Why Your CPA Firm Is a “Financial Institution” (And What That Means for Cybersecurity)

If you run a CPA firm, financial advisory practice, mortgage brokerage, or tax prep business, here’s something you might not know: in the eyes of federal regulators, you’re considered a financial institution. Surprised? Most people are.

And that classification comes with serious cybersecurity requirements—requirements many small firms have never heard of, let alone implemented.

The FTC Safeguards Rule: What’s Changed?

The FTC Safeguards Rule has been around since 2003, but major updates in June 2023 changed everything. These updates spell out exactly what businesses like yours must do to protect customer data. The problem? Most small firms still don’t know about these changes, and the compliance clock is ticking.

Who Does This Apply To?

The Gramm-Leach-Bliley Act defines “financial institutions” much more broadly than most people realize. If your business regularly handles financial activities, you’re covered. That includes:

• CPA firms preparing tax returns or giving financial advice
• Financial advisors managing client assets
• Mortgage brokers arranging loans
• Tax prep services processing returns
• Credit counseling and collection agencies

If financial work is part of your normal operations, the FTC considers you a financial institution—regardless of size.

Nine Requirements You Can’t Ignore

The old rule was vague. The new rule isn’t. Here’s what’s now mandatory:

1. Appoint a Qualified Individual – Someone must own your security program.
2. Do Written Risk Assessments – Document how data flows and where risks exist.
3. Control Access – Limit who can see sensitive info.
4. Encrypt Data – Both in transit and at rest.
5. Require Multi-Factor Authentication (MFA) – No exceptions.
6. Keep a System Inventory – Know what touches customer data.
7. Manage Changes Carefully – Assess security impact before updates.
8. Monitor and Log Activity – Detect unauthorized access fast.
9. Have an Incident Response Plan – Be ready when something goes wrong.

And if a breach affects 500 or more consumers, you must notify the FTC within 30 days of discovery. That’s a tight timeline.

Why This Matters

Non-compliance isn’t just risky—it’s expensive. FTC penalties can hit $100,000 per violation, and each missing safeguard counts as a separate violation. Add in state penalties, lawsuits, and reputational damage, and the cost skyrockets.

Cybercriminals know small firms are easy targets. Tax season makes CPA firms especially vulnerable because you hold exactly the data attackers want: Social Security numbers, bank details, income info.

Compliance Doesn’t Have to Break the Bank

The good news? Meeting these requirements doesn’t require an enterprise-level budget. For most small firms, compliance means:

• Enabling MFA (often free)
• Encrypting data (built into modern systems)
• Documenting policies
• Running annual risk assessments
• Using monitoring tools or a security provider

The cost of compliance is a fraction of what a breach or fine would cost.

Bottom line: If you’re assuming “good enough” security will protect you, think again. Now is the time to get this right. Want help figuring out where you stand? Contact sales@secureps.net for a straightforward assessment—no overselling, just what you need to stay compliant.