Financial Institutions

Earlier this month, the New York Department of Financial Services (“NYDFS”) announced that it had finalized the Second Amendment to its “first-in-the-nation” cybersecurity regulation, 23 NYCRR Part 500.  This Amendment implements many of the changes that NYDFS originally proposed in prior versions of the Second Amendment released for public comment in November 2022 and

Following up on the recent release by the New York Department of Financial Services (“NYDFS”) of an updated Proposed Second Amendment to its “first-in-the-nation” Cybersecurity Regulation, 23 NYCRR Part 500 (Proposed Second Amendment released June 28, 2023), it is not too late for companies to submit comments on the most recent version of the proposed

Earlier this week, the Securities and Exchange Commission (“SEC”) published an update to its rulemaking agenda indicating that two previously-proposed cyber rules might not be approved until October 2023 (although the agenda’s timeframe is an estimate and the rules could be finalized sooner, or later). The proposed rules in question address disclosure requirements regarding cybersecurity

In Part 1 of this blog series (see here), we discussed recent data protection developments in China’s e-commerce sector.  In this post, we discuss recently issued rules aimed at improving data governance in China’s financial sector that could also have data protection implications.  These rules can be categorized as falling into two groups: the first group focuses on general data governance requirements applicable to all financial institutions, and the second group regulates specific types of financial services.

These new rules were published by the China Banking and Insurance Regulatory Commission (“CBIRC”) and People’s Bank of China (“PBOC”) during the first quarter of 2021, and include:

  • Guidelines for Data Capacity-Building in the Financial Industry (“Guidelines”) (official Chinese version available here);
  • Financial Data Security – Data Life Cycle Security Standard (“Standard”) (official Chinese version available here); and
  • Draft Credit Reporting Management Measures (“Draft Measures”) (official Chinese version available here).

Both the Guidelines and Standard provide detailed criteria for financial institutions on the proper collection, use and protection of “financial data,” while the Draft Measures introduce data-related requirements for licensed credit reporting agencies.  All of these new rules include data security requirements for both personal and non-personal data.Continue Reading Privacy Updates from China: Proliferation of Sector-Specific Rules As Key Legislation Remains Pending – Part 2: Data Protection in the Financial Sector

On December 4, 2018, the Federal Trade Commission (“FTC”) announced that it is accepting public comments regarding its Identity Theft Detection Rules, 16 C.F.R. Part 681 (the “Rules”), as part of a systematic review of the Commission’s regulations and guidelines. The review of the Rules is particularly noteworthy because identity theft is among the top consumer complaints to the FTC, and has been an enforcement priority for the FTC’s Bureau of Consumer Protection.
Continue Reading FTC Solicits Public Comment on Identity Theft Detection Rules

On November 6, 2018, the French data protection authority (the “CNIL”) published a report that discusses some of the questions raised by the use of blockchain technology and perceived tensions between it and foundational principles found in the General Data Protection Regulation (the “GDPR”).  As we noted in an earlier blog post on this topic, some pundits have claimed that certain features of blockchain technology, such as its reliance upon a de-centralised network and an immutable ledger, pose GDPR compliance challenges.  The CNIL has attempted to address some of these concerns, at least in a tentative manner, and further guidance from EU privacy regulators can be expected in due course.

De-centralised network

The CNIL acknowledges that EU data protection principles have been designed “in a world in which data management is centralised,” and where there is a clear controller of the data (“data controller”) and defined third parties who merely process the data (“data processors”).  Applying these concepts to a de-centralised network such as blockchain, where there are a multitude of actors, leads to a “more complex definition of their role.”  In brief, EU data privacy rules are the square peg to blockchain’s round hole.

Notwithstanding this, the CNIL considers that participants on a blockchain network, who have the ability to write on the chain and send data to be validated on the network, must be considered data controllers.  This is the case, for instance, where the participant is registering personal data on the blockchain and it is related to a professional or commercial activity.  By contrast, according to the CNIL, the miners, who validate the transactions on the blockchain network, can in certain cases be acting as data processors.  As a consequence, data processing agreements would need to be in place between the data controllers and the data processors on any blockchain network.

