INTRODUCTION:
In today’s interconnected world, businesses operate across borders, serving customers globally. This inevitably leads to the transfer of personal data across jurisdictions. While such transfers enable innovation and commerce, they also expose personal data to significant risks, particularly when moving between countries with varying levels of data protection.
The growing reliance on cross-border data flows has raised critical concerns about safeguarding personal information. As highlighted in Recital 101 of the General Data Protection Regulation (GDPR), the increase in such flows has raised new challenges and concerns regarding the protection of personal data. The GDPR emphasizes that when personal data leaves the European Union (EU) to third countries or organizations, the level of protection guaranteed within the EU must not be compromised. To address these challenges, the GDPR establishes stringent requirements to ensure personal data remains secure, even when transferred to jurisdictions with less robust data protection frameworks. A key mechanism for achieving this is the Transfer Impact Assessment (TIA).
The TIA is a vital tool for organizations to evaluate the risks associated with cross-border data transfers and to implement appropriate safeguards. It helps ensure compliance with data protection regulations while demonstrating accountability, transparency, and a commitment to safeguarding individual rights. By proactively assessing potential vulnerabilities, businesses not only meet their legal obligations but also foster trust with their customers, ensuring that personal data remains protected in a globalized economy.
This blog explores the significance of Transfer Impact Assessments, the steps involved in conducting them, and their critical role in facilitating safe and compliant cross-border data transfers, including insights into India’s Digital Personal Data Protection Act (DPDPA).
WHEN DOES A TRANSFER OF PERSONAL DATA OUTSIDE THE EEA OCCUR?
The GDPR does not explicitly define what constitutes a transfer of personal data outside the European Economic Area (EEA). However, the European Data Protection Board (EDPB) has outlined three key criteria that must all be met to identify such a transfer:
1. A data controller or processor involved in the processing is subject to the GDPR.
2. This controller or processor shares, transmits, or otherwise makes personal data accessible to another organization (controller or processor).
3. The receiving organization is located in a country outside the EEA or is an international organization.
When these conditions are fulfilled, the data transfer is considered to occur outside the EEA and must comply with GDPR requirements for cross-border transfers.
WHY IS A TIA IMPORTANT?
With the rise of privacy regulations worldwide, including GDPR, organisations must adhere to specific legal standards when transferring data internationally. A Transfer Impact Assessment (TIA) must be conducted by data controllers or processors (referred to as exporters) before transferring personal data from a European Economic Area (EEA) country to a non-EEA country, provided the transfer relies on a GDPR tool under Article 46. However, this is not required if the destination country is covered by an adequacy decision by the European Commission as given in Article 45 or if the transfer is based on one of the exceptions listed in Article 49 of the GDPR.
The purpose of a TIA is to evaluate whether the data importer in the third country can meet the obligations specified in the data transfer agreement. This involves assessing the legal framework and practices of the destination country, particularly regarding access to personal data by government authorities. If any risks or shortcomings are identified, the TIA helps determine if additional measures can be applied to ensure the level of data protection required by EU laws.
Since the importer typically holds critical information about the local laws and practices, their cooperation is essential for completing the TIA. For relationships between controllers and processors, processors are required to share this information with controllers under Article 28 of the GDPR. Simply providing a summary or conclusion without detailed insights into the local laws, government practices, or specific transfer circumstances does not fulfil the processor’s obligations under Article 28(3)(h) of the GDPR.
CONDUCTING AN EFFECTIVE TIA: A STEP-BY-STEP GUIDE:
Conducting a Transfer Impact Assessment (TIA) helps organizations evaluate risks associated with cross-border data transfers and implement safeguards to protect personal data. The process involves several key steps as follows:
Step 1: Determine if a TIA is required
The first step is to determine if a TIA is needed. Organizations must assess whether they are engaged in cross-border data transfers, such as sharing data with vendors, affiliates, or partners in other countries. Particular attention should be given to whether the transfer involves a jurisdiction without an “adequacy decision,” where the EU or another authority has not recognized the destination country’s data protection standards as sufficient.
Step 2: Define the scope of the data transfer
Next, it is important to define the scope of the data transfer. This includes outlining the type of data being shared (e.g., names, health information, financial details), the purpose of the transfer (such as providing services, marketing, or internal operations), and identifying the countries involved, including both the data origin and destination.
