Achieving Gramm-Leach-Bliley Act (GLBA) compliance is crucial for financial institutions for several reasons, including:
- Maintaining customer trust by protecting their privacy
- Risk mitigation through enhanced security measures
- Building competitive advantage
- Promoting operational integrity and,
- Avoiding legal penalties
If you are interested in ensuring overall compliance for your company to avoid a fine or gain a competitive advantage than it’s a good idea to review our GLBA guide. Below you will learn how to achieve Gramm-Leach-Bliley Act compliance for your financial institution or financial services form.
Gramm-Leach-Bliley Act (GLBA) Overview
<span style=”text-decoration:underline”>The Gramm-Leach-Bliley Act (GLBA)</span>, or the Financial Modernization Act, is a US federal law enacted in 1999 that requires financial services to explain their customers’ data protection and sharing practices.
The primary purpose of this law is to ensure that financial institutions protect the privacy of their consumer’s personal financial information.
GLBA applies to financial institutions or companies that provide <span style=”text-decoration:underline”>financial services</span> and products to consumers, such as banks, insurance companies, credit unions, insurance companies, investment companies, brokers, lenders, dealers, and others.
Because the Act applies to a wide range of organizations, GLBA compliance with the Act is enforced by different federal agencies and regulators. This mostly depends on the type of financial institutions, such as:
- Banks – The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board
- Other financial institutions (not including banks) – Federal Trade Commission (FTC)
- Credit unions – National Credit Union Administration (NCUA)
- Insurance companies – State insurance authorities
In other words, a <span style=”text-decoration:underline”>financial organization</span> that wants to comply with the GBLA must communicate the following with its customers:
- How it shares customer’s sensitive data?
- What are the customers’ opt-out rights and options if they don’t want the organization to share their personal data with <span style=”text-decoration:underline”>third parties</span>
- What specific protections are available for customers’ private data?
3 Key Components of GLBA
The GLBA has three key components. These components or rules govern how a financial institution should handle its customers’ private financial information.
- Financial Privacy Rule
According to the <span style=”text-decoration:underline”>Financial Privacy Rule</span>, financial institutions must provide a specific notice regarding their privacy policies and practices concerning third parties (affiliated and non-affiliated) and also allow consumers to opt out of the disclosure of their nonpublic personal information (NPI) to a non-affiliated third party.
- Safeguards Rule
The GLBA <span style=”text-decoration:underline”>Safeguards Rule</span> says that financial institutions under the jurisdiction of the Federal Trade Commission (FTC) have specific measures to keep consumer information secure and ensure their third-party affiliates and partners protect their consumers’ data.
- Pretexting Provisions
The third and final key component of GLBA, pretexting provisions, explains that any <span style=”text-decoration:underline”>financial institution </span>under GLBA must take reasonable measures to detect and prevent unauthorized access to its consumers’ data. Understanding these three components of the GLBA is the first step in ensuring your organization complies with this regulation.
GLBA Compliance Checklist
Financial Privacy Rule
- Privacy Notices: Provide clear and detailed privacy notices to consumers about your data collection, sharing, and protection practices and measures
- Opt-out: Allow customers to easily opt out of sharing their non-public personal information (NPI) with non-affiliated third parties
- Information Sharing Policies: Make sure your data-sharing practices with third parties adhere to the legal and regulatory requirements
Safeguards Rule
- Identify Risks: Conduct <span style=”text-decoration:underline”>risk assessment</span> and identify potential risks to consumer data security.
- Written Information Security Program: Create and maintain a written information security program (WISP) to address and mitigate the risks you’ve identified
- Employee Training and Education: Provide a <span style=”text-decoration:underline”>data privacy training program</span> to improve the awareness and readiness of your employees
- Third-Party Management: Verify your third-party vendors and service providers have and follow proper data security measures in place that align with your own
- Monitor and Test: Regularly monitor, test, and update your information security program as you meet new challenges
Pretexting Provisions
- Employee Training and Awareness: Help your employees identify and prevent unauthorized data access attempts and other ways to obtain customer data by malicious attackers like phishing
- Identity Verification: Verify the identity of the person or entity that is requesting customer information
- Incident Response Plan: Develop an incident response plan on what to do in case of unauthorized access or disclosure
GLBA Non-Compliance Penalties
The GLBA includes several fines for violations.Each violation can cost the business $100,000 and up to 1% of the company’s assets. Also, the Federal Deposit Insurance Corporation (FDIC) can fine employees or senior executives individually with $10,000 fines for individual violations and up to $1,000,000 fines for more significant violations and on top of that can risk a prison sentence between 5 and 12 years.
FAQs
What is the main purpose of the Gramm-Leach-Bliley Act?
The Act’s primary purpose is to ensure that financial institutions protect the privacy of their consumer’s personal financial information.
What are the 3 protections of GLBA?
The following three rules govern how a financial institution should deal with its customers’ private financial information:
- Financial Privacy Rule
According to the Financial Privacy Rule, financial institutions must provide a specific notice regarding their privacy policies and practices concerning third parties (affiliated and non-affiliated) and also allow consumers to opt out of the disclosure of their nonpublic personal information (NPI) to a non-affiliated third party.
- Safeguards Rule
The GLBA Safeguards Rule financial institutions under the jurisdiction of the Federal Trade Commission (FTC) have specific measures to keep consumer information secure and ensure their third-party affiliates and partners protect their consumers’ data.
- Pretexting Provisions
The third key component of GLBA, pretexting provisions, explains that any financial institution under GLBA must take reasonable measures to detect and prevent unauthorized access to its consumers’ data.
What is the FCRA Gramm-Leach-Bliley Act?
The Gramm-Leach-Bliley Act (GLBA), or the Financial Modernization Act, is a US federal law enacted in 1999 that requires financial institutions to explain their customers’ data protection and sharing practices.
The Act’s primary purpose is to ensure that financial institutions protect the privacy of their consumer’s personal financial information.
GLBA applies to financial institutions or companies providing financial services and products to individuals, such as banks, insurance companies, credit unions, insurance companies, investment companies, brokers, lenders, dealers, etc.
What is the difference between GDPR and GLBA?
The General Data Protection Regulation (GDPR) is a comprehensive EU data privacy framework for commercial, non-profit, and public sector organizations. It regulates how they process all types of EU residents’ personal data. On the other hand, the Gramm-Leach-Bliley Act of 1999 is a US federal law requiring financial institutions like banks, insurance companies, and others to inform consumers of their information sharing and protection practices and to have appropriate data security measures in place.
How Can Captain Compliance Help You?
Understanding and following any of the numerous state or country specific data privacy regulations is a legal necessity in todays world, and non-compliance can lead to significant penalties and loss of customer trust. Captain Compliance provides expert consultation for companies looking to comply with the different data privacy regulations worldwide, including the Gramm-Leach-Bliley Act and has software to help with compliance.
<span style=”text-decoration:underline”>Ensure your financial institution is GLBA-compliant. Get in touch for a free consultation quote today!