The CNIL further considers that where there are multiple participants who decide to carry out processing activities via a blockchain network, they will most likely be considered “joint controllers,” unless they identify and designate their roles and responsibilities in advance.   Individuals who use the blockchain for personal use (i.e., individuals who access the network to buy and sell a virtual currency), however, would not be data controllers as they can rely on the “purely personal or household activity” exception.  
Continue Reading The CNIL Publishes Report On Blockchain and the GDPR

On October 18, 2018, the Dutch Supervisory Authority for data protection adopted guidance on the second Payment Service Directive (“PSD2”).  The PSD2 intends to open the financial services market to a larger scale of innovative online services.  To that effect, the PSD2 sets out rules for obtaining access to the financial information of bank customers. 

Blockchain technology has the potential to revolutionise many industries; it has been said that “blockchain will do to the financial system what the internet did to media”.  Its most famous use is its role as the architecture of the cryptocurrency Bitcoin, however it has many other potential uses in the financial sector, for instance in trading, clearing and settlement, as well as various middle- and back-office functions.  Its transformative capability also extends far beyond the financial sector, including in smart contracts and the storage of health records to name just a few.

A blockchain is a shared immutable digital ledger that records transactions / documents / information in a block which is then added to a chain of other blocks on a de-centralised network.  Blockchain technology operates through a peer network, where transactions must be verified by participants before they can be added to the chain.

Notwithstanding its tremendous capabilities, in order for the technology to unfold its full potential there needs to be careful consideration as to how the technology can comply with new European privacy legislation, namely the General Data Protection Regulation (the “GDPR”) which came into force on 25 May 2018.  This article explores some of the possible or “perceived” challenges blockchain technology faces when it comes to compliance with the GDPR.
Continue Reading The GDPR and Blockchain

The UK Financial Conduct Authority (“FCA”) published on July 5 a joint Discussion Paper with the Prudential Regulation Authority (“PRA”) and the Bank of England (“BoE”) on “Building the UK financial sector’s operational resilience.”

The Discussion Paper focuses on the ability of regulated firms and financial market infrastructures (“FMIs”) to “respond to, recover and learn from operational disruptions,” most notably cyber-attacks.  The supervisory authorities recognise that a lack of operational resilience represents a threat to financial stability and describe it “as no less important than financial resilience.

The supervisory authorities invite feedback on several questions in the Discussion Paper from firms, trade associations, and consumer bodies as well as from individuals and businesses who use authorised or recognised entities’ business services.  The authorities will use responses to help develop potential proposals for consultation and develop their respective approaches.  The deadline to respond is October 5, 2018.Continue Reading UK Regulators Publish Joint Discussion Paper on Operational Resilience in the UK Financial Sector

The EU Payment Services Directive (PSD2), which took effect on January 13, 2018, puts an obligation on banks to give Third Party Providers (TPPs) access to a customer’s payment account data, provided the customer expressly consents to such disclosure.  The new legislation is intended to improve competition and innovation in the EU market for payment services.  The General Data Protection Regulation (GDPR), which is due to take effect from May 25, 2018, enhances individuals’ rights when it comes to protecting their personal data.  The interaction between PSD2, aimed at increasing the seamless sharing of data, and the GDPR, aimed at regulating such sharing, raises complicated compliance concerns.

For example, where banks refrain from providing TPPs access to customer payment data for fear of breaching the privacy rights of their customers under the GDPR, competition authorities may consider this a breach of competition law.  This concern is already becoming a reality for banks – on October 3, 2017, the European Commission carried out dawn raids on banking associations in Poland and the Netherlands following complaints from fintech rivals that the associations were not providing them with what they considered legitimate access to customer payment data.
Continue Reading Overlap Between the GDPR and PSD2