non-compliance occurrence might cost a lot to organizations. Consequently, it is imperative to take non-compliance seriously and take the necessary steps. Here’s a rundown of the penalties you’re likely to face if you don’t follow the rules.

Legal Consequences

To limit security breaches, businesses are obligated by law to follow privacy and data protection compliance standards. Any failure will result in the following legal ramifications.

  1. Penalties and fines: Non-compliance with privacy rules can result in penalties and corrections from the regulatory agencies that oversee them. The severity of non-compliance and the regulatory authority in charge of the matter may influence the imposed fines. GDPR fines, for example, can cost a firm up to 4% of its revenue.
  2. Lawsuits: When a data breach occurs due to non-compliance, the consequences go beyond fines and penalties. Customers, vendors, employees, and other stakeholders are all affected by a data leak. There’s a good likelihood that these individuals will decide to pursue legal action and file a lawsuit.
  3. Governmental Audits: Any severe breach of consumer data could result in the Federal Trade Commission (FTC) acting on behalf of American consumers pursuing legal action. Suppose the corporation is determined to be out of compliance and irresponsible. In that case, the FTC may impose a punishment and costly annual compliance examinations for years following the negligent action.
  4. Regulatory scrutiny: It’s not easy to recover from a security breach that occurred due to non-compliance. After paying fines and penalties, many businesses are subjected to expensive regulatory audits for several years.
  5. Imprisonment: Organizations are required by regulatory standards to take the appropriate precautions to protect their customers’ data. In the most extreme examples of non-compliance, a company’s directors, owners, and executives may be prosecuted for criminal negligence.

Business Consequences

Sometimes, business ramifications of non-compliance may not have direct monetary costs, but the damage might be extensive. The following are some of the most prominent business consequences:

  1. Disruption of business: Non-compliance can significantly negatively impact a business as a result of its cascading effect. Customers and Clients will lose trust in a company that cannot protect their personal information and will likely defect to the competition. Furthermore, the costs of fines, lawsuits, and other legal expenses will hurt an organization’s capacity to make required commercial expenditures.
  2. Loss of Revenue: Non-compliance can cause firms to cease operations, resulting in a loss of revenue temporarily. Such loss can be disastrous for a company because the costs of running a corporation while it is inactive might be enormous. This is why most businesses never fully recover from a massive data breach.
  3. Compensation and Remediation Costs: Forensic investigations to discover the source and origin of the breach, close the exploited gaps, and handle any residual risk to consumers and others are among the many costs connected with a security failure. After all, free credit monitoring services must be paid for.
  4. Security Breaches: Non-compliance may result in security breaches, resulting in the loss of sensitive corporate data. Selling this data is a common way for cybercriminals to generate money. Businesses cannot afford this while also dealing with other problems of non-compliance.
  5. Damaged brand reputation: If the public learns of non-compliance concerns or security breach instances, the organization’s reputation could suffer long-term damage. Customers will lose faith in the firm, and it may be a long time before the company’s reputation is restored to its previous splendor.

Non-compliance also increases the risk of data breaches, which can damage a brand’s reputation. In addition, stock prices drop, and customers depart when data breaches occur. According to some studies, a successful cyberattack can cost up to 25% of its market share. Customers are hesitant to do business with the organization because they are concerned about identity theft. It’s much worse if they believe an enterprise  placed their information at risk on purpose.

Here are the individual effects of non-compliance to the most prominent data protection acts specified above.

HIPAA

The Office of Civil Rights (OCR) and the US Department of Health and Human Services handle civil infractions under HIPAA. HIPAA also sets a framework for sanctioning criminal behavior; however, the Department of Justice is in charge of enforcing those sanctions.

Penalties for Civil Violations

OCR will usually provide you the option to adapt your system to their criteria to comply with HIPAA. However, civil penalties may be imposed on organizations that do not resolve their issues.

  1. Unintentionally breaking HIPAA laws might result in fines ranging from $100 to $50,000 per infraction. Repeat offenses bring a maximum penalty of $25,000 per year.
  2. Reasonable non-compliance that is not the result of willful neglect is punishable by a fine ranging from $1,000 to $50,000 per violation. The maximum penalty for repeat offenses is $100,000 per year.
  3. After the infraction is resolved, the fine for willful disregard ranges from $10,000 to $50,000, with a maximum yearly fine of $250,000 for repeat offenses.
  4. Willful negligence (where violations are not addressed) is punishable by $50,000 for each offense, with maximum annual penalties of $1.5 million.
  5. In 2021, Fresenius was fined $3.5 million by the OCR for five incidents when it didn’t comply with the HIPAA standards.

