Financial Privacy

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On June 23, Congressman Patrick McHenry released a discussion draft of new legislation to modernize federal financial data privacy law. The draft legislation would amend and build on the Gramm-Leach-Bliley Act (“GLBA”). The draft includes notable provisions on consumer rights, data minimization, and disclosures. It also updates the definition of “financial institution” to include data…

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

Covington experts on issues as varied as supply chain and other commercial contracts, employment, and insurance are supporting companies on the commercial implications of Coronavirus COVID-19.  But this blog post provides a brief overview of some of the key issues that privacy and cybersecurity professionals should have top of mind in dealing with response efforts.  We describe below both privacy implications of disclosing data to government authorities and commercial partners and strategies to manage COVID-19 risk by collecting additional information about employees and visitors, as well as the cybersecurity implications of these outbreak prevention and management efforts.

  • Our professionals around the globe have been advising clients on the privacy risks of disclosing health and other personal data to public health authorities and other government agencies.  As we blogged about here, regulators at many different levels of the Chinese government have been actively collecting personal data to monitor and mitigate the spread of the virus, and that’s now happening across the globe.  Other public health agencies worldwide are requesting information from private companies to assist with containing or mitigating the spread of the virus.  For example, they may seek information about a person’s contacts in order to conduct contract tracing of an infected person.  Although public health agencies generally have broad information-gathering authorities, these laws typically do not overcome privacy laws that restrict disclosures of personal or other sensitive information.  Companies may need to consider how to mitigate these legal risks before responding, particularly where more detailed information is requested. …
    Continue Reading Key COVID-19 Issues for Privacy and Cybersecurity Professionals

In December 2019, the People’s Bank of China (“PBOC”) issued the draft Measures for the Protection of Financial Consumers’ Rights and Interests for public comment (“draft Financial Consumer Measures”) (an official Chinese version is available here).  Although the draft Financial Consumer Measures focus more broadly on consumer rights in the financial sectors, they imposes upon financial institutions privacy and cybersecurity obligations that—in certain instances—extend beyond the requirements stipulated in China’s Cybersecurity Law (“CSL”).

Following up on the draft Financial Consumer Measures, PBOC issued the Personal Financial Information Protection Technical Specification (“Financial Information Specification”) on February 13, 2020 setting forth additional privacy and cybersecurity requirements applicable to the life cycle of personal financial information collected and processed by regulated financial entities and other entities that process personal financial information (“Financial Industry Entities”). While the Financial Information Specification follows the general personal information protection principles under the Cybersecurity Law (“CSL”) framework, some specific requirements are worth highlighting, as explained below.
Continue Reading China Releases Personal Financial Information Protection Technical Specification

On March 5, 2019 the Federal Trade Commission (“FTC”) published requests for comment on proposed amendments to two key rules under the Gramm-Leach-Bliley Act (“GLBA”).  Most significantly, the FTC is proposing to add more detailed requirements to the Safeguards Rule, which governs the information security programs financial institutions must implement to protect customer data.

In addition, the FTC is proposing to expand the definition of “financial institution” under the Safeguards Rule and the Privacy Rule to include “finders.”  Finally, the FTC is proposing to amend the Privacy Rule to make technical and conforming changes resulting from legislative amendments to GLBA in the Dodd-Frank Act and FAST Act of 2015.

Proposed Revisions to the Safeguards Rule’s Information Security Program Requirements

The Safeguards Rule establishes requirements for the information security programs of all financial institutions subject to FTC jurisdiction.  The Rule, which first went into effect in 2003, requires financial institutions to develop, implement, and maintain a comprehensive information security program.  As currently drafted, the Safeguards Rule has few prescriptive requirements, but instead generally directs financial institutions to take reasonable steps to protect customer information.

The FTC’s proposed revisions would add substantially more detail to these requirements.  Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, explained that the purpose of the proposed changes is “to better protect consumers and provide more certainty for business.”  The new requirements are primarily based on the cybersecurity regulations issued by New York Department of Financial Services (“NYSDFS”), and the insurance data security model law issued by the National Association of Insurance Commissioners.
Continue Reading FTC Proposes to Add Detailed Cybersecurity Requirements to the GLBA Safeguards Rule

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

By Bruce Bennett, Carlo Kostka, Craig Pollack, Dan Cooper, Gemma Nash, Kristof Van Quathem, Mark Young, and Sophie Bertin

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

On December 1, 2016, the Commission on Enhancing National Cybersecurity released its Report on Securing and Growing the Digital Economy. In its Report, the Commission, established in February 2016 by President Obama, provided detailed short- and long-term recommendations to strengthen cybersecurity in the public and private sectors. The Commission took a multi-stakeholder approach, emphasizing the need for broad public-private cooperation, defined consumer rights and responsibilities, and international streamlining efforts. The Report focused on eight cybersecurity topics identified in the Commission’s charging Executive Order: federal governance, critical infrastructure, cybersecurity research and development, cybersecurity workforce, identity management and authentication, Internet of Things, public awareness and education, state and local government cybersecurity, and additionally insurance and international issues.

After studying these eight critical areas, the Commission articulated ten foundational principles that shaped its recommendations in the Report. These principles focused on the growth in size and density of Internet-connected systems, United States and federal government leadership in cybersecurity innovation, private-public collaboration, clear definitions of authority and accountability, consumer education, user-friendly cybersecurity products, privacy and trust development, the unique needs and constraints of small businesses, and designing incentives for innovation.

The Report then enumerated myriad imperatives, recommendations, and action items for the current and next Presidential administrations to develop robust cybersecurity in the nation.
Continue Reading The Commission on Enhancing National Cybersecurity Releases Its Report on Securing and Growing the Digital Economy

On September 13, 2016, New York Governor Andrew Cuomo announced a proposed regulation that would require financial service institutions to develop and implement cybersecurity programs to prevent and mitigate cyber-attacks.  The proposed regulation will be subject to a 45-day comment period once it is published in the New York State Register. The regulation will…