Step 3: Assess legal frameworks in both jurisdictions
The third step involves assessing the legal frameworks of the originating and destination countries. Organizations must understand local data protection laws and evaluate whether the receiving country offers adequate privacy protections. They should also identify the legal mechanisms for transfer, such as adequacy decisions, Standard Contractual Clauses (SCCs), Binding Corporate Rules (BCRs), or derogations like explicit consent or contractual necessity. Being aware of any recent legal updates in either jurisdiction is also critical.
Step 4: Evaluate potential privacy risks
Once the legal landscape is clear, organizations should evaluate potential privacy risks. This involves analysing the sensitivity of the data, the purpose of the transfer, and the privacy standards of the receiving country, including risks like government access or weak regulatory oversight. Identifying these risks allows organizations to anticipate potential challenges, such as unauthorized disclosures or surveillance issues.
Step 5: Implement safeguards to mitigate risks
Once risks have been accessed, organizations must implement safeguards to mitigate them. These can include using Standard Contractual Clauses (SCCs) for regulatory compliance, applying technical measures like encryption or pseudonymization to secure data during transfer, and adopting organizational practices such as limiting data access and conducting regular audits. These measures should directly address the specific risks identified in the assessment.
Step 6: Document the entire TIA process
The TIA process should be thoroughly documented. This includes detailing the risks identified, the safeguards applied, the legal basis for the transfer, and the reasoning behind each decision. Proper documentation supports regulatory compliance and demonstrates accountability and transparency, which are crucial during audits.
Step 7: Monitor and update the TIA regularly
Finally, ongoing monitoring and review are essential. Organizations should periodically revisit the TIA to account for changes in legal frameworks, emerging risks, or shifts in organizational needs. Regular updates ensure that the assessment remains effective and compliant with evolving data protection regulations and expectations.
By following these steps, organizations can confidently manage cross-border data transfers while prioritizing privacy and legal compliance.
INDIA’S DPDPA AND CROSS-BORDER DATA TRANSFERS:
The Digital Personal Data Protection Act (DPDPA) 2023 is India’s primary legislation governing the processing of personal data. It applies to any entity—Indian or foreign—that processes the personal data of individuals, if such processing is in connection with any activity related to offering of goods or services to Data Principals within the territory of India.
Section 16 of the Act grants central government authority to restrict cross-border transfers of personal data to certain countries by establishing a “negative list.” However, the section also clarifies that its provisions will not override any existing Indian laws that provide a higher degree of protection or impose stricter restrictions on the transfer of personal data by a Data Fiduciary outside India. Furthermore, there has been certain exemption provided by the Act itself where the above stated provision will not apply, such as when processing personal data is necessary for enforcing legal rights or claims, or when conducted by courts, tribunals, or regulatory bodies performing judicial, quasi-judicial, or supervisory functions. Exemptions also cover processing for the prevention, detection, investigation, or prosecution of offences, for contractual obligations involving individuals outside India, or for corporate schemes like mergers, demergers, or amalgamations approved by competent authorities. Additionally, processing is permitted for assessing the financial status of loan defaulters, provided it complies with applicable disclosure laws.
Currently, as the rules under the Act have not yet been notified, there is limited clarity regarding the criteria for including a country in the ‘negative list’ or the specific measures an entity must take when transferring data across borders. Nonetheless, whenever personal data is being transferred outside India, the transferring entity must conduct due diligence and implement the measures suggested above into its practice to ensure that the transferred data is safe with the recipient entity. Such measures not only ensure compliance with the law but also enhance the trust and confidence of customers in India whose data are being transferred, fostering a secure and responsible data-handling environment.
CONCLUSION:
In a globalized economy, ensuring the secure and compliant transfer of personal data across borders is critical for businesses and individuals alike. Transfer Impact Assessments (TIAs) play a pivotal role in mitigating risks associated with cross-border data flows by evaluating legal frameworks, identifying privacy risks, and implementing safeguards. By adhering to regulations like the GDPR, organizations demonstrate accountability, transparency, and a commitment to protecting personal information. While the DPDPA’s rules regarding cross-border transfers remain in development, proactive measures such as due diligence and adherence to international best practices can build trust and ensure compliance. Ultimately, robust TIAs not only help organizations navigate complex legal landscapes but also foster customer confidence, supporting sustainable and responsible growth in an increasingly data-driven world.
