Financial Services Compliance: How To Meet Data Regulations

9 mins to read

Financial Services Compliance

Any business in the financial services industry faces stringent compliance standards and regulations. Financial services includes investment banks, insurance companies, brokerage firms, CPA firms, wealth management, mutual funds, and more – the scope is broad. But what they all have in common is they handle extremely sensitive financial information like financial history records, customer personally identifiable information, sales data, and market information. To accommodate how sensitive this kind of data is, the government and private agencies have developed financial data security compliance standards to keep organization’s data hygiene up-to-par.

Financial Security Threat Landscape

The financial services industry is one of the greatest targets for cyber and cloud attacks. In fact, according to IBM’s Cost of a Data Breach Report 2022, the financial sector has the second highest data breach costs at just over $5 Million. Their data can be sold on the dark web, used to commit fraud, or offer inside information that can be exploited.

Some of the common threats the financial industry faces include:

Phishing: this entails social engineering often in the form of emails posing as legitimate sources, baiting employees to engage and provide sensitive information or offer entryway to their organization’s environment.

Ransomware: a type of malware encrypting company or personal information to block the owner’s access until a ransom sum is paid.

Insider Threats: whether malicious or unintentional, an insider threat is a risk coming from within the organization. This could be a disgruntled employee acting out of malice to breach the organization’s security or an employee falling for a phishing attack.

Misconfigurations/Vulnerabilities: misconfigurations are improper security controls that create risk and possible entryway for an attacker into a cloud environment. Vulnerabilities in workloads or network can also be exploited allowing attackers entryway.

To help mitigate these threats, regulators have developed and continue to release financial data security compliance standards that enforce proper data protection methods.

Benefits of Financial Cybersecurity Compliance and Risks of Non-Compliance

It can be difficult for businesses to keep track of what they’re accountable for because there are so many different compliance standards, but prioritizing compliance comes with great benefits. 

Benefits of compliance:

  • Clear Visibility. Meeting compliance standards forces organizations to gather a clear inventory of their environment including all data, workloads, and identities.
  • Easier Audits. Maintaining continuous compliance standards keeps organizations proactively ready for audits, as opposed to scrambling and a full-court press of time and resources at the final hours.
  • Trust. Not only does compliance help build an organization’s legitimacy with the regulators and government, but it assures customers that their data and money is in good hands.

Risks of non-compliance:

  • Security Threats. Compliance standards are enforced to help protect businesses from data loss and theft, so not meeting their requirements leaves organizations with insufficient security measures and at risk of the threats discussed above.
  • Monetary Fines. Many regulations come with serious monetary fines. Violating PCI-DSS can cost up to $500,000 per incident while violating the Banking Secrecy Act can cost $250,000 or criminal charges.
  • Loss of Business. If your organization faces a data breach, not only does it cost customer trust, but also disrupts business operations – and potentially even the national economy.

Key Financial Data Security Regulations

Payment Card Industry Data Security Standard (PCI DSS)

The Payment Card Industry developed Data Security Standards – PCI DSS for short – to prevent credit card theft and fraud, and protect credit card holders. Any financial institution processing, storing, or using credit card information must comply with PCI. The greatest requirement is safeguarding customer credit card information with sufficient security measures.

The Gramm-Leach-Bliley Act (GLBA)

The GLBA enforces the security of consumer information and disclosure of all data-sharing to customers. All institutions offering financial services or products must comply with GLBA. The Act includes two major requirements: Financial Privacy Rule, which entails organizations to provide a privacy notice to customers explaining how they’re interacting with their personal data, where it is shared, and how it is protected; Second, the Safeguards Rule requires organizations to write an infosec plan detailing how they use their customer data and how they will protect it.

The Sarbanes-Oxley Act (SOX)

SOX is a Federally enforced law protecting investors from financial fraud through recommended security measures. Its main purpose is to ensure there are verified cybersecurity frameworks and controls in place to prevent data disclosure, fraud, or data tampering. SOX requires an ‘Internal Controls Report’ – a detailed and accurate report of all financial disclosures and an audit trail of all access to data available to an auditor.

The Bank Secrecy Act (BSA)

The BSA requires financial institutions to notify the Federal government of any known terrorist funding, money laundering, or tax evasion. To maintain compliance, financial institutions must keep a record of cash purchases and take note of any possible suspicious monetary transactions.

