The introduction of the EU’s General Data Protection Regulation (GDPR) signalled a major shift in data privacy law, immediately affecting technology giants like Google, Facebook, Instagram, and WhatsApp. These organisations faced significant fines, serving as a stark reminder for all entities with poor regulatory compliance. A common misconception persists that a business’s geographic location affects its compliance requirements under GDPR. In fact, compliance is determined by the processes established, not the place where operations occur.

Understanding the GDPR

The GDPR defines organisations that handle data belonging to EU entities as either Data Controllers or Data Processors. Compliance requires adherence to specific elements concerning the handling of personal information—that is, any information that can be used to identify an entity.

Key requirements for compliance include:

  • Consent: Obtaining consent to keep personal information and providing clear intimation about the nature of the data retained.
  • Right to Erasure (‘To be Forgotten’): Complying with requests from individuals to have their data deleted, with exceptions for certain transactional records.
  • Breach Notification: Compliance with mandatory procedures to inform specified authorities when data is illegally accessed or hacked, typically within 72 hours.
  • Purpose Limitation: Data must only be utilised for the purpose for which it was initially pursued. Once the data has been used, it must be securely erased.

Administrative Fines in Summary

GDPR enforcement relies on two tiers of administrative penalties, calculated based on worldwide annual turnover:

1.     Tier 1: Up to 2% of worldwide annual turnover, or €10 million, whichever is greater.

2.     Tier 2: Up to 4% of worldwide annual turnover, or €20 million, whichever is greater.

Crucially, the percentage basis for the fine is the worldwide annual turnover from the previous year, not just the turnover generated in the country where the violation occurred.

Compliance: Location is Not the Determinant

In today's technology-savvy landscape, accounting and outsourcing are widespread practices used to enhance performance and achieve cost-effectiveness. This environment has naturally raised questions about the compliance burden on data processors located outside the EU.

However, the location of the data processor is irrelevant. Compliance is entirely governed by the established processes and procedures. A processor within the EU could be non-compliant and attract fines for both themselves and the data controller, while a processor based outside the EU might be entirely compliant. When considering outsourcing accounting services, data controllers must ensure their partners are demonstrably GDPR-compliant through robust procedures.

Achieving Compliance for Outsourced Accounting Firms

It is highly beneficial for outsourcing accountants to be proactive about compliance. It not only minimises exposure to potential fines but also significantly enhances the security of operations, protecting against data loss and severe reputational damage. What may have once been a voluntary measure is now a mandatory choice.

Below are fundamental steps that an outsourced accounting company must undertake to become GDPR compliant:

  • Data Protection by Design and Default: Businesses must implement measures ensuring data safety is integral to their systems. This means mechanisms are specifically designed to safeguard EU organisation data, and this safeguard is a default process.
  • Appoint an Officer: An officer must be appointed to oversee the implementation of compliance procedures. This may include using tools to track and trace data processing activities.
  • Mandate Standard Operating Procedures (SOPs): Implement and enforce SOPs to ensure data protection fulfills all regulatory standards.
  • Organise Training: Regular training and orientation sessions must be held to make personnel aware of the regulations and ensure compliance measures are strictly maintained.
  • Robust Audits and Authentication: Authentication mechanisms must be robust to limit access to information only to the necessary resources and processes.
  • Demonstrate Willingness: Firms must demonstrate their commitment to compliance. This acts as a mitigating factor in the event of any breach, showing that every effort was made to safeguard the data.
  • Incident Handling System: Establish an efficient hierarchy to handle data incidents, including a defined chain of command. Firms must be ready to forward information regarding breaches to the relevant authorities and affected parties within the 72-hour timeframe.

For firms providing outsourcing accounting services, compliance with GDPR elevates process security, avoids administrative penalties, and ensures they can continue to deliver their expertise and cost-effective solutions to businesses.

Summary

The General Data Protection Regulation (GDPR) mandates strict compliance for all entities processing EU personal data, irrespective of their location; success relies on robust processes, not geography, covering requirements like consent, Right to Erasure, and 72-hour breach notification to avoid massive fines. Compliance is mandatory, requiring steps like Data Protection by Design, officer appointment, and Incident Handling Systems. Take action to review your data practices immediately; if you need expert assistance in establishing demonstrably compliant processes, Doshi Outsourcing is ready to help you achieve and maintain full adherence to the regulation.