What Is Data Protection Act and Why Do Businesses Must Comply with It?

Data Protection Act was passed by the UK’s parliament in 2018. DPA which relates to the European Union’s GDPR (General Data Protection Regulations) replaced the Data Protection Act 1998. The Act deals with the protection, use, control, and process of users’ data
by businesses and other entities. It guides organizations, businesses, and even the government on how to protect the rights to privacy and the personal information of people. Also, it sets different levels of access to information for everyone to regulate information sharing and prevent data theft and other potential risks associated with Data and information sharing.

Businesses have to record and process the data of their customers, suppliers, employees, and other entities for resource management and customer experience. Following are a few of the many obligations that businesses must fulfill to comply with the Data Protection Act.

• Collection and Use of personal data must be carried out in a fair and lawful manner and for specified purposes
• Personal data must be kept secure to prevent accidental loss and destruction
• Accuracy and relevancy of personal data must be ensured.
• Individuals must have access to their personal data and they must be allowed to correct any discrepancies
• Businesses must have prior consent from individuals and permission before collecting and using their personal data
• Personal data should be transferred only when safeguards are adequate and the transfer is safe.
• Businesses must clearly state the purpose of collecting data and whether that data is being shared with third parties or not.

How many Data Protection Principles are there?

According to the Information Commissioner’s Office, there are 7 principles in DPA.

These principles are a key to safeguarding the personal information of entities and Individuals. Data Protection Act is specific to the UK, other jurisdictions have similar legislation that guides public and private entities on the use and process of public data.

Why are these principles important?

These principles are of core importance in laying the foundations for adherence to the UK’s GDPR guidelines. Neglecting these principles especially failure in compliance with the Data Protection Act may leave the entire firm open to hefty penalties. Article 83(5)(a) states that infringements of the basic principles for processing personal data are subject to the highest tier of administrative fines. This could mean a fine of up to £17.5 million, or 4% of your total worldwide annual turnover, whichever is higher.

Why Data Protection is Necessary?

Personal information and data are sensitive information that can be misused if accessed by criminals. Mostly, cases have been reported of misuse of information for fraud, money laundering, identity theft, and scams. Also, personal information can be misused to steal money from an individual or to harm them. Therefore, to mitigate such threats, governments devise strategies, policies, and guidelines to prevent data theft and ensure individuals’ right to privacy. However, the information of each individual is recorded, updated, and monitored by the government and regulatory agencies in order to differentiate between a proven
criminal and an innocent individual.

Apart from this, the following are key factors that make Data Protection important:

• Safeguarding Privacy:

Ensures that personal information is handled while respecting the individual’s privacy rights.

• Data Security:

Rules for robust security measures to protect sensitive KYC and AML data from breaches and unauthorized access.

Also Read: Data Security and Privacy Considerations in KYC Outsourcing

• Consent and Transparency:

Requires informing individuals about data collection purposes and obtaining necessary consent with declaring the actual intent of data use.

• Legal Compliance:

It is a legal requirement to comply with DPA to avoid penalties and legal consequences when conducting KYC and AML procedures.

• Risk Mitigation:

Reduces the risk of legal consequences and reputational damage resulting from data mishandling during KYC and AML processes.

Also Read: kyc remediation process

Why Businesses Must Comply with the Data Protection Act?

With businesses and social interactions going digital, people are becoming more conscious than ever about how tech giants and even brick-and-mortar businesses are controlling, processing, and using their data. Relevant data protection regulations in different
jurisdictions bind businesses to abide by the relevant laws. Compliance with these laws not only prevents business entities from facing penalties but also helps establish the trust of their customers, employees, and other stakeholders. Organizations that explicitly state their compliance with the data protection rules and regulations of the respective jurisdiction can also gain user confidence.

GDPR – A Brief

General Data Protection Regulation (GDPR) is considered the most stringent privacy and security law in the world. Even though it was passed by the European Union (EU), its obligations are imposed globally as far as the data collection is related or linked to the EU. GDPR went into effect on 25 May 2018. It imposes fines, and penalties and sometimes makes arrests against the violators of its privacy and data security standards.

Final Thoughts

Data Protection Act is a regulation for protecting personal information from misuse. In this way, the personal information of any individual who has protection from the law can’t be used in fraudulent activities such as money laundering or other forms of financial crime. It is much supported by a robust KYC AML system that has to rely on customer data in order to make sure that criminals don’t get to use funds from and for fraudulent activities.