Guide to Privacy Compliance [Examples, Challenges, & How to Comply]

June 2023: After an investigation by the Office for Civil Rights, Yakima Valley Memorial Hospital paid $240,000 in HIPAA settlement after their security guard accessed the medical records of 419 individuals without authorization. Penalties like this are common when businesses take privacy compliance laws lightly.

Let’s dive deep into privacy compliance and understand how you can avoid these penalties by implementing the right steps.

TL;DR Privacy compliance protects sensitive data, prevents legal penalties, and maintains business reputation by adhering to laws like GDPR, HIPAA, and CCPA. Building a privacy compliance program involves identifying relevant laws, conducting risk assessments, implementing controls, training employees, and monitoring systems regularly. Using automation tools for compliance helps manage controls, collect evidence, and ensure continuous compliance with minimal manual effort.

What is privacy compliance?

Privacy compliance is the indication of an organization’s adherence to data protection laws and regulations that govern the collection, processing, transmission, and management of sensitive or confidential data. It includes complying with regulations like HIPAA, GDPR, or CCPA to protect a business from breaches, unauthorized access, and unintentional leakage. 

Data privacy compliance regulations may or may not be compulsory for your business. It is not a yes or no question and depends on a plethora of factors. These commonly include the type of data you process, primary location where your business operates, industry type, size of your organization, service you offer, and more. 

What is a privacy compliance law?

Privacy compliance law is a legal framework that ensures organizations meet regulatory requirements for handling personal information, including collection, storage or processing of data. Non-adherence to the law can result in data breaches which may initiate investigations by authorities or lead to fines and penalties.

Privacy compliance laws apply to all organizations that collect, process, or store personal data. These laws aim to balance privacy protection with legitimate data use, adapting to evolving technology and data practices. 

Examples of privacy compliance laws include GDPR (EU), CCPA (California), and PIPEDA (Canada). Non-compliance to such laws often result in fines and legal penalties and can even lead to imprisonment.

Why is privacy compliance important?

Privacy compliance helps to protect customer data, secures business critical information, and minimizes the chances of penalty due to non compliance. 

In an ever changing landscape of regulations, privacy laws undergo frequent updates, thanks to the increasing concerns over customer privacy rights and security breaches. 

If your business handles sensitive customer or vendor data, adherence to compliance laws is not an option. In many cases, certifications for security and privacy regulations like ISO 27001 and SOC 2 is a sales unblocker. 

Here are three main reasons why you should follow privacy laws:

To avoid legal thick soup

In 2021, Europe’s privacy watchdog GDPR slapped a fine of $887 million (or 746 million euros) on retail giant Amazon for breaching data protection regulations. 

In May 2023, tech giant Facebook was forced to pay their way out of a data collection scandal. GDPR fined them 1.2 billion euros ($1.3 billion) and ordered them to halt the unlawful data transfer from EU users to the United States. 

For billion dollar companies, recovering from these financial shocks is just a matter of days. However, small businesses or even enterprises may not recover from the impact of heavy financial blows. 

Incidents like these show how unforgiving regulatory bodies can get when it comes to non compliance. It highlights the importance of keeping your compliance guards up, all time.

To protect brand image

Penalties due non compliance are not the only concern. Even if you can afford to pay your way out of a legal crisis and recover from the loss, the reputational damage won’t be an easy recovery. 

Take the Cambridge Analytica and Facebook scandal for example – a harrowing case of misuse of personal data to influence elections, this incident left an irreversible mark in the image of the highly prestigious institution. 

Tech companies like Google, Facebook, and Amazon are notorious for hoarding customer data, but this hardly impacts their bottom line as they are monopolies. For small to medium sized businesses with multiple competitors, one scandal = game over. 

To mitigate security incidents

Security breaches are costly, chaotic, and complicated. It eats up people bandwidth, thins your investment budget, and hampers business continuity. It’s not a risk worth the headache, time, and money. 

It is crucial to note that a data privacy compliance framework in itself doesn’t guarantee defense against breaches. Rather, it is your controls, processes, and measures that work together to minimize the possibility of successful breach. 

Privacy compliance frameworks or laws ensure that you have these systems in place and they work effectively. 

Privacy compliance laws 

There are dozens of regulatory requirements that help you become privacy compliant. Let’s understand some of the common frameworks. 

