Financial institutions across the globe use Amazon Web Services (AWS) to transform the way they do business. Regulations continue to evolve in this space, and we’re working hard to help customers proactively respond to new rules and guidelines. In many cases, the AWS Cloud makes it simpler than ever before to assist customers with their compliance efforts with different regulations and frameworks around the world.
In the United Kingdom, the Financial Conduct Authority (FCA), the Bank of England and the Prudential Regulation Authority (PRA) issued policy statements and rules on operational resilience in March, 2021. The PRA also additionally issued a supervisory statement on outsourcing and third-party risk management. Broadly, these Statements apply to certain firms that are regulated by the UK Financial Regulators: this includes banks, building societies, credit unions, insurers, financial markets infrastructure providers, payment and e-money institutions, major investment firms, mixed activity holding companies, and UK branches of certain overseas firms. For other FCA-authorized financial services firms, the FCA has previously issued FG 16/5 Guidance for firms outsourcing to the ‘cloud’ and other third-party IT services.
These Statements are relevant to the use of cloud services. AWS strives to help support our customers with their compliance obligations and help them meet their regulator’s expectations. We offer our customers a wide range of services that can simplify and directly assist in complying with these Statements, which apply from March 2022.
What do these Statements from the UK Financial Regulators mean for AWS customers?
The Statements aim to ensure greater operational resilience for UK financial institutions and, in the case of the PRA’s papers on outsourcing, facilitate greater adoption of the cloud and other new technologies while also implementing the Guidelines on outsourcing arrangements from the European Banking Authority (EBA) and the relevant sections of the EBA Guidelines on ICT and security risk management. (See the AWS approach to these EBA guidelines in this blog post).
For AWS and our customers, the key takeaway is that these Statements provide a regulatory framework for cloud usage in a resilient manner. The PRA’s outsourcing paper, in particular, sets out conditions that can help give PRA-regulated firms assurance that they can deploy to the cloud in a safe and resilient manner, including for material, regulated workloads. When they consider or use third-party services (such as AWS), many UK financial institutions already follow due diligence, risk management, and regulatory notification processes that are similar to the processes identified in these Statements, the EBA Outsourcing Guidelines, and FG 16/5. UK financial institutions can use a variety of AWS security and compliance services to help them meet requirements on security, resilience, and assurance.
The Statements reference the principle of proportionality throughout. In the case of the outsourcing requirements, this includes a focus on material outsourcing arrangements and incorporating a risk-based approach that expects regulated entities to identify, assess, and mitigate the risks associated with outsourcing arrangements. The recognition of a shared responsibility model, referenced by the PRA and the recognition in FCA Guidance FG 16/5 that firms need to be clear about where responsibility lies between themselves and their service providers, is consistent with the long-standing AWS shared responsibility model. The proportionality and risk-based approach applies throughout the Statements, including the areas such as risk assessment, contractual and audit requirements, data location and transfer, operational resilience, and security implementation:
- Risk assessment – The Statements emphasize the need for UK financial institutions to assess the potential impact of outsourcing arrangements on their operational risk. The AWS shared responsibility model helps customers formulate their risk assessment approach, because it illustrates how their security and management responsibilities change depending on the services from AWS they use. For example, AWS operates some controls on behalf of customers, such as data center security, while customers operate other controls, such as event logging. In practice, AWS helps customers assess and improve their risk profile relative to traditional, on-premises environments.
- Contractual and audit requirements – The PRA supervisory statement on outsourcing and third-party risk management, the EBA Outsourcing Guidelines, and the FCA guidance FG 16/5 lay out requirements for the written agreement between a UK financial institution and its service provider, including access and audit rights. For UK financial institutions that are running regulated workloads on AWS, please contact your AWS account team to address these contractual requirements. We also help institutions that require contractual audit rights to comply with these requirements through the AWS Security & Audit Series, which facilitates customer audits. To align with regulatory requirements and expectations, our audit program incorporates feedback that we’ve received from EU and UK financial supervisory authorities. UK financial services customers interested in learning more about the audit engagements offered by AWS can reach out to their AWS account teams.
- Data location and transfer – The UK Financial Regulators do not place restrictions on where a UK financial institution can store and process its data, but rather state that UK financial institutions should adopt a risk-based approach to data location. AWS continually monitors the evolving regulatory and legislative landscape around data privacy to identify changes and determine what tools our customers might need to help meet their compliance needs. Refer to our Data Protection page for our commitments, including commitments on data access and data storage.
- Operational resilience – Resiliency is a shared responsibility between AWS and the customer. It is important that customers understand how disaster recovery and availability, as part of resiliency, operate under this shared model. AWS is responsible for resiliency of the infrastructure that runs all of the services offered in the AWS Cloud. This infrastructure comprises the hardware, software, networking, and facilities that run AWS Cloud services. AWS uses commercially reasonable efforts to make these AWS Cloud services available, ensuring that service availability meets or exceeds the AWS Service Level Agreements (SLAs).
The customer’s responsibility will be determined by the AWS Cloud services that they select. This determines the amount of configuration work they must perform as part of their resiliency responsibilities. For example, a service such as Amazon Elastic Compute Cloud (Amazon EC2) requires the customer to perform all of the necessary resiliency configuration and management tasks. Customers that deploy Amazon EC2 instances are responsible for deploying EC2 instances across multiple locations (such as AWS Availability Zones), implementing self-healing by using services like AWS Auto Scaling, as well as using resilient workload architecture best practices for applications that are installed on the instances.
For managed services, such as Amazon Simple Storage Service (Amazon S3) and Amazon DynamoDB, AWS operates the infrastructure layer, the operating system, and platforms, whereas customers access the endpoints to store and retrieve data. Customers are responsible for managing resiliency of their data, including backup, versioning, and replication strategies. For more details about our approach to operational resilience in financial services, refer to this whitepaper.
- Security implementation – The Statements set expectations on data security, including data classification and data security, and require UK financial institutions to consider, implement, and monitor various security measures. Using AWS can help customers meet these requirements in a scalable and cost-effective way, while helping improve their security posture. Customers can use AWS Config or AWS Security Hub to simplify auditing, security analysis, change management, and operational troubleshooting.
As part of their cybersecurity measures, customers can activate Amazon GuardDuty, which provides intelligent threat detection and continuous monitoring, to generate detailed and actionable security alerts. Amazon Macie uses machine learning and pattern matching to help customers classify their sensitive and business-critical data in AWS. Amazon Inspector automatically assesses a customer’s AWS resources for vulnerabilities or deviations from best practices and then produces a detailed list of security findings prioritized by level of severity.
Customers can also enhance their security by using AWS Key Management Service (AWS KMS) (creation and control of encryption keys), AWS Shield (DDoS protection), and AWS WAF (helps protect web applications or APIs against common web exploits). These are just a few of the many services and features we offer that are designed to provide strong availability and security for our customers.
As reflected in these Statements, it’s important to take a balanced approach when evaluating responsibilities in cloud implementation. AWS is responsible for the security of the AWS infrastructure, and for all of our data centers, we assess and manage environmental risks, employ extensive physical and personnel security controls, and guard against outages through our resiliency and testing procedures. In addition, independent third-party auditors evaluate the AWS infrastructure against more than 2,600 standards and requirements throughout the year.
We encourage customers to learn about how these Statements apply to their organization. Our teams of security, compliance, and legal experts continue to work with our UK financial services customers, both large and small, to support their journey to the AWS Cloud. AWS is closely following how the UK regulatory authorities apply the Statements and will provide further updates as needed. If you have any questions about compliance with these Statements and their application to your use of AWS, reach out to your account representative or request to be contacted.
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