Table of Contents
- 1 Key Takeaways:
- 2 What Is SOC 2?
- 3 The History of SOC 2 Compliance
- 4 What Is the Core Criteria of SOC 2 Compliance?
- 5 Why Is SOC 2 Compliance Important?
- 6 What Are the Two Types of SOC 2 Reports?
- 7 How to Become SOC 2 Compliant
- 8 What Is the Difference Between ISO 27001 and SOC 2?
- 9 Conclusion
- 10 Identity.com
Key Takeaways:
- SOC 2 (System and Organization Controls 2) compliance is a set of standards designed to manage how organizations handle sensitive data. This helps customers feel secure about their privacy and trust in the company.
- SOC 2 compliance is essential for SaaS providers, fintech companies, and other organizations that handle sensitive customer information.
- Achieving SOC 2 compliance not only enhances data security but also helps optimize internal processes. This ensures that systems operate efficiently, reducing errors, improving service reliability, and strengthening overall business performance.
As we move into 2025, data protection has evolved from a hot topic to a vital industry, fueled by the rise in internet-based crimes. With more businesses depending on the internet for their operations, data is constantly being transmitted across borders, and cloud services have simplified workflows. But with these conveniences comes an increasing risk—data mishandling has led to cyberattacks, identity theft, malware installation, online blackmail, and extortion.
Have you ever asked your third-party service providers or network vendors how they protect data during and after transmission? Can you be sure that these vendors are taking the necessary steps to secure your information? And if you’re the vendor, how can you prove to your customers that their data is safe with you? The answer lies in SOC 2 compliance.
What Is SOC 2?
SOC 2 (System and Organization Controls 2) compliance is a set of standards designed to manage how organizations handle sensitive data. Unlike more stringent security frameworks like PCI DSS, SOC 2 is often seen as a non-financial reporting framework, focusing on evaluating a service provider’s adherence to its own declared practices and standards. This ensures the security, integrity, and privacy of an organization’s data.
SOC 2 plays a critical role in building customer trust by demonstrating a service provider’s commitment to preventing data breaches, unauthorized access, and other security threats. As a result, many businesses—especially those in the B2B and SaaS sectors—require SOC 2 compliance reports before entering into contractual agreements. This makes SOC 2 a key standard for organizations handling sensitive customer data.
The History of SOC 2 Compliance
SOC 2 compliance originated in the early 2000s when the American Institute of Certified Public Accountants (AICPA) introduced the SOC framework to help organizations demonstrate their internal controls and processes for managing sensitive data. The initial framework, SOC 1, was developed to address controls around financial reporting, particularly for service organizations that handled financial transactions or reporting on behalf of clients. SOC 1 was focused on ensuring that these service organizations had adequate controls in place to prevent errors or fraud that could impact the accuracy of their financial reports.
As the digital landscape and technology evolved, so did the need for a broader standard to address growing concerns about data security and privacy. In 2011, the AICPA introduced SOC 2, expanding the scope to cover key areas such as security, confidentiality, privacy, processing integrity, and availability. This was especially important for tech, SaaS, and B2B businesses, which were becoming increasingly dependent on third-party vendors to handle sensitive customer data. SOC 2 focused on ensuring that these organizations had strong safeguards in place to protect against data breaches and unauthorized access.
SOC 2 emerged as a response to the limitations of SOC 1, which remained focused on financial controls. As the risks surrounding data breaches and cybersecurity grew, SOC 2 became a critical framework for businesses to not only meet regulatory standards but also build trust with their customers.
What Is the Core Criteria of SOC 2 Compliance?
SOC 2 compliance is built around five core criteria known as the Trust Service Criteria or Trust Service Principles. These principles are designed to help organizations protect their client data and ensure security, privacy, and reliability. Here’s a breakdown of each:
1. Security
The foundation of SOC 2 compliance is security. This principle ensures that an organization’s systems are protected against unauthorized access, breaches, and other vulnerabilities. It includes policies and procedures to prevent data compromise, such as firewalls, intrusion detection systems, and multi-factor authentication. Security is assessed in every SOC 2 report, forming the mandatory baseline for compliance.
2. Privacy
The privacy principle focuses on how personal data is collected, used, retained, and disclosed. It ensures that data collection practices align with legal requirements and industry standards, protecting individuals’ rights to privacy. For example, companies must ensure that personal data is securely handled and is only shared with authorized parties.
