Ensuring data privacy & compliance for banks to align with global standards like GDPR & DPDPA
By Shibu Paul, Vice President – International Sales, Array Networks
In today’s digital world, data privacy has continued to be of great concern, especially in the banking and financial sectors. Banks play a crucial role in protecting all sensitive, private, financial information and identity. They help to keep our money safe and are known to be trusted institutions charged with holding large volumes of customer data that may comprise personal identification, financial transactions, and credit histories, thus rendering them good targets for cyber threats and data breaches. Customers’ trust in their banks relies primarily on how secure these banks keep their personal data. And in current times, banks are needed to implement robust data protection measures, given the increasing volume and sophistication of cyberattacks.
Banks are not only threatened by cyber-attacks but also by regulatory authorities, as governments across the world are globally strengthening regulations to protect personal information. The Digital Personal Data Protection Act (DPDPA) 2023 and the General Data Protection Regulation (GDPR) are two of the most important regulatory frameworks that banks must adhere to. GDPR is an international standard regulation that mainly targets businesses that have operations in the European Union, whereas the DPDPA is India’s answer to rising demands for personal data privacy to regulate data processing activities in the nation.
By being compliant with both GDPR and DPDPA, banks can ensure that they meet both international and domestic compliance standards, thus minimising legal risks and protecting themselves from huge fines. Adherence to these frameworks will not only guarantee the bank’s operation within the limits of the law but also reinforce the confidence that customers have in their bank, which is critical for customer retention and satisfaction. In this article, we’ll explore how banks can align with these standards, protect their customers’ data, and maintain a competitive edge in an increasingly regulated and digital financial landscape.
Understanding GDPR and DPDPA
The General Data Protection Regulation (GDPR) of 2018 prescribes stringent standards for the collection, storage, and processing of EU residents’ personal data and covers organisations operating inside the EU and outside but doing business with the EU’s citizenry. The regulation is premised on several fundamental principles that include lawfulness, fairness, transparency, limitation of purpose, data minimisation, accuracy, limitation of storage, and integrity and confidentiality. Accountability has a strong emphasis on this regulation. Failure to comply with GDPR can lead to heavy fines of up to 4% of global annual turnover or €20 million, whichever is higher, thus making it essential for organisations to protect data and comply with regulatory requirements.
Whereas, India’s Digital Personal Data Protection Act (DPDPA), enacted in 2023, seeks to protect personal data in India and extends to domestic and foreign persons collecting, storing, or processing personal data of Indian citizens. The Act would require the explicit consent of the individual to whom the personal data relates before the collection of any personal data. It requires data minimisation and data localisation, whereby some of the data must be stored within India. DPDPA also makes certain responsibilities binding on fiduciaries of data, such as strong data protection practices, explicit data processing principles, and a Grievance Officer designation at financial institutions for complaint handling about data. The law protects stronger privacy rights while keeping organisations responsible for keeping data genuine and transparent.
Steps banks can take to align with GDPR and DPDPA
- Develop a Comprehensive Privacy Policy
Banks need to establish a strong privacy policy that specifies the purpose and extent of data collection, processing, and storage. The policy must also include the rights of data subjects, such as access, correction, and data erasure. The policy must have proper communication on the collection, usage, storage, and sharing of data with third parties. Disclosure of data retention periods and safe disposal procedures is important for both GDPR and DPDPA compliance.
- Implement Strong Data Protection Measures
Data leakage, or data theft can pose serious problems to banks. To provide data security, banks must implement encryption of data at rest and in transit. Data loss prevention (DLP) methods help protect sensitive data from both inside and outside threats by blocking any unauthorised attempts to move sensitive information outside the network. Rigorous access control and role-based authentication policies need to be put in place to protect sensitive data. Furthermore, data minimisation principle must be followed to collect only the required data for specific purposes. Security audits must be performed periodically to review and strengthen the robustness of these practices.
- Obtain and Manage Explicit Consent
GDPR and DPDPA require explicit and clear consent from individuals before processing their personal data. Banks are required to ensure that consent is voluntary and informed, with individuals being fully aware of the use of their data. Mechanisms for consent should be updated and reviewed regularly to keep pace with changing regulatory requirements, and simple tools for revoking consent should be made available to data subjects.
- Conduct Regular Privacy Audits and Risk Assessments
It is crucial that banks hold regular internal reviews of their data privacy procedures to maintain compliance with the regulations. Using third-party auditors for independent evaluations is advisable to determine gaps and threats within the data protection system. Risk assessments must also be done to identify potential threats, and measures must be implemented to mitigate such risks.
- Train Employees and Foster Awareness
Banks must train employees on a regular basis in best practices for data security and privacy, learning how to manage sensitive information and identify potential threats. Developing a security awareness culture within the organisation is critical to staying alert to data breaches and making sure staff is able to meet privacy standards.
- Establish a Data Breach Response Plan
Banks need to formulate and execute an incident response plan to respond to data breaches rapidly and effectively. The plan should have well-defined procedures for notification of the concerned individuals and regulatory authorities in case of a breach. Keeping thorough records of data breaches and remedial measures is also necessary to ensure transparency and compliance.
- Ensure Vendor Compliance and Appoint a Data Protection Officer (DPO)
The banks have to ensure thorough due diligence when choosing third-party providers so that they follow data protection legislation. Agreements should distinctly specify the two parties’ responsibility regarding data protection. Moreover, appointment of a Data Protection Officer (DPO) is necessary for monitoring compliance activities, handling of data protection planning, and an intermediary for contacts from data subjects and regulatory agencies.
- Maintain a Data Inventory and Cross-Border Compliance
Having a complete record of personal data is vital for data responsibility management and adherence to GDPR’s principle of accountability. Banks should frequently screen and categorise personal data, specifying its origin, purpose of processing, and access controls. Additionally, when data is transferred outside the country, banks must ensure conformity with applicable regulations, such as making sure that required security measures are in place for the transfer.
Conclusion
Banks need to align with international standards on data privacy, such as GDPR and DPDPA, to protect client data, maintain their trust, and avoid legal penalties. By setting up comprehensive privacy policies, secure data protection measures, and regular compliance reviews, banks can ensure adherence to the stringent requirements of these regulations. Also, instilling a culture of data privacy consciousness besides having a Data Protection Officer will considerably complement those compliance efforts. By implementing these measures, banks can not only protect their customers’ data but also foster a reputation of trustworthiness and responsibility in the digital era.
