February 1, 2023

What is Compliance Washing?

The recent wave of data breaches has seen some of the world's largest companies make headlines for all the wrong reasons. The personal data of millions of individuals was compromised; ensuring security and compliance is a crucial consideration for consumers when choosing with whom to conduct business.

# Insights

The threat of a cyberattack is a real and rapidly growing concern for businesses. Meanwhile, the number of laws, regulations and information security requirements for businesses is ever-increasing. In the identity verification industry, solution providers vary significantly in how they handle and store personally identifiable information. In some instances, the storage and processing methods may be reasonable, but not always. This can lead to some businesses misrepresenting the extent to which their practices are compliant.

What is compliance washing?

Compliance washing is a term used to describe the practice of companies making false or exaggerated claims about their privacy and security standards to gain an advantage in the market. This can include making claims about compliance with industry standards and regulations or exaggerating the effectiveness of security measures which can significantly impact both consumers and businesses.

How does compliance washing impact consumers?

Companies may engage in compliance washing to appear more trustworthy and secure, even if their practices do not meet the standards they claim to uphold. As a result, consumers may be misled into believing that a company’s identity verification services are more secure and private than they actually are.

One of the main ways that compliance washing can impact consumers is by causing confusion and mistrust. When companies claim to comply with specific regulations or standards, consumers may assume that their personal information is being handled securely and responsibly. However, if a company is found to be engaging in compliance washing, it can call into question the validity of its claims and lead to a loss of trust in the company and the industry as a whole.

The impact of compliance washing on businesses

For businesses, compliance washing can create a level of uncertainty and risk. Many organisations overlook how data security is implemented across their supply chain. A data breach within your supply chain can cause severe damage to your business and customers. To protect themselves, businesses must do their due diligence and select a partner that is certified and adheres to the world's highest industry standards and regulations. This ensures that their policies and procedures adhere to the highest level of data protection and can safeguard personal data from data breaches.

The identity verification industry is heavily regulated. Compliance with regulations and standards is crucial for protecting personal information and ensuring businesses operate ethically and responsibly. If a solution provider is found to be engaging in compliance washing, it can face penalties and fines from regulators. This can lead to a loss of customers and damage your company's reputation.

It is essential for the identity verification industry to be transparent and to take steps to ensure that they are truly compliant with regulations and standards. Additionally, businesses must be vigilant and do their due diligence when choosing a solution provider to work with.

This blog is a part of our in-depth series exploring compliance in the identity verification industry. Discover how to keep your customers' privacy safe, reduce risk, and create a positive customer onboarding experience.

Ready to learn more? Download our Privacy-First Guide to User Onboarding for a comprehensive look at privacy best practices.

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