Global data privacy regulations are on the rise due to heightened consumer concerns and instances of personal information misuse, and Gartner predicts that by the end of 2024, 75% of the world's population will be covered by modern privacy laws. As a result, organizations are urged to prioritize identifying, categorizing, and protecting their data to meet compliance requirements, manage risks, and enhance overall data security. Data classification, involving visual labeling, metadata application, and the use of technology like data discovery and data classification solutions, is highlighted as a crucial step in accomplishing that, and organizations are beginning to recognize that building an effective compliance strategy with such tools can deliver significant business benefits.
This blog aims to briefly touch on several prominent privacy regulations, including the GDPR, HIPAA, ITAR, PCI DSS, SOX, and others, and shed light on how data classification can be instrumental in achieving and optimizing compliance.
What Are the Business Benefits of Data Classification?
Data classification, despite sounding like yet another security solution that could only serve to cause business friction, actually plays a crucial role in benefiting businesses on various fronts. Adopting a user-driven classification approach ensures consistent enforcement of controls, rules, and policies throughout the organization. Beyond providing security against external threats, data classification guards against accidental data loss within the organization by using metadata to trigger actions in downstream security and data management solutions. This approach also enhances the effectiveness of security incident and event monitoring tools, enabling the early detection of unusual or risky user behavior.
Moreover, user-driven classification processes contribute to building a culture of security awareness across the organization. This empowers all employees to understand the value of the information they handle daily and encourages responsible data treatment. Facilitating safer collaboration, managing data more effectively, and improving operational efficiency are all equally important benefits. With data protection traveling with individual pieces of data, organizations can integrate systems, share information freely, and avoid unnecessary costs associated with hoarding vast amounts of data.
Unfortunately for organizations, compliance with emerging data privacy regulations is non-negotiable and, as a result, is often seen as a burden more than something that could benefit the business. In reality, however, a comprehensive, proactive approach to compliance -- fueled by a robust data classification solution -- can turn a challenge-ridden pain point into a competitive differentiator. By classifying data and embedding classification labels as metadata within files, businesses can audit and monitor access to sensitive information, keeping a detailed trail of policy discrepancies. This not only helps in rapid identification and mitigation of potential breaches but also serves as evidence of appropriate data control and documentation, thereby avoiding crippling fines and legal consequences.
Data Classification for GDPR
The General Data Protection Regulation (GDPR) is a comprehensive data protection and privacy regulation enacted by the EU to enhance the rights of individuals (i.e., data subjects) regarding their personal data. Implemented in May 2018, GDPR aims to provide citizens with greater control over their personal information, affording them specific rights, and establishes strict guidelines for organizations handling such data. It introduces principles such as consent, data minimization, and the right to be forgotten, compelling businesses to be transparent about data processing practices and ensuring the secure handling of sensitive information. GDPR applies to any entity that processes the personal data of EU residents, irrespective of the organization's location, imposing significant fines for non-compliance and emphasizing the importance of safeguarding individuals' privacy in the digital age.
In compliance with the GDPR, organizations are required to conduct a data inventory to collect and manage records of processing activities, including establishing the categories of data and the purpose of processing, all of which can be facilitated by a data classification solution. Similarly, organizations are also required to conduct a data protection impact assessment (DPIA) that covers all processes involved in the collection, storage, use, or deletion of personal data, along with the data's value and level of confidentiality. Specific categories of data that are deemed "special" by the GDPR (e.g., healthcare data, biometrics, ethnic data, etc.) require further protection.
Data Classification for HIPAA
The Health Insurance Portability and Accountability Act (HIPAA) is a U.S. legislation enacted in 1996 to safeguard the privacy and security of individuals' health information. HIPAA establishes national standards for the protection of sensitive patient data, known as Protected Health Information (PHI), and aims to ensure the confidentiality, integrity, and availability of such information. The law applies to healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates, regulating the use and disclosure of PHI and granting patients certain rights over their medical information. HIPAA also includes provisions for electronic transactions and code sets to standardize healthcare data interchange, promoting efficiency and uniformity in the healthcare industry while prioritizing the confidentiality of patient records.
Data classification in healthcare goes beyond compliance; it becomes a cornerstone for ensuring patient trust and maintaining the integrity of critical health information. HIPAA compliance requires organizations to group data by its level of sensitivity and identify where it is stored, received, maintained, or transmitted. Data classification can automate the identification and organization of such data, enable streamlined auditing and monitoring capabilities, and apply consistent policies and controls based on sensitivity.
Furthermore, being that PHI is a subset of Personally Identifiable Information (PII), data classification capabilities as they apply to HIPAA compliance are similarly useful for complying with regulations that protect other forms of PII, including the Children’s Online Privacy Protection Act (COPPA), Family Educational Rights and Privacy Act (FERPA), and Gramm-Leach-Bliley Act, among others.
Data Classification for ISO 27001
ISO 27001 is an international standard for information security management systems (ISMS), providing a systematic approach to managing and protecting sensitive information within an organization. Developed by the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC), ISO 27001 outlines a set of requirements and best practices for establishing, implementing, maintaining, and continually improving an ISMS. The standard covers a wide range of security aspects, including risk management, access controls, cryptography, and incident response, with the goal of ensuring the confidentiality, integrity, and availability of information. While not mandatory, ISO 27001 certification demonstrates an organization's commitment to information security and compliance with globally recognized standards, instilling confidence among stakeholders and customers in the effective management of sensitive data.