Here are the 3 common privacy compliance frameworks:

HIPAA

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law in the United States. HIPAA aims to standardize the flow of healthcare information and protect sensitive patient data like medical records. 

If you run a healthcare business or provide a service for one, then in all probability you process, transmit, and store protected health information (PHI). This makes you liable to the HIPAA law. 

HIPAA has five titles, of which the Title II (Administrative Simplification) is pertinent to healthcare service as it is concerned with the privacy and security of health information, violations, offenses, and penalties.  

The administration simplification act consists of five rules relating to privacy, transactions and code sets rule, security, unique identifiers, and enforcement. Let’s understand what the privacy rule entails. 

HIPAA Privacy Law Compliance

HIPAA’s privacy rule protects personally identifiable health information (PII) stored or transmitted via electronic means. PII refers to any data that can be used to identify an individual directly or indirectly. 

The privacy rule applies to Health Plans, Health Care Providers, Health Care Clearinghouses, and Business Associates (BA). 

The goal of the privacy rule is to protect sensitive health data while providing and promoting the highest quality of care. It works on the principle of “minimum necessary rule”, meaning that covered entities should limit the use and disclosure of PHI to only what is necessary to perform a particular task. 

Under the privacy rule, patients have the right to view or receive copies of their medical information, request an amendment of their health records, decide who can view their health information, see an accounting of their non routine disclosures, receive a notice of the privacy practices, and lodge a complaint. 

Covered entities can disclose PHI if the data owner requests access to their information or if the Department of Health and Human Services (HHS) is conducting a compliance investigation. 

There are six purposes and scenarios in which a CE can disclose PHI without the individual’s permission: 

1. If the PHI owner requests access
2. For activities like treatment, payment, or health care operations
3. Taking informal permission in case where the individual is incapacitated, in an emergency situation, not in a condition to make a professional judgment, or the disclosure is evaluated to be in the patient’s best interest
4. If the use or disclosure is required to comply with the administrative simplification rule
5. When used for public interest for benefit like to comply with a law, for research purposes, if it helps to prevent a serious threat to the individual’s life, and more
6. If the PHI fall under the definition of “limited data set” (data from which direct identifiers is removed) 

If you are a covered entity, you must implement administrative requirements, no matter the size of your health care facility. These requirements include: 

• Develop and implement privacy policies or procedures aligned with the privacy rule
• Designate a privacy official responsible to develop and implement these policies and procedures
• Train your employees on the policies and procedures to help them conduct their duties securely
• Mitigate security incidents that result in PHI disclosure
• Implement adequate administrative, physical, and technical safeguards to minimize intentional or unintentional PHI disclosure
• Set up a process to allow patients to lodge complaints regarding compliance with the privacy rule
• Document and retain policies, procedures, notices, complaints, and designation up to six years from the date of creation
• Do not retaliate against an individual for exercising their rights under the privacy rule

If you fail to comply with a privacy rule requirement, the HHS may impose penalties ranging from $100 per failure up to $25,000 a year for multiple violations. 

In cases of criminal penalties (intentional disclosure of PHI), the individual may face a fine of $50,000 and one year imprisonment. It may go up to $250,000 and up to ten years in prison if the case involves false pretenses. 

Use Sprinto to map, manage, and monitor HIPAA requirements from a single dashboard. Automate workflows, implement the right privacy controls, train your employees on the security practices, publish HIPAA aligned documentation, and capture compliance evidence for audit success. Learn more.

CCPA

The California Consumer Privacy Act (CCPA) is a state law that protects consumer privacy rights for California residents. Effective from January 2020, the bill applies to all california based businesses and nonprofit entities that 

1. Collect personal consumer information
2. Exceeds $25 million in gross revenue
3. Earns 50% or more of the total revenue by selling personal consumer data

CCPA gives the following rights to consumers:

• Consumers have the right to request a business to disclose the categories of personal information they collect, along with the sources from which it is collected
• You must provide adequate transparency about the information and purpose for which you intend to use the information
• If a customer requests you to delete their personal information, you must comply after verifying the request
• If your business personal information of customers, they have the right to request the disclosure of its categories, purposes, and the third parties who have access to the data. 
• If a customer chooses to opt out of the sale of their personal data, you cannot discriminate against them for exercising this right. 
• Discrimination includes selling poor quality goods or quoting a higher price, with the exceptional cases where the difference is justified by the value provided by the data. 

