Embracing the New FTC Safeguards Rule: An In-Depth Guide on Compliance for Financial Institutions with CTI Technology
As a leading IT consulting company in Chicago, CTI Technology is committed to helping organizations implement the appropriate technology solutions to ensure compliance with the updated FTC Safeguards Rule. The rule, which comes into effect on June 9, 2023, expands the definition of “financial institution,” significantly impacting many businesses’ compliance requirements for protecting customer information.
As a business owner or stakeholder, it is crucial to prepare for the implementation of these new technologies. The approaching December deadline raises IT strategy, planning, and budgeting concerns. To help you better understand and navigate these changes, we have broken down the essential aspects of the updated FTC Safeguards Rule into three easily digestible sections:
- Which financial firms are affected by the Safeguards Rule update?
- What new definitions does the Safeguards Rule include?
- How should finance entities use the new Safeguards guidelines to create reasonable information security programs?
We will also discuss how CTI Technology is well-equipped to support your organization in meeting these new compliance requirements and provide a detailed roadmap for achieving compliance.
Download our free FTC Safeguards Guide
Affected Financial Institutions
The updated FTC Safeguards Rule broadens the definition of “financial institution,” encompassing 13 specific categories. These categories cover a wide range of businesses, including:
- Retailers issuing their credit cards
- Automobile dealerships leasing vehicles on a nonoperating basis for over 90 days
- Personal property or real estate appraisers
- Career counselors specializing in financial organizations
- Businesses providing check printing or money wiring services
- Check cashing businesses
- Accountants or tax preparation services
- Travel agencies offering financial services
- Real estate settlement service providers
- Mortgage brokers
- Investment advisory companies and credit counseling services
- Companies acting as finders for buyers and sellers of products or services
- Couriers serving banks
New Definitions and Modifications
The new rule introduces seven new terms and one modification, all carrying implications for IT security and compliance. Some of these new terms include:
- Authorized User: Any employee, contractor, agent, customer, or another authorized to access an organization’s information systems or data.
- Encryption: The transformation of data into a form that results in a low probability of assigning meaning without using a protective process or key.
- Information Security Program: The administrative, technical, or physical safeguards used to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle customer information.
- Multi-Factor Authentication: Authentication through verification of at least two types of authentication factors, such as knowledge factors (password), possession factors (token), or inherence factors (biometric characteristics).
- Penetration Testing: A test methodology in which assessors attempt to circumvent or defeat the security features of an information system by attempting penetration of databases or controls from outside or inside the information systems.
- Security Event: An event resulting in unauthorized access to, or disruption or misuse of, an information system, information stored on such information systems, or customer information held physically.
Additionally, the definition of “Financial Institution” has been modified to cover a broader range of businesses.
Creating a Reasonable Information Security Program
Financial institutions must establish a reasonable information security program to ensure compliance with the new FTC Safeguards Rule. This program should include the following elements:
- Appointment of a qualified individual responsible for the security program
- Periodic risk assessments
- Safeguards to control identified risks
- Regular testing and monitoring of the effectiveness of the security program
- Implementation of multi-factor authentication for any individual accessing customer information
- Encryption of customer information
- Incident response plans to address security events and potential data breaches
- Secure disposal of customer information
- Oversight of service providers, ensuring they maintain appropriate safeguards
- Regular training and management of employees on security awareness and procedures
CTI Technology: Your Partner in Compliance
CTI Technology, with its vast experience in providing IT consulting services to financial institutions, is well-positioned to help you navigate these new requirements. Our team of experts will work closely with your organization to create a tailored roadmap for achieving compliance with the updated FTC Safeguards Rule. Our services include:
- Assistance with risk assessments and the development of an effective information security program
- Implementation of multi-factor authentication and encryption solutions
- Evaluation and improvement of existing IT infrastructure and security measures
- Guidance on service provider oversight and management
- Employee training and awareness programs
We understand that the upcoming deadline may be a cause for concern, but with CTI Technology, you can be confident in meeting the updated compliance requirements. We are dedicated to helping you protect your customer information and maintain the trust of your clients.
In conclusion, the updated FTC Safeguards Rule significantly expands the definition of “financial institution” and introduces new requirements for protecting customer information. Affected businesses must understand the implications of these changes and implement appropriate measures to comply with the new guidelines. By partnering with CTI Technology, you can ensure your organization is well-prepared to navigate these changes and maintain the highest information security standards.