GLBA (Gramm-Leach-Bliley Act) or GLBA compliance ensures that financial institutions adhere to a set of federal guidelines established by the Gramm-Leach-Bliley Act (1999). The act protects customers’ nonpublic personal information (NPI) held by financial institutions.
To comply with GLBA, these financial institutions must:
- Safeguard customer records and information.
- Provide customers with notices of their information-sharing practices.
- Develop, implement, and maintain safeguards to protect customer information.
Depending on the severity of the situation, failing to comply with the GLBA as a financial institution can result in various consequences, from a poor reputation to vast fees and fines.
Securing and ensuring the confidentiality of customers’ private financial information is key to maintaining GLBA compliance. That’s why WinZip® Enterprise works to ensure even the most sensitive types of financial data remain safe.
History of the GLBA Act
The GLBA was introduced in the U.S. Senate on May 6th, 1999, by Senator Phil Gramm and co-sponsored by Senator Paul Sarbanes. It was quickly passed with overwhelming bipartisan support in both chambers of Congress and became law on November 12th, 1999, after being signed by President Bill Clinton.
The GLBA protects private customer details from banking institutions like banks, credit unions, and other authorities located within different states. It also applies to companies outside America registered under certain conditions outlined in this act.
Who does GLBA apply to?
The Gramm-Leach-Bliley Act (GLBA) is a regulation in the United States that applies to all financial institutions that collect, store, or use personal financial information from consumers. This includes banks, credit unions, mortgage lenders, investment firms, and insurance companies.
The GLBA also applies to these institutions’ service providers to store customer data.
How does GLBA compliance work?
To align with GLBA compliances, many organizations put a series of safeguards and policies in place. These safeguards include:
- Data security policies.
- Procedures to detect and prevent unauthorized access to customer data.
- Training programs for employees on security and privacy for customer data.
- Audit procedures for compliance with the applicable regulations.
- Incident response plans in case of a security breach/attack on customer records.
- Encryption methods for sensitive data (SSNs, dates of birth, credit card numbers).
- Risk assessments and regular reviews to ensure security measures remain in place.
For example, as per GLBA compliance regulations, companies must also perform annual audits that review portfolios. Moreover, they must provide detailed reports on customer-sensitive data to ensure they are meeting the standards for security.
Failure to comply with the GLBA can result in civil or criminal penalties, restrictions on activities, and possible revocation of licenses. In addition, severe violations can result in heavy fines, ranging from hundreds of thousands to millions of dollars, depending on the scope and duration of the infringement.
In general, failing to comply with GLBA regulations puts businesses at risk for serious legal repercussions and may damage their reputation and credibility among potential customers. Therefore, financial institutions must remain compliant with all federal regulations to protect themselves from any unnecessary liabilities related to consumer information privacy.
What are the 3 key rules of GLBA?
The GLBA includes several significant provisions to protect consumer data while gaining customers’ trust that their personal information will remain secure.
The three main rules of the GLBA include:
Financial Privacy Rule
Financial Privacy Rule in the GLBA requires certain financial institutions to inform customers how it collects, shares, and safeguards their personal information. Under this rule, the financial institution must provide clear and conspicuous notice about its privacy practices upon initial customer contact.
In addition, they must identify:
- What information is being collected from the customer?
- How it intends to use that information.
- How it will protect against any misuse of that information.
- That customers can opt out of sharing their data with a third party.
Moreover, the Financial Privacy Rule outlines the specific categories of personal data covered by this, including a customer’s:
- Account numbers
- Credit card numbers
- Income or investments
- Medical history or other health-related information
The Safeguards Rule of the GLBA mandates that financial institutions must have measures to protect customers’ personal information’s confidentiality, security, and integrity.
To ensure compliance with the Safeguards Rule, financial institutions must:
- Designate a qualified individual to coordinate and account for the security program.
- Develop a written security plan to identify potential risks and vulnerabilities and how they will be addressed and prevented.