3. Confidentiality
The confidentiality principle ensures that confidential data is protected from unauthorized access and disclosure. It covers sensitive information that needs to be safeguarded, such as business strategies, proprietary information, and intellectual property. Proper access controls and encryption protocols are essential to maintain confidentiality.
4. Processing Integrity
Processing integrity ensures that the systems involved in processing data do so accurately, completely, and in a timely manner. It ensures that data processing is done according to defined procedures and meets expected quality standards. This principle is especially important for businesses that process transactions or sensitive data and require a high level of accuracy and efficiency.
5. Availability
The availability principle focuses on the accessibility of data and systems when needed. It ensures that systems are operational and can handle the required workload without downtime. Availability measures include monitoring systems for performance, setting up data backups, and maintaining disaster recovery plans to minimize downtime and ensure data remains accessible.
Why Is SOC 2 Compliance Important?
SOC 2 compliance is essential for ensuring data security and privacy, even though it’s not a mandatory requirement like PCI DSS or KYC. However, many companies now consider SOC 2 compliance a vital factor when selecting a cloud-based service provider. Here’s why SOC 2 compliance is crucial:
- Competitive Advantage: A SOC 2 report demonstrates your organization’s commitment to data security, offering a competitive edge in the market. It builds trust with existing and potential clients, making it easier to acquire new customers who prioritize data protection.
- Avoidance of Data Breach Fines: While achieving SOC 2 compliance involves time and resources, it’s significantly less expensive than the potential financial penalties that come with data breaches. Data breach fines can reach millions of dollars, making SOC 2 compliance a smart investment in protecting your business.
- Regulatory Compliance: SOC 2 compliance aligns with other data security frameworks such as HIPAA and ISO 27001. By meeting SOC 2 standards, organizations are better positioned to meet broader regulatory requirements and avoid compliance-related issues.
- Organizational Benefits: SOC 2 compliance goes beyond reassuring clients. It provides valuable insights into your organization’s risk management, internal controls, governance, and regulatory oversight. This helps strengthen your company’s overall operations and security posture.
What Are the Two Types of SOC 2 Reports?
SOC 2 evaluations are conducted annually, with reports valid for twelve months. There are two primary types of SOC 2 reports, each tailored to meet different business needs:
1. Type I Report
A Type I report assesses the design of a company’s internal controls at a specific point in time. Auditors evaluate whether these controls are appropriately designed to protect client data and adhere to trust principles such as security, confidentiality, and privacy.
2. Type II Report
How to Become SOC 2 Compliant
Achieving SOC 2 compliance involves a thorough evaluation of your organization’s data security and operational practices. The process typically starts with a comprehensive review of your company’s internal controls and systems related to the five Trust Service Criteria: Security, Privacy, Confidentiality, Processing Integrity, and Availability. These criteria outline the key aspects of data management that need to be securely handled to ensure compliance. Below are the essential steps for obtaining SOC 2 compliance:
1. Identify the Trust Service Criteria Relevant to Your Organization
SOC 2 compliance is flexible, allowing businesses to focus on the specific criteria that align with their industry and customer requirements. Begin by determining which of the five criteria are relevant to your organization. For instance, a SaaS company may prioritize security and availability, while a healthcare provider may need to emphasize privacy and confidentiality due to regulatory requirements such as HIPAA.
2. Conduct a Risk Assessment and Gap Analysis
Before starting the formal audit process, conduct a thorough risk assessment to identify any gaps in your existing practices. This includes assessing your organization’s current data security measures, privacy controls, and operational procedures. A gap analysis helps pinpoint areas where your company may be lacking in terms of security policies, data handling procedures, or system capabilities, giving you the chance to address them before undergoing a formal SOC 2 audit.
3. Implement Necessary Controls and Processes
Once you’ve identified the gaps, implement the necessary controls to meet SOC 2’s standards. This may include revising your company’s policies, updating security systems, and establishing new procedures for handling sensitive data. It’s crucial to ensure that you have the right systems and protocols in place for data encryption, access controls, monitoring, and incident response. These controls must be fully operational before you begin the SOC 2 audit process.
4. Engage a Certified CPA Firm for the Audit
Identity.com
SOC 2 is a flexible reporting framework that properly handles clients’ data or information. Every service provider in the Identity.com ecosystem is SOC 2 compliant to ensure the safety and security of our users’ data. Identity.com is an open-source ecosystem providing access to on-chain and secure identity verification. Our solutions improve the user experience and reduce onboarding friction through reusable and interoperable Gateway Passes. For more info, please refer to our docs.
