Does Cloud adoption make regulatory compliance harder for Financial Service Businesses?
Many financial service entities have leveraged cloud computing benefits to strengthen their competitive edge. For example, the cloud's enhanced interoperability, scalability, and adaptability have been central to the growth of firms like UK's Starling and Monzo banks.
Some financial services organisations hesitate to adopt cloud technologies due to fears that they may face regulatory compliance challenges.
Debunking Myths On Cloud Regulatory Compliance
Most financial services firms base their decisions to migrate to the cloud on myths that often undermine cloud adoption value.
Adopting the Cloud May Compromise Data Privacy and Protection
Some financial services companies hesitate to migrate to the cloud since they fear it is harder to comply with regulatory laws and standards if a firm becomes more dependent on a cloud service provider.
A recent survey revealed that 80% of respondents in the insurance and banking industry said that security, reputation, and data availability are key criteria for choosing a cloud service provider.
However, this is untrue since adopting a cloud infrastructure provides a cost-effective approach to complying with necessary data protection and privacy regulations. For example, the EU's General Data Protection Regulation (GDPR) relaxes some provisions for data controllers that leverage the cloud's pseudonymisation to replace direct customer data identifiers with randomly generated pseudonyms. In addition, the cloud can help identify Personally Identifiable Information (PII) that is not pseudonymised and redact it to ensure compliance.
Furthermore, the cloud provides strong encryption algorithms and efficient key management processes that enhance client data privacy and protection. Numerous regulations place data encryption at the heart of their regulatory compliance standards, and adopting the cloud allows financial services firms to encrypt sensitive data. Financial services institutions can use the cloud's client-side encryption, leverage the cloud's key management service, or entrust key management to a trusted third party.
Additionally, cloud providers have introduced efficient methods for facilitating key services' management integration with a cloud solution, ensuring compliance with required encryption standards.
Many institutions in the financial industry also worry that adopting cloud functionalities for projects requiring advanced analytics may grant CSPs access to unencrypted client or corporate data.
But, due to the advancement of innovative cloud solutions, cloud providers can ensure the privacy and security of financial services data without compromising the analytical functionalities. Cloud services providers apply machine learning and intelligent computations to encrypted cloud data allowing financial services consumers to utilise cloud computations analytics without exposing data to unauthorised access.
2. It is Harder to Achieve Regulatory Compliance in the Cloud
Potential financial services cloud consumers worry that transitioning to the cloud hinders regulatory compliance. For instance, a common myth is that it is challenging to assess and evaluate the industry's IT infrastructure while it is managed and run by a third party. In contrast to this notion, adopting cloud technologies can help significantly reduce the efforts needed to ensure compliance with necessary laws and bolster measures required to keep up with changing regulations.
Cloud providers develop solutions designed to help consumers comply with multiple regulatory requirements and standards straight out of the box. These include regular updates to enable compliance with the changing regulatory landscape, third-party service provider validation, and data classification to prioritise security. Financial services firms can also localise contracts and SLAs with a cloud provider to ensure local regulations and standards compliance. Besides, cloud-based compliance tools, including automation, support large-scale compliance. For example, automating regulatory compliance monitoring facilitates the identification of missing requirements, crucial configuration changes, and alerting compliance officers regarding the measures needed to enable compliance.
Artificial intelligence and machine learning tools also play a critical role in maintaining cloud compliance with financial regulatory requirements. They are autonomous and designed to detect and alert cloud consumers of misconfigurations and vulnerabilities, enabling financial services firms to automate specific regulatory reports and free up the capacity for handling regulatory strategies and incidents. The cloud adoption framework also enables a complete audit trail of cloud activities as mandated by various regulations.
Cloud adoption also helps consumers in the financial sector to centralise compliance tools and controls. This reduces the chances of missing compliance requirements or accidental misconfigurations that can cause non-compliance. In addition, the cloud makes it possible to restrict users accessing specific applications and data to specific countries or regions. Cloud services comprise data residency controls, which reflects the need for financial services firms to ensure full transparency on who accessed which data, in line with financial compliance regulations.
Cloud Adoption Supports Regulatory Compliance
Cloud adoption could be the answer that financial services firms look for to address regulatory compliance concerns. Migrating services, applications, and data from a firm's dedicated on-premise infrastructure to a properly configured cloud environment provides additional security layers that reduce systemic risks, boosting compliance efforts with data security measures for the financial sector. Moreover, migrating core workloads to hybrid or multi-cloud strategies enhances the security and resiliency of deployed infrastructure.
More importantly, financial services cloud consumers can work with their providers to ensure compliance. Cloud providers often work with financial services regulators and customers to provide the assurances and controls needed to enable compliance, transparency, data locality, and risk management. Cloud service providers can ease the regulatory burden for financial organisations by creating regulatory configurations to meet compliance requirements. Leveraging the regulatory configurations ensures that financial companies don't deploy unsecured services, such as unencrypted data analytics.
Furthermore, some cloud providers include compliance assurances in the service level agreements. The compliance offerings may be based on different assurances, including but not limited to formal assessments, validations, authorisations, attestations, and certifications performed by third-party auditing firms. The assurances may also comprise customer guidance compliance documentation, self-assessments, and contractual amendments created to help financial institutions address their regulatory needs.
In other words, considering the network underlay that delivers cloud-hosted infrastructure, cloud service providers give financial services consumers access to advanced data orchestration levels through private and secure networks. Thus, adopting a cloud solution can help a financial organisation abide by the necessary security requirements and regulations so that it does not worry about compliance complexities. Additional regulatory compliance benefits of adopting cloud technologies include:
· Cloud security and segmentation policies are unified in a single cloud environment that identifies missing compliance requirements, ensuring financial services firms comply with multiple regulations.
· Embedded security tools and solutions designed to prevent unauthorised access, sharing, or altering cloud data help meet compliance and security requirements.
Ensuring cloud compliance with Cloud Geeni
Cloud Geeni has many clients in the Financial Services sector enjoying the benefits of successful cloud migration to a fully compliant platform with an industry leading end user experience.
We understand the complexities of migrating legacy software and applications to the cloud and can assist your financial services firm with cloud adoption to ensure access to the lastest SaaS products and services.
Cloud Geeni are a Microsoft Gold certified cloud platform provider with the end user experience as our primary focus.
Why not get in touch with a cloud expert today to understand more.