Best Practices for Financial Institutions to Share Sensitive Data and Reduce Fraud Risk

Speaking at a conference on fintech and regulation in Dublin on 4^th February, 2025, Central Bank Deputy Governor Derville Rowland has said that technology that allows financial institutions to share information in a way that complies with GDPR rules will be “essential” to fight financial crime, as fraud continues to rise significantly.

In the EU, financial institutions must adhere to strict guidelines for sharing sensitive data to prevent fraudulent activity, complying with the General Data Protection Regulation (GDPR). This involves several essential practices and considerations for both automated data transfers and individual data sharing scenarios:

1. Automated Data Transfer

• • Secure Transfer Protocols: Financial institutions must use secure transfer methods such as HTTPS, SFTP, or encrypted APIs to ensure data integrity and confidentiality during transit.

• • Data Protection Impact Assessments (DPIAs): Before sharing data, institutions should conduct DPIAs to identify and mitigate any potential risks associated with the data sharing. Some data transfer solutions include DPIAs helping to bridge the gap between IT and compliance departments and help to make compliance that bit easier.

• • Data Minimization: Only the necessary amount of data required for the specific purpose should be transferred, limiting exposure. Choosing a file transfer solutions that includes the ability to minimise or / and anonymise data as automatically as part of the data transfer, can make this easier to achieve.

• • Access Controls: Automated systems must include strict access controls to ensure only authorized systems and personnel can initiate or access data transfers.

• • Regular Audits: Automated transfer processes should be regularly audited for compliance with security policies and GDPR requirements. The right technical solutions should have such reporting logs readily available in real-time.

2. Individual Data Sharing

• • Explicit Consent: For individual data sharing, financial institutions must obtain explicit, informed consent from the data subject, detailing what data is shared, with whom, and for what purpose.

• • Data Protection Impact Assessments (DPIAs): Before sharing data, institutions should conduct DPIAs to identify and mitigate any potential risks associated with the data sharing.

• • Encryption: Data shared on an individual basis should be encrypted both in transit and at rest to protect against unauthorized access. The right technical solutions should offer encryption by default.

• • Right to Withdraw Consent: Individuals must have the right to easily withdraw their consent for data sharing, with institutions required to facilitate this process seamlessly.

3. Common Data Breaches and Prevention Technologies

1. 1. Phishing Attacks: Deploy advanced email filtering, phishing detection tools, and regular security training for employees to recognize and respond to phishing attempts. Technical solutions that control who can send and receive data significantly reduce this scenario.

1. 1. Unauthorized Access: Use multi-factor authentication, strict access controls, and continuous monitoring of access logs to prevent unauthorized access.

1. 1. Data Interception: Implement end-to-end encryption for all data transfers to prevent data interception.

1. 1. Insider Threats: Employing authorisation flows and workflows along with full audit trails can help to prevent insider threats. Some of the most common data breaches can also be due to human error, e.g. emailing sensitive data to the wrong person. Choosing data sharing technologies with data breach prevention controls can significantly reduce the amount of data breaches, make passing audits easier and prove your business prioritises protecting your customer data.

4. Implementing GDPR Compliance

• • Transparency: Financial institutions must be transparent in their data processing activities, clearly informing customers about how their data is used, stored, and shared.

• • Accountability: Institutions must not only comply with GDPR but also demonstrate their compliance through records, policy documentation, and proactive governance practices.

• • Partnership Management: When working with third parties, institutions must ensure their partners comply with GDPR through binding contractual agreements and regular audits.

Managed File Transfer Solutions with Wizuda

Financial institutions must ensure the highest levels of security and compliance when sharing sensitive data to prevent fraud. Wizuda’s Managed File Transfer (MFT) solution provides a comprehensive, GDPR-compliant approach to secure data transfers, offering encryption by default, access controls, automated DPIAs, and real-time audit logs. By implementing Wizuda MFT, financial institutions can confidently manage data sharing while minimising risks associated with breaches, unauthorized access, and human error. Ensure your business stays compliant and secure by getting in touch today – Contact Wizuda.