FCA Regulated Businesses and Data Protection: What Financial Businesses Need to Know

As a UK business, you must navigate and comply with key legal rules. Financial services firms must comply with UK GDPR if they process personal data, regardless of any FCA regulations that apply to their business activities. Financial services firms typically handle large volumes of personal data and sensitive information, such as financial data, identity verification records, or biometric data. Failing to comply with UK GDPR can lead to enforcement action by the ICO, reputational harm, and substantial financial penalties. Poor data handling can also result in data breaches, which put customers at risk, so firms must implement robust data protection measures. This article explores how UK GDPR applies to financial services businesses, the consequences of non-compliance, and how legal advice helps firms achieve compliance.

Does UK GDPR Apply to Financial Services Businesses?

If a financial services business processes personal data, the UK GDPR applies. In addition, the Data Protection Act 2018 sits alongside and supplements the UK GDPR. Both regimes set broad rules to govern the processing of personal information, applying to virtually all businesses. The Information Commissioner’s Office (ICO) enforces the UK GDPR and has the power to investigate businesses that fail to meet their obligations.

Complying with financial regulations does not automatically ensure UK GDPR compliance. Businesses must assess UK GDPR requirements separately to meet their legal obligations.

Financial services firms handle high-risk personal data, including financial records, identity documents, credit reports, and biometric identification information. 

For example, firms often process this data for KYC or AML checks, which means they must establish a lawful basis under the UK GDPR.

If a financial services business uses profiling or automated decision-making, such as credit scoring or fraud prevention, involving personal data, it must comply with the UK GDPR’s strict requirements.

What are Some Key UK GDPR Obligations for Data Controllers?

Financial services businesses that act as data controllers must comply with several UK GDPR requirements. These obligations vary depending on how firms process personal data, and there is no one-size-fits-all approach. Some key examples include:

• ensuring a lawful basis for processing personal data, such as consent or legal obligation;
• providing clear privacy notices to individuals explaining how their data is collected and used; 
• implementing security measures to protect personal data from unauthorised access or breaches; 
• only retaining data for as long as necessary and securely disposing of it when no longer needed; 
• allowing individuals to exercise their data rights, such as accessing or requesting deletion of their data; and 
• entering into data processing agreements with data processors to ensure personal data is protected. 

The specific obligations depend on how firms process personal data, so they should assess their compliance based on their operations.

Why Has the FCA Warned Financial Firms About Client Data?

The FCA has warned firms to handle client data responsibly, particularly when transferring or processing personal information. It has laid out essential guidance that financial services should understand. 

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Although the FCA does not enforce the UK GDPR, the warning reinforces the importance of compliance with data protection laws. It demonstrates the FCA’s expectations for responsible data handling for financial services firms. 

What are the Consequences of Non-Compliance with UK GDPR?

UK GDPR non-compliance can lead to severe legal and financial penalties. The ICO may impose fines of up to £17.5 million or 4% of global turnover, whichever is higher.

Clients expect financial services firms to uphold strict confidentiality and security measures when handling data. A serious data breach results in financial losses, reputational harm, and legal claims.

How Can Legal Advice Help Financial Services Businesses Achieve Compliance?

Depending on their activities, financial institutions must comply with data protection laws and financial regulations. To avoid compliance risks, they should assess their obligations carefully and seek legal advice when necessary.

UK GDPR compliance can be complex – particularly for financial services firms handling high-risk personal data. A data protection lawyer can evaluate a firm’s compliance framework, identify gaps, and recommend remedial action for compliance. 

Key Takeaways

If a company provides financial services and processes personal data, UK GDPR compliance is mandatory regardless of any other rules it may need to follow. Financial services regulatory compliance does not equate to compliance with data protection laws. Mishandling financial data results in fines, reputational damage, and regulatory scrutiny. Financial services companies should seek legal advice to help build a strong UK GDPR compliance plan and reduce risk.

If your financial services business needs help understanding your data protection obligations, our experienced data, privacy and IT lawyers are here to help. As part of our LegalVision membership, you can access lawyers who can answer your questions and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.

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