Read: The smartest way to fastrack CCPA compliance

GDPR

The General Data Protection Regulation is a European Union regulation on information privacy. If your business processes personally identifiable data of a EU resident, it is liable to GDPR regulations. Here are seven laws relating to privacy you should be familiar with:

Lawfulness, fairness, and transparency: Lawfulness means you should have a solid and legal ground for collecting data. Examples include having user consent, to fulfill a legal obligation, to cater to public interest, or a legitimate interest. 

Fairness falls on the same lines as lawfulness – implying that you should process data only when necessary. In other words, don’t mislead or deceive the data owners. 

Transparency means you communicate the purpose and intent of processing data without holding any information. You can do this by issuing a privacy notice to your data subject. 

Purpose limitation: This principle aims to ensure that you limit the data usage only to its original intended purpose and – clearly communicate the purpose to the data subjects. If you need to use it for anything else, you should ask for consent again. 

Data minimization: Collect only the amount of data necessary to fulfill your purpose. With cloud accessibility, we often end up gathering data we dont require – this is a clear violation of GDPR. 

For example, if you run an online food delivery business, customers needn’t add their age or profession in the contact/ address page. 

Accuracy: As the data controller or processor, it is your responsibility to ensure that the collected data is correct, updated, and complete. 

Storage limitation: When the data has served its purpose, delete it from your storage. Similar to the principle of data minimization, storage limitation aims to reduce the amount of unnecessary data. Set up your system in a way that anonymizes or automatically deletes data after the required period. 

Integrity and confidentiality: Concerned with data security, the principle of integrity and confidentiality aims to protect private data from security threats like unauthorized access and data damage. 

As a controller, you must protect data from unlawful processing, accidental leakage, destruction, and tampering with the original form. 

Accountability: How will GDPR regulators know that you are taking the necessary measures as you claim to for protecting data subject’s privacy? The accountability principle, as the name suggests, holds data controllers accountable by asking for audit proof such as documentation. 

Sprinto helps you build a clear, comprehensive, and chaos free GDPR program in three steps. First we identify which systems in your organization collect and process personal data. Next, we implement the technologies and policies to protect the data. Then we communicate your commitment to data privacy across relevant channels. See how. 

How to build a privacy compliance program

In the digital age adherence to privacy laws is not just a regulatory obligation, but a competitive differentiator. But building a privacy compliance program from the ground up is easier said than done. 

If you are planning to build one, these steps can help you understand what it entails. 

Step 1: Know your obligations

Complying with privacy laws, unfortunately, is not very straightforward, nor is it objective. This is because your obligations to privacy regulation boils down to the type of data you process, the location where you operate, and the type of industry your business falls under, among many others. This is what we mean by “know your obligations”.

You can check if GDPR applies to you and who should follow HIPAA. In some cases, your organization may be liable to more than one regulation. 

Step 2: Conduct a risk assessment

Once you know which privacy regulation is right for your business, it is crucial to understand which components or elements of data are not compliant with the applicable regulation(s). 

A thorough risk assessment should highlight

• The risks associated with third-party vendors privy to sensitive information
• A list of where the data is stored
• A log of users and stakeholders who can access it
• A detailed historical log of data breaches
• Assign an impact score on each risk based on industry benchmarks
• Vulnerability tests and gaps found using the test

You can also check how to conduct a HIPAA risk assessment. 

Step 3: Get everyone on board

From employees to board members and investment partners, everyone should be on the same page about the program’s strategy. 

The IT managers and board of directors should come to an agreement on the budget, technology, timeline, stakeholders, and other factors. 

Get an employee training and communication plan detailing the learning modules, time to complete and who should follow it from the human resource team. Every function and stakeholder should understand and agree to the privacy protection practices. 

Your marketing or PR team should communicate the adopted changes regarding data privacy to existing and potential customers. 

Step 4: Create and document policies

Privacy policies are written documents that serve as a legal declaration to customers and stakeholders about your practices. Much like a notice of terms and conditions, your policies should be thorough, customized to your business requirements, and offer a high level of transparency. 

