June 9, 2015,
Banks, Council of Ministers, data protection, EU General Data Protection Regulation, European Commission, European Parliament 
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According to Varonis (Nasdaq:VRNS), a leading provider of software solutions for unstructured, human-generated enterprise data, banks will be among the first to be hit with massive fines for falling foul of the EU’s General Data Protection Regulation (GDPR).
In a poll conducted at Cebit – Europe’s largest IT show – the company revealed the level of how unprepared the financial services sector is to life under GDPR. Notably, 50% of all respondents that took part in the survey worked within the European banking sector.
According to Varonis, despite the small sample size of 145 respondents, its survey reflects a much wide degree of how under prepared the financial services sector is as well as the nervousness that has penetrated the wider banking community.
Key survey findings:
- 80% think that a bank is the most likely organization to be the first to suffer the maximum fine (of €100m) for failing to meet the requirements of GDPR
- When asked in which country the bank is most likely to be based, of those surveyed 30% said Germany, 28% said US and 22% said another EU country
- Only 48% of respondents thought that their organization could report a breach within the proposed 72-hour deadline (which could be reduced to 24 hours when the draft Regulation is agreed by the European Parliament, Council of Ministers and the European Commission)
- Only 31% have a plan to enable them to comply with GDPR and only a 33% have the processes and technology in place to prevent their organization from getting a large fine as a result of GDPR
- 71% of respondents didn’t know what companies need to do in order to comply with GDPR
- Only 22% of respondents knew that the maximum fine under the new legislation is planned to be €100 million – most thought it was only going to be €10m (41%) or €1m (32%) and a small number thought the fine could be €1bn
- A third of respondents thought that the GDPR will come into effect in 2015, a further 28% thought it would take another year to 2016, 7% thought it would never become law, and 32% did not know when it would become law.
“From looking at this survey, it’s not clear whether the nervousness stems from worries over data protection standards where many banks have as yet to conduct data protection impact assessments (DPIA) across their whole business or whether there’s a fear that supervisory authorities in Europe will take action as a result of new powers that they’ll have under GDPR.
“Either way, the message is clear – all banks that operate within the EU need to start to take action today in order to avoid running the risk of being fined after the transition period of the GDPR ends, likely to be in 2017,” observes Professor Bryan Foss, a leading data protection and governance expert and former director of IBM’s financial services global business.
The survey tends to indicate that education and training in what banks and other financial services organisations should do in order to protect business continuity is now a major risk management issue.
And most respondents assume that GDPR will impact the financial services sector more than any other once the Regulation is imposed.
David Gibson, Varonis Vice President, adds:
“We can expect a major upgrade of the EU’s General Data Protection Regulation in the next 12-24 months. Fines are expected to be 2% of annual income up to €100m for failing to protect EU citizens’ personal data. And there could also be a significant number of individual claims in addition to fines, so the sums involved could be a substantial cost, even to a large enterprise.
“The new Regulation will also mark a shift from a self-regulated environment to an enforcement regime, which will affect any organization storing personal identifying information on European citizens (including US companies operating in the EU).
“Organizations need to be prepared to protect customer data and prove that they are doing so to an appropriate degree of care, report any breaches and remove any data at the request of EU citizens.”
Hazel Grant, partner and Head of Data Protection at Fieldfisher LLP says that given the extended scope and reach of GDPR as well as the increased nature of fines, the Varonis survey raises important concerns as to the extent that organisations are ready to comply with the terms of GDPR and manage any data breach scenario.
“The scale of potential fines will be closer to those handed down for bribery or anti-trust violations and for the financial services sector data protection compliance will be every bit as important as FCA regulatory compliance.
“Even though the GDPR may not be in full force until 2017, there’s considerable work to be done now by those seeking to offer goods and services to data subjects in the EU and to ensure that they’re in the best possible position to comply with the GDPR or run the risk that they’ll also suffer significant reputation damage to their businesses for failing to comply,” warns Hazel Grant.
Varonis has produced the following tips for organisations to keep unstructured data in compliance and enable them to prepare for life under GDPR:
- Minimize data collection – the proposed GDPR has strong requirements that companies limit the data they collect from consumers
- Report promptly – data breach notification is a new requirement that EU companies will have to handle
- Retain carefully – the GDPR minimization rules apply not only to the scope of the data collected but also how long it’s kept. In other words, you shouldn’t be storing data longer than is necessary for its intended purposes
- Beware the new definition of personal identifier – GDPR expands the definition of personal identifiers and this change is important because the EU law centres on protecting these identifiers
- Use clear and easy to understand language – companies will need to obtain explicit consent—an ‘opt-in’ from the consumer—when collecting data
- Find your delete key – ‘right to erasure’ means that when consumers withdraw consent on data they’ve given, the companies will have to remove it
- Remember cloud computing doesn’t escape from requirements under GDPR – the new EU Regulation follows the data.
The full guide in English and German can be downloaded here
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