ISO 27001 Annex A 5.1.2 states that information must be classified based on various factors, including legal requirements, value, criticality, and sensitivity to unauthorized disclosure or modification. To accomplish this, Annex A Control 5.12 encourages the creation of a classification scheme in which information assets are categorized by sensitivity. Annex A 5.13 then defines a set of procedures for information labeling.
Data Classification for ITAR
The International Traffic in Arms Regulations (ITAR) is a set of United States government regulations that control the export and import of defense-related articles, services, and technology. Administered by the U.S. Department of State, ITAR aims to safeguard national security interests by restricting the access and transfer of sensitive military and defense-related information to foreign entities. ITAR regulates the export of items listed on the United States Munitions List (USML) and imposes strict compliance requirements on companies involved in the defense industry, including manufacturers, exporters, and brokers. Entities subject to ITAR must obtain proper authorization, maintain robust security measures, and adhere to stringent documentation and reporting procedures to ensure the controlled and lawful transfer of defense-related materials and technology. Non-compliance with ITAR can result in severe penalties, including fines and legal consequences.
ITAR requires a data-centric approach to data protection that allows the greatest possible control over the handling, use, and export of sensitive data both within the company and to external organizations, particularly given the international nature of the data being handled. Because the perimeter around ITAR data is often less defined, the ability to apply export control policies (often via data classification) that follow the data as it travels is paramount.
Data Classification for PCI DSS
The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure the secure handling of credit card information during transactions. Developed by major credit card companies, including Visa, MasterCard, and American Express, PCI DSS establishes a framework for businesses that handle payment card data to implement robust security measures. The standard encompasses requirements for network security, access controls, regular monitoring, and encryption, aiming to protect sensitive cardholder information and prevent data breaches. PCI DSS compliance is mandatory for merchants, service providers, and any entity involved in payment card transactions, with different levels of requirements based on transaction volume. Adherence to PCI DSS helps safeguard customer data, builds trust in payment systems, and reduces the risk of financial fraud. Non-compliance can lead to fines, increased transaction fees, and reputational damage for businesses.
All cardholder data must be classified by type, retention permissions, and necessary level of protection to ensure that the proper security controls are applied and verify that all cardholder data in the environment is documented. Furthermore, the scope of the data environment must be defined and data processing guidelines must be created and followed. Finally, strict control over the storage, accessibility, and distribution of cardholder data must be maintained at all times.
Data Classification for SOX
The Sarbanes-Oxley Act (SOX) is a U.S. federal law enacted in 2002 to enhance corporate governance and financial transparency in publicly traded companies. SOX compliance involves adhering to specific regulations that aim to prevent financial fraud, ensure accurate financial reporting, and protect the interests of shareholders. SOX compliance is essential for public companies to maintain accountability, instill investor confidence, and mitigate the risk of fraudulent financial practices. Non-compliance can result in severe penalties, including fines and imprisonment for corporate executives.
Similarly to ISO 27001, SOX compliance doesn't mandate data classification, its benefits assist in complying with several sections of the law. In summary, implementing a data classification solution allows for the consistent application of controls for financial reporting (Section 404), prohibits the unauthorized alteration, destruction, or concealment of records in tandem with downstream security solutions (Section 802), and ensures the accuracy of financial reports (Section 302).
Data Classification for Other Regulations
While data classification will certainly aid organizations in their efforts to comply with some of the longer-standing data privacy regulations like the ones listed above, its benefits don't end there. A comprehensive solution will not only address organizations' current data protection needs but also keep up with the ever-growing regulatory landscape. Data classification solutions play a crucial role in addressing the diverse and evolving data protection needs of organizations that must comply with more modern or niche regulations like Controlled Unclassified Information (CUI), Cybersecurity Maturity Model Certification (CMMC), Electronic Product Monitoring System (EPMS), National Institute of Standards and Technology (NIST), and Protection of Personal Information Act (POPIA), among many others.
These comprehensive solutions offer a flexible framework that allows organizations to customize classification criteria to align with the specific requirements of these regulations. For instance, they enable the identification and segregation of Controlled Unclassified Information, ensuring that such data receives the appropriate level of protection. Additionally, data classification tools aid in mapping security controls and practices outlined in regulations like CMMC and NIST, helping organizations assess and enhance their cybersecurity posture. By providing a versatile and adaptable approach to data management, classification solutions become instrumental in navigating the intricate landscape of diverse data protection regulations, ensuring comprehensive compliance across various industry-specific and regional requirements.
Fortra’s Data Classification Avoids Common Pitfalls and Optimizes Compliance
The regulatory landscape is constantly in flux, but some organizations are finding that their solutions can't quite keep up. On the other end of the spectrum, however, others are finding that their solutions are keeping their data in the right hands, but causing needless business friction in the process. Fortra's Data Classification Suite (DCS) strikes the balance between ease of deployment and scalability, meaning that it can address current compliance needs on day one and tackle future needs as the business grows, all while avoiding common data classification pitfalls along the way. Learn more about our comprehensive compliance solution, its key features, and its business benefits in our compliance solution brief, and schedule a demo today to see it in action.
