How To Ensure Your Accounting Practice Is FTC Compliant

Navigating the intricacies of compliance can be challenging, especially when it involves protecting sensitive financial data.  

For accounting practices, and bookkeepers alike, the Federal Trade Commission (FTC) has set stringent rules which must be followed to avoid large fines, reputational damage and limit potential legal liability.  

Let’s dive into how to make sure your accounting practice aligns with the FTC’s expectations. 

Understanding FTC Compliance in Accounting 

Gramm-Leach-Bliley Act (GLBA) 

The Gramm-Leach-Bliley Act, or GLBA, sets the framework for financial institutions, including accounting practices, to safeguard sensitive customer data. The Act includes specific rules regarding privacy notices, information sharing, and data protection. 

The FTC Safeguards Rule 

Under the GLBA, the Safeguards Rule mandates financial institutions, which includes accountants, to develop a written information security plan (WISP) tailored to their size, complexity, and nature of their activities. This plan should include: 

• Designating an individual to coordinate the information security program. 
• Identifying and assessing risks to client information. 
• Designing and implementing safeguards to control the risks. 
• Regularly testing and monitoring the effectiveness of these safeguards. 
• Updating the security program as necessary to respond to evolving risks. 

Privacy Rule 

The Privacy Rule of the GLBA requires accounting practices to provide privacy notices to their clients explaining how they collect, use, and protect their information. Clients must also be informed of their right to opt out of information sharing with third parties. For all Practice Protect clients we provide a fully complete list of compliance documentation to help ensure you meet all ongoing FTC requirements.  

Steps to Achieve FTC Compliance

1. Designate a Qualified Individual 

Assign a person within your organization, or a trusted service provider like Practice Protect, to oversee the implementation and maintenance of the security compliance program. The Qualified Individual will be responsible for ensuring policies are up to date.

2. Conduct a Risk Assessment

Identify the potential threats to client data within your organization. This includes evaluating both physical and digital security measures to detect vulnerabilities which could lead to unauthorized access or data breaches. Again, this is something during your onboarding with Practice Protect we complete on your behalf. 

3. Develop and Implement Security Policies

Based on your risk assessment, design and implement appropriate security policies. These policies will include: 

• Encrypting sensitive data. 
• Restricting access to confidential information. 
• Regularly updating software to patch security vulnerabilities. 
• Implementing secure communication channels for sharing client data.

4. Educate and Train Your Team

Compliance isn’t a one-person job. Ensure your entire team understands the importance of protecting client information and is well-versed in your firm’s security policies. Practice Protect provides on-demand security training and regular security training webinars for clients. 

5. Create and Disseminate Privacy Notices

Develop clear and concise privacy notices that detail your data collection, usage, and sharing policies. Ensure clients understand their rights and how to exercise them.

6. Monitor and Review Compliance

Regularly test your security systems and review your compliance program to identify areas that require improvement. Update policies and procedures as needed to respond to changes in regulations and evolving security threats. 

Frequently Asked Questions

How often should I update my compliance policies? 

Your compliance policies should be reviewed at least annually, or whenever significant changes occur within your organization or the regulatory environment. Regular reviews ensure your policies remain relevant and effective. 

What should I do if I suspect a data breach? 

Act quickly to contain the breach and prevent further damage. Notify your Designated Individual, assess the impact of the breach, and follow legal requirements regarding client notification. Implement corrective measures to prevent similar breaches in the future. 

Is encryption mandatory for FTC compliance? 

While the FTC doesn’t explicitly require encryption, it’s considered a best practice for protecting sensitive data. Implementing encryption for data storage and transmission helps safeguard against unauthorized access. 

Wrapping It Up 

Ensuring your accounting practice is FTC compliance isn’t just about ticking off a checklist; it’s about building trust with your clients and protecting their sensitive information. By following the guidelines laid out in this article, you can establish a robust compliance program that helps your firm navigate the regulatory landscape confidently.