Financial Industry Regulatory Authority (FINRA)

FINRA developed a set of security measures brokers and brokerage firms must follow to protect buyer data, but also the financial industry itself. Cybersecurity is a growing requirement of FINRA and the agency requires firms to build a program addressing the following security programs: risk assessment, security controls, data loss prevention, access management, incident response, staff training, and more.

General Data Protection Regulation (GDPR) in Financial Sector

GDPR is regulated by the EU designed to protect citizens from personal data compromise. Personal data refers to any data that can be connected back to the identity of an individual. All financial services processing data linked to EU citizens must comply with the GDPR. Businesses are either ‘controllers’ or ‘processors’ of data.

Best Practices for Financial Data Security Compliance

1. Leverage the Cloud

Cloud computing and the transition to cloud service provider managed infrastructure is changing the security game. If configured correctly, the cloud can provide security greater than ever possible on-prem. Cloud Service Providers like AWS, Azure, and Google Cloud detail a Shared Responsibility Model for security, that upholds their dedication to securing the physical hardware, infrastructure, and services customers use. To quote the Deputy Secretary of the U.S Treasury, “there is no question that providing consumers with secure and reliable financial services means greater demand for cloud-based technologies.”

2. Secure Assets

Crown-Jewels First

If you have properly inventoried all data and classified it to understand what it is and how it is important to your business, you can then prioritize securing the highest-value assets first. Not all data is created equal, so different assets require immediate attention and more stringent controls.

Implement Least Access

A Least Access policy starts at the data, and works outwards to enforce that only the entities that absolutely need access to complete their job should be granted it. Less access granted, is less access to be exploited by attackers.

Role-Based Access

Role-based access is a data access restriction practice that entails assigning access according to roles. This practice prevents users from holding access that doesn’t pertain to their needs. Instead of assigning specific identities permissions, the organization grants privilege to roles that an identity can then assume.

Encrypt Data

Not only is encryption a best practice, but also a requirement by many financial data security compliance standards. Data encryption at both rest and transit helps keep sensitive information locked down in the case of attacker entry.

3. Govern Identity Privilege

Effective Permissions

In the cloud, privilege can be hard to see. There are many cases where identities hold unintentional abilities we never intended for them to have whether they are permissions compounding to create toxic combinations, or permissions inherited covertly. Insight into every identity’s ‘effective permissions’ is the only way to truly see every action they can take, and then strip risky access. Proper identity security will better protect critical assets.

4. Detection & Response

Anomaly Detection

Monitoring your environment and especially data access history and identity privilege use is very important. With the right technology in place, this allows anomalies to be detected like a datastore being accessed from a new identity, or an identity using a permission it never has before. Anomaly detection catches changes that create new risk or catch attacker activity early.

Remediation Technology

Once events are detected, or risky configurations are found, organizations need a security tool to help with remediation. This can be either guided remediation instructions or leveraging automation to shut down access immediately.

5. Create an Incident Response Plan

Every business in the financial sector should have a documented Incident Response plan, in fact, many financial services compliance regulations require one. This plan details exaclty what the organization will do in the event of an incident. The plan should outline what the security team needs to do, how data may be restored, how to mitigate damage, who to report the incident to, and so on. Timely reporting is a critical best practice – most acts and regulations note ‘as soon as possible’ or within 36-72 hours.

Tools to Ensure Compliance

Data Encryption and Tokenization

Data encryption is a common best practice used to protect the contents of data. It works by scrambling up sensitive data that can only be understood using an access key. Tokenization works by entirely removing sensitive data from a database and replacing it with another nonsensitive entity referred to as a ‘token.’ A good use case for an encryption tool is meeting PCI DSS requirements as data like credit card numbers should be highly protected.

Data Loss Prevention (DLP) Solutions

Data Loss Prevention tools aim to prevent data loss or leakage from your environment. This includes protecting data, maintaining compliance, and controlling access to data. Its capabilities spann across data storage monitoring, data governance, data leak detection, and data inventorying. Ideally a DLP solution, especially in the cloud, should have strong insight into data access by identities. Identities are a big target in the cloud attack path and are what attackers exploit to gain access to data via privilege.

Advanced Threat Detection and Monitoring Systems

Threat and anomaly detection tools are the next line of defense solution that monitor your environment for any unusual activity or changes. They work by examining activity data like configuration logs, or access history logs, and comparing them to secure baselines of typical activity. Monitoring tools are important to helping keep organizations in compliance as the cloud especially is a dynamic landscape.

