SOC 2 attestation is a security guideline that verifies a company's compliance with standards for managing customer data– and is considered one of the baselines in security compliance for financial institutions' vendors and third parties. It is also becoming a validation requirement for organizations’ vendors if an organization is seeking cyberliability insurance.
SOC 1 and SOC 2 attestations are both cybersecurity frameworks that deal with the handling of data by service organizations, but they focus on different aspects. SOC 1 is concerned with the internal controls over financial reporting. It is beneficial for organizations that affect or are part of their client's financial reporting. On the other hand, SOC 2 deals with controls relevant to security, availability, processing integrity, confidentiality, and privacy of data. This makes it suitable for organizations that manage customer data, particularly in the technology sector. Here is a simplified comparison:
| Features | SOC 1 Compliance | SOC 2 Compliance |
| Purpose | Focuses on internal controls over financial reporting. | Focuses on controls related to security, availability, processing integrity, confidentiality, and privacy. |
| Primary Audience | User entities and auditors assessing financial reporting controls. | Customers, partners, and stakeholders concerned with data security and privacy. |
| Report Types |
Type 1: A report on the fairness of the presentation of management's description and the suitability of the design of the controls. Type 2: Includes Type 1 plus the operating effectiveness of the controls over a specified period. |
Type 1: A report on the suitability of the design of the controls at a specific point in time. Type 2: Includes Type 1 plus the operating effectiveness of the controls over a specified period. |
| Criteria Used |
Based on standards relevant to financial reporting, such as those defined by the American Institute of CPAs (AICPA). |
Based on the Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy. |
| Scope | Limited to controls that are relevant to user entities’ financial reporting. |
Broader scope covering controls that protect data and ensure privacy and integrity. |
| Example Use Case |
A payroll processing company ensuring its processes affect clients' financial statements accurately. |
A Managed Services provider demonstrating sound practices related to the proper management and care of client infrastructure and client data. |
| Report Structure |
Includes a description of the system, management's assertion, and the auditor's opinion. |
Includes a description of the system, management's assertion, and the auditor's opinion, but focuses on Trust Services Criteria. |
| Common Industries | Financial services, insurance, payroll processing. | Technology service providers, cloud computing, data hosting, and software-as-a-service (SaaS) providers. |
Understanding a SOC 2 audit involves knowing the requirements that service providers must adhere to for obtaining and maintaining SOC 2 attestation. Continue reading to discover more about these requirements, the importance of SOC 2 attestation for your vendors, and the aspects evaluated during a SOC 2 audit.
What Is SOC 2 Attestation, and How Is It Maintained?
To become SOC 2 attested, a company must have well-documented security policies and standard operating procedures in place related to the 5 Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. These categories comprise the five pillars of SOC attestation.
For sustained SOC 2 attestation, businesses are required to establish a robust baseline for their employees and environment's daily operations, complemented by sophisticated reporting tools capable of identifying deviations from this norm. Such deviations could include unauthorized data access by non-privileged employees or external phishing threats.
Utilizing advanced continuous security monitoring solutions is the most effective strategy for early detection of such irregularities. Prompt alerting systems within your reporting framework are essential, enabling immediate notification of any unusual activity, thereby empowering your IT specialists to address and resolve the situation swiftly. Key indicators for these alerts include unauthorized data exposure or alterations, changes in control settings, irregular file transfers, and atypical user account activities.
Why Your Vendors Should be SOC 2 Attested
Financial institutions themselves are not required to be SOC 2 attested but are responsible for ensuring their vendors meet the criteria that align with SOC 2 standards according to the FFIEC. The vendors that support the business data of a financial institution in any way are typically required to be SOC 2 attested if the data being stored includes confidential information.
According to FFIEC guidelines, there are certain standards all financial institutions are required to adhere to, including the following:
- Ensure the security and confidentiality of customer information.
- Protect against any anticipated threats or hazards to the security or integrity of such information.
- Protect against unauthorized access to or use of customer information that could result in substantial harm or inconvenience to any customer.
This applies to any vendor responsible for hosting or maintaining the business data of a financial institution, i.e., managed service providers. These providers are responsible for abiding by the same regulations set forth by the FFIEC and the Consumer Financial Protection Bureau (CFPB) relative to federal consumer financial law. The best way to ensure that service providers are abiding by these regulations is to obtain a SOC 2 report.
What Goes into a SOC 2 Audit
Service providers are responsible for selecting the Trust Services Criteria that pertains to their particular business. A provider does not need to adhere to all five; however, it is recommended that a provider supporting a financial institution adhere to at least the security, confidentiality, privacy, and process integrity standards.
The audit itself is conducted by a team of auditors experienced in SOC attestation. They review the policies of each service provider and determine whether their control measures fit the criteria of SOC attestation. They will take into consideration each Trust Services Criteria the vendor reports and measure it against their stringent guidelines.
Data Management
One of the most heavily weighted aspects of a SOC review for service providers representing financial institutions is data management. There are three categories that the auditor will focus on during the evaluation:
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The preservation of all electronic records.
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The retention period for which this information is stored.
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The type of records that need to be stored.
The remainder of the audit will address:
- The security of the systems housing the data.
- Confirmation that information is readily available to clients when they expect it to be.
- How confidential information is protected.
- Verification that the information promised to be kept confidential is kept that way.
- Verification that data is processed in the agreed-upon ways, with incident control measures, access policies, etc.
Final Thoughts
As numerous financial institutions outsource data storage, data management, and IT services, the vendors they engage are crucial in maintaining compliance with federal banking regulations. Collaborating with a SOC 2 attested service provider enables you to concentrate on core business initiatives without the constant need to ensure that your business data systems adhere to industry standards.
BBH Solutions is a New York City-based managed service provider that specializes in compliance for regional banks in the Tri-State area and beyond. We offer compliance support either as a stand-alone service or as a part of our complete managed services offering.
Our team of experts is committed to providing best-in-class support while keeping all your critical business data and applications secure. Our cloud offerings put security first, so you can rest assured knowing that, when it comes time for an audit, your IT systems are covered.
If you are approaching an audit or have areas of concern regarding your audit-readiness test results, download our IT Audit Remediation Plan for Regional Banks.
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If you are interested in learning more, contact us to speak with one of our compliance specialists today.
