FTC Safeguards Rule Compliance Breakdown

The deadline for compliance with the FTC Safeguards Rule is quickly approaching, and with that Rule comes several necessary steps that subject businesses must adhere to. If your organization falls under the Rule, the deadline for compliance is June 9, 2023. While this deadline, and the specifics of the Safeguards Rule, apply to certain covered financial institutions and other businesses that hold confidential data on their customers (such as CPA firms, wealth managers, dealerships, etc.), businesses of all kinds should pay attention as these rules pave the way for possible future compliance standards.

Here, we will explore every piece of the compliance puzzle to understand the requirements better and the steps a business needs to take to meet them. This information is intended as a checklist to facilitate alignment with the Safeguards Rule while highlighting action items that must be addressed along the way. Keep in mind that expert help is available to assist with these steps, and this recommended support can reduce the potential for fines and other issues related to non-compliance. 


The first facet of compliance to explore is accountability. This is a critical aspect of compliance as the FTC’s intent with the rule is to push businesses that collect sensitive consumer data to remain accountable for managing and guarding personal information. When companies take accountability to heart, it’s good for the organization and the consumer alike.

A few key components of accountability are: 

  • Designating a qualified individual to implement your company’s information

This qualified individual can either work for your company or be associated with a service or affiliate hired for this purpose. The individual does not need a specialized degree or title for this role but needs to know the business’s daily operations and how data security is involved within it.    

  • Regularly monitor and evaluate your third-party vendors.

Regular monitoring and evaluating third-party vendors a business uses is another critical step towards lasting accountability. Your business will be accountable for any cracks in data security defenses that third-party vendors create. That makes it important to understand and trust that those vendors have adequate systems along these lines. 

  • Have a qualified individual make an annual report to the Board of Directors or Senior Officer 

Adequate accountability also involves keeping the higher-level members of a business properly informed. A qualified individual responsible for developing and submitting an annual report to either a Board of Directors or Senior Officer is necessary for compliance. 

Risk Management

Risk management is another integral piece of compliance. A business must be held accountable for implementing safeguards and developing plans and systems to deal with risks before, after, and during a data security incident. 

These risk management actions should include the following: 

  • Creating and maintaining a written incident response plan (WISP)

Security events, as defined by the Safeguards Rule, include any incident involving “unauthorized access to or misuse of information stored on your system or maintained in physical form.” A written incident response plan functions as a response and recovery protocol document, dictating what actions are needed and in place when an incident occurs. A WISP’s elements should include the business’s processes in a security event, the roles and responsibilities of decision-makers, and internal and external communications and information sharing.  

  • Completing a written risk assessment along with periodic reassessments

An in-depth risk assessment is vital for creating a WISP and will also help a business know what sensitive data it holds and how this is stored. The evaluation also needs to assess and analyze any possible threats relating to customer information. Regular reassessments are also required to adapt to a constantly evolving threat landscape.  

  • Implementing customer information safeguards

With a plan and assessment in order, proper safeguards to better protect customer information must be implemented. These safeguards aim to control the risks spotlighted in the risk assessment. Some possible safeguards include implementing and reviewing access controls, customer information encryption, and multi-factor authentication for anyone with access to customer information. These safeguards should also be tested regularly to assess how effective they are. 


The people who work for a business, specifically those with access to sensitive customer information, are critical to security. Employees and staff need to understand their role in compliance, how important data security is, and where their actions and habits can be improved for better security. 

This can be accomplished by: 

  • Maintaining a log of authorized users’ activity.

Keeping a log of authorized users’ activity allows a business to monitor who is accessing customer information and when they are doing so. This can help pinpoint security weaknesses while also detecting any unauthorized access. 

  • Adequate staff and employee training

Staff and employee training is a must to achieve compliance. A security and response plan is only effective if those in charge of implementing it know what they are doing. Internal vulnerabilities are a likely culprit for data breaches, and organizational security is only as effective as its least cautious employee. 

  • Having policies and procedures in place

Policies and procedures relating to security must be in place for personnel to stick to them. These policies need to be easily accessible and available for all to ensure that employee actions are in line with compliance requirements. 

Data Protection 

Data protection is the goal of all security efforts relating to the FTC Safeguards rule. All other elements aim to achieve this, but the components of proper data protection are also a required aspect of compliance. 

Data protection for FTC compliance includes: 

  • Multi-factor authentication for those accessing any consumer data

Multi-factor authentication helps to ensure that only authorized users of consumer data can access this. It can reduce the risk of hacker-exploited vulnerabilities and compromised staff login information.  

  • Continuous monitoring or annual penetration testing and bi-annual vulnerability assessments

Monitoring safeguards and vulnerabilities provide insight into where security improvements are needed and potential points of entry for threat actors. Penetration testing allows for real-world displays of any safeguards in action to assess effectiveness. 

  • Data encryption at rest and in motion 

Encryption is a crucial security measure that makes it more difficult to access consumer data. This is needed when data is stored and transferred, as it remains a target for cybercriminals regardless of where it resides within an organization’s systems. 

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