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Over half of financial services firms do not know where all their customer and employee personal data is stored, according to a survey by auditors PricewaterhouseCoopers (PWC).

Despite the fact that financial services firms hold extremely sensitive data on their customers, 54 per cent of those surveyed by PWC said that they did not have "an accurate inventory of where personal data for employees and customers is collected, transmitted or stored".

In the survey, 51 per cent of finance companies surveyed said that third party service providers did not have to comply with their privacy policies.

The situation is even worse in public sector bodies. The PWC survey found that 65 per cent of those did not have an inventory of where data is collected and stored.

PWC surveyed over 7,000 organisations, 665 of which were financial services companies and 553 of which were public sector bodies.

The finance firms told PWC that investment in information security had improved, and that while other budgets were being squeezed, their firms were spending significant sums on technology to improve data security.

Even with that investment, though, not all financial services companies are keeping track of security breaches that could expose personal data. PWC found that 44 per cent of them did not know what types of security incidents had happened to them, while 45 per cent did not know the source of attacks.

"Financial services firms have been leaders in privacy and security, but their policies and capabilities are being outstripped by changes in technology and business practices," said PWC managing director Sergio Pedro. "Firms must address customer demand, competitive pressure and stringent, ever-changing regulatory requirements by developing comprehensive, integrated privacy and data protection programmes."

Of the financial services firms surveyed 23 per cent were from Europe and 48 per cent from the US.

Many financial services processes are now conducted by third parties through outsourcing deals which often involve processing in other parts of the world. Not all financial services firms ensure that data protection is as stringently enforced by third parties as by themselves, though.

PWC found that only 45 per cent of financial services companies conduct due diligence on the security and data protection policies of third party processors of employee and customer information, and only 34 per cent have an inventory of those companies.

In the public sector even less work is done to examine the policies and practices of contractors. Only 24 per cent of public sector organisations surveyed by PWC have an inventory of third party data processors or conduct due diligence on those firms.

Pinsent Masons and Amberhawk Training are holding an Update session on 26 January in London where up-to-date data protection topics are the agenda. If you are interested in this event, please email chris.pounder@amberhawk.com for a brochure.

See: The survey

Copyright © 2008, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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