Identity and Access Management

If protecting data and meeting compliance requirements is the goal, it is impossible to not consider identity and access security. IBM’s Cost of a Data Breach reported ‘compromised credentials’ as the number one attack vector facilitating breaches in 2022. Identities are often the key to accessing business data and applications. Identities hold any number of permissions allowing data reading, editing, copying, and deleting. Some identities hold the privilege to wipe out a business environment – so proper insight into their entitlements is critical. Least Privilege is similar to Least Access, but instead considers access from the identity angle, enforcing that identities only be granted the permissions they absolutely need to execute their job.

Cloud Security and Compliance

The Cloud is a complex web of entities – identities, data, workloads, applications, and platform configurations. All of these things interact, and at great scale. Maintaining proper compliance requires sufficient security of everything in your cloud, not just data. Consider the following cloud attack chain: A misconfiguration has left a workload (an EC2 instance) publicly accessible through a port to the internet. On this workload is a lambda function (a machine identity) used to help process files on a database (an S3 bucket). Unintentionally, the lamba function is actually significantly overprivileged and able to assume a RoleAssignment that gives it access to another database in an entirely different environment holding customer PII. Everything is connected in the cloud. Cloud Security Platforms are built for cloud-native risks that protect every step of the cloud attack path.

How to Implement an Effective Data Security Compliance Program

Identifying Key Data Assets and Risks

A sufficient data security program that falls in line with compliance requirements is contingent upon first identifying all your data and classifying it. This means knowing where exactly your data is, understanding what it is, and how important it is to your business. Not all data is created equal, and your organization will treat more sensitive assets more securely. Data tagging is a helpful procedure that will label your data by name, source and value (e.g. Project:Application: CustomerPII. A proper data inventory is a foundational step, as well as continuous scanning for new data or data movement.

Implementing Data Security Policies

Data inventory and classification is necessary to unlock the next stage: enforcing rules and policies. Implementing data security policies will help you regulate the usage and access of data. This is a critical step in meeting compliance requirements. A common data security policy is Least Access, which denotes that access to a specific application or datastore only be granted to those identities that absolutely need it.

Monitoring and Assessing Compliance

Once your data hygiene is up-to-par and policies are in place, the next step is preventing any drift out of compliance. Key to this process is leveraging a threat detection or anomaly detecting tool. These tools can detect any configuration drift, data appearing in new places, or any suspicious access or action from identities. The right tool will then alert your security teams allowing you to remediate the concerns. This sort of continuous insight into your compliance state makes things a lot easier for when your annual audit comes around. A Continuous Cloud Security Posture Management (CSPM) Solution is a great option to consider if you’re working out of the cloud.

Make Financial Data Security Compliance Easy with Sonrai

Sonrai’s deep insight into access analytics and cloud identity entitlements reveals the unintended paths to your data. The patented identity analytics combined with next-generation CSPM continuous monitoring detect when your cloud drifts out of compliance. Then your teams are alerted in an intelligent and automated ticketing workflow with guidance to remediate — or bots are sent on your behalf to align your cloud with our prebuilt financial services data security compliance frameworks.

Want to learn more about how Sonrai protects financial services from cloud threats? See our compliance solution.


What is financial cybersecurity compliance?

Financial cybersecurity compliance is the adherence of industry-based security regulations by relevant financial institutions. 

What is an example of financial compliance?

One example of financial compliance is an organization protecting and encrypting customer credit card information. This would be compliant with the PCI-DSS.

What is the difference between data security and compliance?

Data security refers to the security measures an organization puts in place to protect its data. It includes best practices, access controls, secrecy measures, and data loss prevention. Compliance refers to an organization’s ability to meet agency or federally enforced regulations that prescribe certain standards. There can be data security compliance, but other forms of compliance as well.

What security compliance standards are for finance?

There are several compliance standards for the financial services industry specifically, including: Payment Card Industry Data Security Standard (PCI DSS), The Gramm-Leach-Bliley Act (GLBA), The Sarbanes-Oxley Act (SOX), The Federal Financial Institutions Examination Council (FFIEC) and more.

How can I enforce compliance for financial data?

Implement a tool that includes both continuous monitoring to detect when there is drift away from financial data security best practice and automated remediation to correct risks. This takes the burden off manual efforts for your team.