A company that signs up to comply with the provisions of the Safe Harbor Agreement for the transfer of personal data from Europe to the US must have a process to verify its compliance. There’s very little in the way of “official” guidance on this question. I’ve spent some time trying to figure out how companies can verify compliance. Here are three options, and companies should choose the model that fits best with their corporate culture and structure.
A company can conduct a traditional audit of privacy practices company-wide. The problem with company-wide audits based on traditional checklists, however, is that no two people read the checklist the same way; and all the incentives are to be brief and forgetful when filling out a form. If the checklist is used by an interviewer, the return on investment of time goes up in terms of quality of information, but only so much as the interviewer has the knowledge of the product and the law to ask the right questions. The bigger and more diverse the company, the more daunting the task and the less consistent the information collected.
The traditional auditor approach to verification usually includes massive checklists, compiled and completed by a large team of consultants, usually driven by outputs that require formal corrective action reporting and documented procedures, and cost a fortune. To an auditor, verification means proof, not process; it means formal procedures that can be tested to show no deviation from the standard, and corrective action steps for procedures that fail to consistently deliver compliance.
Alternative Model – Data Flow Analysis
An alternative model involves a more simple procedure focusing on risk. It shows that a company is least at risk when it collects information, and that the risk increases as it uses, stores and discloses personal information to third parties. The collection risk is mitigated through notice of the company’s privacy practices; IT security policies that include authorizations for access and use of information mitigate the risks associated with storage and use; and strong contractual safeguards mitigate the risk on disclosure of personal information.
What personal information do you collect
What do you use it for
Where is it stored and how is access granted to it
To whom is it disclosed
A disadvantage with the above approach is that it is somewhat labor intensive and time consuming. Note however that this procedure is not a traditional audit, which can take far longer, cost much more and generally is backward looking (i.e., what did you do with data yesterday?). Instead, the data flow analysis identifies what the company does with data on an ongoing basis and armed with that knowledge, permits the company to continuously improve its privacy policies – it is a forward-looking approach that permits new internal tools or products to be developed around the output. For example, one side benefit of this approach is that every service would yield up the data elements captured and where they are stored.
There is yet one more alternative – the use of SoX-like sub-certifications to verify the accuracy and completeness of product or service privacy statements. Sarbanes-Oxley requires the company CFO and CEO certify that the information provided to the public regarding the company’s financial matters is true. In order to make the certification, most companies have established a system of sub-certifications where those officers and employees with direct, personal knowledge of the underlying facts certify up that the information is correct.
The same could be done in regard to privacy. There is a two-fold advantage from this approach. First, it emphasizes the importance of the information collection by attaching to it the formality of a certification. Second, it can inform a training program as it forces periodic review of the policy and therefore attention to its existence and relevance.
How granular should the inquiry be at the product level? In a distributed model of verification, the manner and means of confirming the accuracy of the content can be left to the entrepreneurial talents of the managers. The key is to ensure that the information provided is complete and accurate, and that the product lead and/or counsel are willing to certify the results.
There is very little guidance publicly available that informs the process of an in-house review, but it is hard to criticize the very same process accepted for validation of a company’s financial statements upon which individual consumers and investors rely for financial decision-making.