How will Brexit affect our data transfers?
Insights have been provided by EY and KPMG
Insights have been provided by EY and KPMG
According to an EY polling, 24% of financial services firms consider the issue of data transfers as one of their main worries surrounding the ongoing debate of Brexit.
In the event of a no-deal Brexit, financial services firms will need to make certain that they do not breach data laws—lest they wish to incur a fine of up to 4% of their turnover.
“UK Financial Services firms spent large amounts to get ready for GDPR, but they must again ensure that their data systems are ready for a possible no-deal Brexit.”
The Big Four firm has launched a guide around last-minute preparations for a possible no-deal Brexit. When it comes to data transfers, personal data will not be allowed to be sent from the EU to the UK unless firms have taken “specific mitigating action”.
As James Stewart, head of Brexit at KPMG UK, has stated: “Business is holding its breath ahead of the votes in parliament this week, knowing that, if Brexit has taught us anything, it is to expect the unexpected.”
However, the risks surrounding data transfers seems to be another blow that UK businesses are going to have to figure out how to endure, following the European Commission’s claim that it would not provide immediate data adequacy for the UK in the event of a no-deal.
EY’s report warned: “The penalties for breaching the rules are high, with firms facing fines of 4% of turnover or EUR 20 million, whichever is the highest.”
“Overall, the one unifying issue is that everyone wants greater clarity on the UK’s future trading conditions, so they can unlock longer-term strategic restructuring, cost management, and investment decisions—both inward and outbound.”
The UK government has announced the implementation of statutory instruments in the event of a no-deal; this will ensure a legal “status quo” for data transferring outside of the UK.
“UK financial services firms spent large amounts to get ready for GDPR, but they must again ensure that their data systems are ready for a possible no-deal Brexit,” said Steve Holt, UK and EMEIA financial services partner at EY.
He continued: “With fines of 4% of turnover, as well as the reputational damage of any misstep, it should be a key priority. Many firms have already addressed this, but time is running out for those yet to have taken the necessary steps.”
“Many in business now say that Brexit’s impact on the UK must be seen not just in terms of the final trade flows, but also in the distraction it creates from other pressing commercial issues, not to mention critical domestic policy.”
The Bank of England’s Financial Policy Committee warned last month that a lack of data adequacy could “restrict EU households and businesses from continuing to access UK financial service providers.”
As it stands, it remains unclear how long it would take the UK to gain data adequacy from the EU if a deal is not reached. Nonetheless, if a deal is established, transfers would not be restricted through the proposed transition period which would end in 2020.
Holt added: “Firms also need to be aware of risks from their clients and suppliers, as individual firms are still responsible for their customer data with third parties. There may also be a need to update privacy notices, as these often require explicit consent if data is transferred outside of the EU.”
With an upcoming week filled with all manner of voting on Brexit, Stewart has concluded: “Companies are now split on whether an extension to the Brexit timeline is a good thing. Some of those who prepared early are locked into March and April specific contingency plans. Those carrying additional inventory know an extension will squeeze their cashflow for longer. Those whose preparations are incomplete want more time. Whilst those who see Brexit as an opportunity for greater entrepreneurialism are desperate to get on with it.
“Overall, the one unifying issue is that everyone wants greater clarity on the UK’s future trading conditions, so they can unlock longer-term strategic restructuring, cost management, and investment decisions—both inward and outbound.
“This means that almost no matter what the outcome in parliament, in the short-term we expect a surge of commercial activity to get underway in the coming weeks. Many in business now say that Brexit’s impact on the UK must be seen, not just in terms of the final trade flows, but also in the distraction it creates from other pressing commercial issues, not to mention critical domestic policy.”
One thing is for certain, however; by the end of this week, there should finally be a level of certainty surrounding the kind of deal we will strike with the EU—if there is indeed a deal at all. Although whether that certainty will be positive or worrying remains to be seen.