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Inside This Article

Here are some key aspects of the FTC Safeguards Rule and how they apply:

The FTC (Federal Trade Commission) Safeguards Rule is a regulation that requires financial institutions to implement and maintain a comprehensive information security program to protect the personal information of their customers. The rule applies to a wide range of financial institutions such as Accountants, CPAs, Financial Advisors, Mortgage Brokers, Real Estate Appraisers, Retailers who extend credit, and other businesses that handle consumer information.

Here are some key aspects of the FTC Safeguards Rule and how they apply:

1.Designate a Qualified Individual to implement and supervise your company’s information security program. The Qualified Individual can be an employee of your company or can work for an affiliate or service provider.

2. Financial institutions covered by the rule must develop, implement, and maintain a comprehensive information security program that is appropriate to their size and complexity. The program should be designed to protect the security, confidentiality, and integrity of customer information.

3. Financial institutions must conduct a risk assessment to identify potential threats to the security of customer information and evaluate the effectiveness of existing safeguards. This assessment helps in determining the appropriate measures to mitigate identified risks.

4.The Safeguards Rule requires financial institutions to implement safeguards to control the identified risks. These safeguards may include physical, technical, and administrative measures such as secure network systems, encryption, access controls, employee training, and regular monitoring to ensure controls are effective.

5. Financial institutions are responsible for selecting and overseeing service providers that have access to customer information. They must ensure that service providers have appropriate safeguards in place to protect the information they handle. This means that your IT company can’t self-audit and will require a third party to audit what they do for you.

6. Financial institutions must provide regular training to employees regarding the proper handling and protection of customer information. This helps in creating awareness and minimizing the risk of data breaches caused by human error.

7.The Safeguards Rule requires financial institutions to have procedures in place to respond to and recover from security incidents. They should promptly investigate and take appropriate steps to address any unauthorized access or breach of customer information.

8.Financial institutions must regularly monitor, test, and update their information security program to ensure its effectiveness. This includes conducting periodic assessments, evaluating any changes in technology or risks, and making necessary adjustments to safeguard measures.

9.The FTC has the authority to enforce the Safeguards Rule and may conduct investigations to ensure compliance. Non-compliance with the rule can result in enforcement actions, civil penalties, and other remedies.

It's important for financial institutions to understand and comply with the Safeguards Rule to protect the sensitive personal information of their customers and maintain trust in their services. The specific requirements and implementation may vary depending on the nature and size of the institution, so it's advisable to consult legal and compliance professionals to ensure compliance with the rule.

If your business is affected by the Safeguards Rule, our small business cybersecurity program includes everything you need to get and stay compliant.

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Imtiaz Munshi, CPA

CFO, AZSTEC LLC

The author Imtiaz Munshi is a Certified Public Accountant and CFO at Azstec, LLC. He is Business Strategist, Tax Planner, Entrepreneur and Advisor to "HNEs" (High Net Worth Entrepreneurs).