- Carefully assess service providers who may also have access to customer data.
- Establish reasonable administrative, physical, and technical procedures for preventing unauthorized access or use of consumer data.
- Create a data security employee training program that covers initial training at hiring and periodic refresher courses.
- Monitor the effectiveness of safeguards and initiate corrective action when needed.
- Test system procedures by conducting routine vulnerability scans and regular penetration tests.
- Establish guidelines for responding to security breaches or incidents.
- Promptly notify affected customers in response to a breach or incident.
Pretexting in cyber security is using false or misleading information to gain access to confidential data and systems. Pretexting often involves a malicious actor attempting to access personal information and sensitive accounts. It is commonly used by hackers, scammers, and identity thieves to steal information from victims online.
The GLBA requires companies in their capacity as service providers to protect customers from pretexting attempts by implementing reasonable policies and procedures. These measures should be designed to detect and respond to pretexting attempts.
Such provisions should include:
- Soliciting and verifying any requests for customer information with written authorization from a customer.
- Monitoring for indications of suspicious activity, such as accounts accessed through unrecognized devices or locations.
- Restricting access only when security protocols are followed.
- Monitoring communication activity on networks for evidence of pretexting activities.
- Using secure authentication methods when authenticating customer data.
- Ensuring all employees receive proper training on pretexting.
5 benefits of GLBA compliance
One of the main benefits of GLBA compliance is that it helps to protect customer privacy. Privacy policies must be clearly explained, ensuring that customers are always aware of how their personal data is used. This heightened security helps to protect any sensitive data collected from customers or held within internal databases, ensuring that it always remains safe and confidential.
Another benefit of GLBA compliance is increased trust from customers. By being transparent about how personal information is used and stored, customers can rest assured that organizations are taking steps to keep their data secure.
Such a level of trust can be invaluable in gaining and maintaining loyal business relationships with existing customers. On the other hand, it can positively affect brand perception among potential new customers. This reputation may make new customers more likely to do business with an organization because they feel confident their data will always be kept safe.
Who enforces GLBA & potential GLBA non-compliance penalties
The GLBA is enforced by the Federal Trade Commission (FTC). The FTC enforces the provisions of GLBA, including how companies must protect customers’ financial information.
Potential penalties for non-compliance with the GLBA vary depending on the type and severity of the violation. Below are some potential GLBA non-compliance penalties:
1. Civil monetary penalties
Individuals or companies that have not complied with the data security provisions within GLBA may face civil monetary penalties of up to $100,000 per violation or up to $5 million for a series of breaches in a single year.
2. Cease and desist orders
Companies found to be in violation may be issued cease and desist orders by government regulators. These orders could make them stop certain activities until corrective measures can be taken.
3. Enforcement actions
In more serious cases, regulators can take enforcement actions against companies. This can include criminal prosecution and financial sanctions such as fines, restitution, and disgorgement (repayment of profits from illegal or wrongful acts).
4. Revocation of licenses
Depending on the nature of the violation, regulators can revoke licenses held by businesses under GLBA, meaning they will no longer be able to conduct business as usual until corrective measures are taken.
5. Removal from service provider directory
Companies that have not taken adequate measures to protect customer privacy could be removed from service provider directories maintained by government agencies such as the Federal Trade Commission or Federal Financial Institutions Examination Council.
How WinZip Enterprise Protects Sensitive Financial Data
WinZip Enterprise is a powerful, customizable solution that gives organizations industry-leading file encryption, data management, and compression capabilities.
Its file-level Advanced Encryption Standard (AES) encryption protects data in transit and at rest, ensuring compliance with major standards such as the Federal Information Processing Standard (FIPS) 140-2 and Defense Federal Acquisition Regulation Supplement (DFARS) regulations.
In addition to bank and military-grade encryption, WinZip Enterprise gives IT administrators full control over their data environments. The solution is fully customizable, ensuring that it meets your unique organizational needs.