Navigating Third-Party Data Sharing and Transfers in the Age of GDPR

In today’s interconnected digital world, companies often need to share and transfer data with third-party partners, such as vendors and service providers, to conduct their business operations. However, sharing and transferring personal data comes with risks and raises concerns about data privacy and security. The General Data Protection Regulation (GDPR) sets strict rules on the sharing and transfer of personal data, with the aim of protecting individuals’ privacy rights. In this article, we will explore how GDPR impacts third-party data sharing and transfers, and the requirements and best practices that companies need to follow to ensure GDPR compliance.

GDPR Requirements for Third-Party Data Sharing and Transfers

Lawful basis for data processing and transfers

GDPR requires that data processing and transfers by third parties must have a lawful basis. This means that data controllers must have a legitimate reason for processing and sharing personal data with third parties, such as obtaining consent from the data subjects, fulfilling contractual obligations, or complying with legal obligations. Data controllers must also ensure that any third parties with whom they share personal data have a legitimate reason for processing the data.

Appropriate safeguards for data transfers

GDPR also requires data controllers to ensure that appropriate safeguards are in place when transferring personal data to third parties, especially when transferring data outside the European Economic Area (EEA). These safeguards may include standard contractual clauses, binding corporate rules, or adequacy decisions by the European Commission.

Data protection agreements with third parties

Data controllers must also have written data protection agreements with third parties that receive personal data. These agreements must include provisions that ensure the third parties comply with GDPR requirements, such as data security and confidentiality, data subject rights, and reporting of data breaches.

Ensuring accountability and record-keeping

Data controllers must be able to demonstrate compliance with GDPR requirements for third-party data sharing and transfers, including having appropriate processes and procedures in place for reviewing and assessing third-party data processing activities. This includes maintaining records of data processing activities, including those carried out by third parties, and conducting regular data protection impact assessments (DPIAs).

Complying with these requirements can be challenging for organisations that share personal data with third parties, especially when those third parties are located outside the EEA. However, failure to comply with these requirements can result in significant penalties, including fines and reputational damage. Therefore, it is crucial for organisations to take GDPR requirements for third-party data sharing and transfers seriously and ensure that they have appropriate measures in place to protect personal data.

Impact of GDPR on Third-Party Data Sharing and Transfers

Changes to data-sharing practices

The GDPR has led to significant changes in the way data is shared and transferred among third-party organisations. In the past, companies could freely share and transfer data without much concern for the privacy and security of that data. However, under GDPR, companies must ensure that they have a valid legal basis for sharing and transferring data. They must also implement appropriate safeguards and enter into data protection agreements with any third-party organisation that will have access to the data.

Consequences of non-compliance

Non-compliance with GDPR can result in significant financial penalties, as well as damage to a company’s reputation. The GDPR allows for fines of up to €20 million or 4% of global annual revenue, whichever is higher, for non-compliance. In addition to financial penalties, non-compliance can also result in legal action from individuals whose data has been mishandled.

Risks and challenges for companies involved in data sharing and transfers

Companies that engage in data sharing and transfers face a number of risks and challenges under GDPR. One of the biggest challenges is ensuring that they have a valid legal basis for sharing and transferring data. This can be particularly challenging in cases where the data is sensitive or involves the personal information of EU citizens. Companies must also ensure that they implement appropriate safeguards to protect the data and prevent unauthorised access or disclosure. This can involve implementing technical measures such as encryption and access controls, as well as organisational measures such as policies and procedures for data handling. Additionally, companies must ensure that they have data protection agreements in place with any third-party organisation that will have access to the data. These agreements must set out the responsibilities of both parties for protecting the data and ensuring compliance with GDPR.

Strategies for GDPR Compliance in Third-Party Data Sharing and Transfers

Conducting due diligence on third-party data processors

Companies can start by assessing the security measures, compliance with data protection laws, and other relevant aspects of third-party data processors before engaging in any data-sharing activities. This helps ensure that any third-party data processor they work with is trustworthy and complies with GDPR requirements.

Implementing appropriate technical and organisational measures

Companies should implement appropriate measures such as encryption and access controls to ensure that the data being shared is secure. They should also have processes in place to detect and respond to any security incidents.

Ensuring clear data protection agreements with third parties

Companies should enter into a written data protection agreement with any third-party data processor that they work with. This agreement should include terms that comply with GDPR requirements and should clearly define the roles and responsibilities of both parties in relation to the processing and sharing of personal data.

Regularly reviewing and updating data-sharing practices

Companies should periodically review their data-sharing practices to ensure that they remain compliant with GDPR requirements. This includes ensuring that the data they share is still necessary and relevant, and that they have the necessary consents and legal basis to share the data. If necessary, companies should update their data-sharing agreements or procedures to ensure they remain GDPR-compliant.

Case Studies

Examples of companies that have navigated GDPR compliance in third-party data sharing and transfers:

1. Microsoft: In 2018, Microsoft announced that it was extending the GDPR’s privacy rights to all of its customers worldwide. The company created new tools and processes to ensure compliance, including developing a GDPR-compliant data protection agreement for its cloud services and creating a dashboard to provide customers with visibility into their compliance status.
2. Mastercard: Mastercard implemented a number of measures to ensure GDPR compliance in its third-party data sharing and transfers, including conducting a risk assessment of its third-party data processors, reviewing and updating its contracts and data protection agreements, and implementing a data classification and retention program.
3. Facebook: After facing significant criticism over its data privacy practices, Facebook made changes to its data sharing and transfer practices in order to comply with GDPR requirements. These changes included updating its terms of service and data policies, improving its consent mechanisms, and appointing a Data Protection Officer to oversee compliance.

Lessons learned from successful GDPR compliance in third-party data sharing and transfers:

1. Conduct thorough due diligence: Companies should conduct thorough due diligence on their third-party data processors, including reviewing their privacy policies and data protection practices, and ensuring they have appropriate technical and organisational measures in place to protect personal data.
2. Establish clear data protection agreements: Companies should establish clear data protection agreements with their third-party data processors that outline the specific data being processed and the purposes for which it is being processed. These agreements should also outline the measures in place to protect the data and ensure compliance with GDPR requirements.
3. Regularly review and update data-sharing practices: Companies should regularly review and update their data-sharing practices to ensure they are in compliance with GDPR requirements. This includes regularly reviewing and updating data protection agreements, conducting risk assessments of third-party data processors, and implementing appropriate technical and organisational measures to protect personal data.

Conclusion

In conclusion, GDPR has significantly impacted third-party data sharing and transfers, necessitating changes in data-sharing practices, the implementation of appropriate safeguards, and the need for clear data protection agreements with third parties. Non-compliance with GDPR can result in significant consequences, including hefty fines and reputational damage. Companies need to take a proactive approach to GDPR compliance, including conducting due diligence on third-party data processors, implementing technical and organisational measures, and regularly reviewing and updating their data-sharing practices. By doing so, companies can navigate the challenges and risks associated with third-party data sharing and transfers, while also ensuring compliance with GDPR and protecting the privacy rights of individuals.