How to Achieve Gramm-Leach-Bliley Act Compliance?

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

The Gramm-Leach-Bliley Act (GLBA), 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 financial services 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 financial organization 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 third parties
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 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 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 financial institution 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 risk assessment 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 data privacy training program 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

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.

Ensure your financial institution is GLBA-compliant. Get in touch for a free consultation quote today!

Adrian Hori