Penalties for Criminal Violations

Financial penalties and jail may be imposed for violations of HIPAA regulations. In addition, if you infringe HIPAA guidelines on purpose, you might face fines of up to $50,000 and a year in prison.

Violations of HIPAA regulations can result in fines of up to $50,000 and a year in prison. In addition, pretenses violations, such as lying to patients about privacy protection, can result in fines of up to $100,000 and up to five years in jail.

Violating HIPAA laws with an intent to profit will end in the worst punishment, that is, a penalty of $250,000 and ten years of imprisonment.

SOC 2

While there are no official consequences for failing to comply with SOC 2 requirements, a SOC 2 audit might expose risks that CPAs, financial institutions, and vendors must resolve. In addition, if an audit reveals a vulnerability, you’re more likely to have data breaches, which can damage your brand.

Compliance with SOC 2 can also help you avoid data breaches, resulting in settlements, lawsuits, and legal fines. For example, data breaches at Yahoo! Inc. cost the business $117 million in a class-action lawsuit between 2012 and 2016.

PCI-DSS

SISA has provided the compliance policy and maintained and adhered to it with over 2000 customers in 40 plus countries.

Any non-compliance in PCI-DSS can result in fines to the acquiring bank ranging from $5000 – 100,000 per month.

If any data breach from the bank or merchant becomes available to the public, indirect costs will also be added to the bank. In such cases, banks can even lose the right to accept cards anymore.

GDPR

The GDPR contains two levels of penalties. First, the penalty amount is determined by how you violate GDPR.

The first tier will set you back €10 million, or 2% of your company’s yearly global turnover (whichever is higher). This penalty is imposed on businesses that do not:

  1. Ensure that the conditions for children’s consent are met.
  2. Process data without first authenticating the identities of the users.
  3. Have all of the necessary certifications
  4. Meet the general obligations that data processors and controllers are expected to meet.

The second tier will set you back €20 million, or 4% of your yearly global turnover (whichever is higher). Companies who do not comply with the following are subject to a more significant penalty:

  1. Adhere to generally established data processing guidelines.
  2. Process data for nefarious purposes
  3. Do not abide by the consent terms.
  4. Recognize that people have the right to govern their data.
  5. Data transfer to other countries

GDPR, like the CCPA, allows citizens to sue you for damages.

The way to compliance

Developing appropriate policies to control data and other security measures is usually the first step in ensuring compliance. Businesses can reduce the dangers to their IT infrastructure by applying these policies.

Moreover, compliance should be an ongoing process. An organization must continually assess the regulatory requirements that govern its operations and close any gaps in compliance.

They can avoid fines and penalties by demonstrating a solid commitment to compliance, as well as improving your organization’s overall security posture.

How to Comply with Regulations in Your Industry?

Choosing a top data protection service provider will help enterprises understand –

  • What is data protection?
  • Why is data protection important? and
  • What data protection act to choose.

Opt for a data protection solution that offers –

  1. SSL/TLS encryption for all web pages and microservices
  2. Encryption at the field level to safeguard data as it travels through pipelines
  3. Firewall for blocking Unauthorized access to apps, information, and networks
  4. Physical security by using Amazon data centers to host and manage physical infrastructure.

Depending on the industry and need, it is recommended to get compliant with:

  1. CCPA
  2. GDPR
  3. HIPAA
  4. SOC 2
  5. Good Practice Guide 13 (GPG13)
  6. Payment Credit Industry Data Security Standard (PCI-DSS)
  7. Federal Information Security Management Act of 2002 (FISMA)
  8. Sarbanes-Oxley Act (SOX)

In a Nutshell

In the past year, especially after the COVID pandemic, data security has become a top priority for businesses of all sizes. Today, personal data breaches happen on a routine basis. From major credit card companies to entertainment giants, every industry is vulnerable to attacks from hackers and other malicious parties.

More and more government organizations enforce harsher laws to protect their sensitive information. However, even in the absence of government or professional regulation, businesses must start considering data security as one of their topmost priorities and invest in data protection platforms to strengthen cyber defences.