Writing policies from scratch is a tedious and time consuming activity. Depending on the type of data you handle, applicable regulations, and company size, policy building can push your compliance program by months. 

We recommend using a tool like Sprinto that offers a comprehensive library of pre-built customizable policies to kickstart your project without bleeding any human bandwidth. 

Step 5: Implement policies and controls  

Now that you have the basics sorted, implement the right technology and security programs to comply with the data privacy laws. These may include setting up access controls, using threat detection and intrusion systems, setting up MFA, encrypting data, practicing data minimization, and more. 

You can do this using automation tools if you want to get compliant in weeks, or manually if you have years to spare. 

Step 6: Monitor controls and manage evidence 

Implementing controls and processes make sense only as long as they work efficiently. Failing controls = non compliance. This is also a tedious and complex process that heavily relies on manual effort. 

We recommend using a compliance automation tool like Sprinto which connects with your system to continuously and comprehensively monitor controls. It shows passing, falling, and critical checks that require your attention from a single dashboard. The tool also collects evidence for subsequent review in an auditor friendly manner. 

Step 7: Continuous compliance and certification

Managing a data privacy compliance project is not a one time activity. You cannot set up the controls and forget about it. Privacy regulations are complex and continuously changing. As you scale and grow, your requirements and processes will change and demand your attention for the smallest update. 

This means if you are certified, its validity may expire after a point in time unless you have a continuous compliance management system to manage the changing privacy laws

It is important to understand that certification may not be mandatory or applicable. For example, there is no official certification body for HIPAA. The governing body (HHS’ Office for Civil Rights or OCR in this case) shows up only when you violate a law. Learn more. 

On the other hand, you can be officially GDPR certified from authorized bodies. 

Challenges of privacy compliance

Compliance is complex. If you are a newbie in the compliance game, expect to face hurdles like:

Which regulation applies to me?

If your business collects and processes large amounts of data as part of its everyday operation, you may face triaging issues. Many businesses struggle with data identification and classification – a much needed step to determine the applicable regulations.

Keeping up with the compliance chaos

Juggling too many processes often becomes overwhelming and chaotic. Ensuring employee training, developing business specific data privacy policies, documenting internal activities, maintaining an updated inventory is easier said than done. Most businesses start out smooth but eventually end up in a pit of compliance confusion and chaos. 

Staying within the budget

A common mistake inexperienced businesses make is underestimating the budget. Siloes, tools, outdated and manual systems, external consultants, and internal pressure on the bandwidth is a recipe for a budget disaster. Businesses end up spending way more than they intended to while planning. 

How Sprinto helps you build an effective privacy compliance program?

Building a privacy compliance program from scratch is not easy. Navigating through the complexities of government laws and regulations is stressful, prone to error, and expensive. 

The easiest, fastest, and smartest way to manage compliance is by using a compliance automation tool like Sprinto. 

Sprinto is a smart compliance management tool that connects with your cloud setup to consciously monitor controls, collect evidence automatically, train your employees and flag non compliant activities. 

With Sprinto, you work with compliance and audit experts who help get certified and maintain continuous compliance without breaking a stride.

Want to know more about how we help companies like yours build a privacy compliance program? Talk to our friendly experts!

FAQs

Why is data privacy compliance important?

Data privacy compliance helps businesses avoid legal consequences of non-compliance, mitigate security risks, and follow laws set by governmental entities. 

Is data privacy compliance compulsory?

Data data privacy compliance may be mandatory for your business depending on several factors including the nature of data you process, the applicable privacy program, the location where your company operates, and the industry. 

How do you monitor privacy compliance?

You can monitor privacy law compliance using an automation tool like Sprinto that helps you manage end to end compliance activities by continuously monitoring your controls, training employees, collecting audit evidence, and offering pre-built policies. 

What is the key role of privacy compliance?

The key role of privacy compliance is to protect individuals’ personal information and ensure organizations handle data responsibly and ethically. It also helps organizations avoid legal penalties, reputational damage, and financial losses associated with data breaches or mishandling of personal information.

How does a business ensure privacy compliance?

Ensuring privacy compliance includes conduct regular privacy impact assessments, developing and enforcing clear privacy policies, practicing data minimization, conducting regular audits and updates and establishing processes for data subject requests and breach responses.