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Why is Pseudonymization of data an essential Practice as per GDPR?

In the daily operations of any business, a large amount of sensitive data goes through HR, marketing, or IT departments. The data that is on the move constantly, is susceptible to a number of attacks that can risk the privacy of the very crucial and sensitive data. Pseudonymization can help lower the risk and avoid any possible data breach.

“Pseudonymization” of data means replacing any identifying characteristics of data with a pseudonym, or, in other words, a value that does not allow the data subject to be directly identified. It also replaces personal identifiers with non-identifying references or keys so that it is not possible for anyone working with the data to identify the data subject without the key.

Pseudonymization is a security technique for replacing sensitive data with realistic fictional data and is a reversible process that de-identifies data but allows the re-identification if necessary. It makes personal data processing easier, reducing the risk of exposing sensitive data to unauthorized personnel and employees.

Pseudonymization can be achieved using various methods like data masking, encryption, or tokenization. When pseudonymized data is produced, according to the GDPR, two sets of information are obtained:

  • The processed information that is not attributable to the person concerned.

  • The additional information that contains the removed link to the data chain and that allows identification of the data.

Although pseudonymization and anonymization are both used to protect the identity of the individual, they are not synonyms. Pseudonymization merely reduces the linkability of a dataset with the original identity of a data subject and is a useful security measure.

  • In case of pseudonymization, if an individual is authorized to access that information, then they will have the key that will enable them to de-identify the data.

  • While anonymization is a technique that irreversibly alters data, so an individual is no longer identifiable directly or indirectly.

Both methods are highly recommended, but the choice will depend on many factors. The best method will be determined by the purpose of processing, the type of data you process, and the risk of a data breach it imposes.

Unlike anonymization, pseudonymized data falls within the GDPR’s regulatory reach and it is an effective security measure to help organizations comply with GDPR data minimization standards. Pseudonymization is a much more sophisticated option since it leaves the key to “unlock” the data, hence, the pseudonymized data is not considered directly identifying, and is not anonymized either, resulting in preserving its original value.

The concept of personally identifiable information (PII) lies at the heart of the GDPR, and the idea of pseudonymization is to separate data from direct identifiers, so that the data cannot be linked back to an identity without additional information. Apart from ensuring data protection, pseudonymization also supports the overall GDPR compliance of any organization. The GDPR introduces pseudonymization as a means of protecting individuals’ rights while allowing data controllers to benefit from the data’s utility and provides them more flexibility. This technique significantly reduces the risk of data exposure while maintaining referential integrity for scientific, historical, and statistical purposes.

The GDPR recommends Pseudonymization as one of the data protection methods for these reasons:

1) Removes Sensitive Data: Pseudonymization enhances privacy by de-identifying sensitive information. It removes direct identifiers, such as name, social security number, credit card number, or contact information hence reducing the risk of data breach, data loss, and data theft.

2) Enables Data-driven Business: Pseudonymization not only helps protect the rights of individuals, but also enables data utility. For companies big and small, using data is an essential part of doing business. While the GDPR requires data controllers to collect data only for “specific, explicit and legitimate purposes”, it provides data controllers who pseudonymised personal data, more flexibility to process the data for a different purpose than the one for which it was originally collected.

3) Practices Data Minimization : Pseudonymization allows data controllers to practice “data minimization”, which limits the use of data to what is necessary for a specific purpose.

Pseudonymization can be used in various purposes, such as:

- Medical or Scientific research, for the processing of statistical data without linking names, addresses and other personal identification data.

- Marketing research & Customer registration, to preserve consumer privacy by substituting the customer’s name with a code.

It is important to automate the pseudonymization practice. Since data management involves a certain level of complexity, hence standardization is the key, both to ensure data protection, in accordance with the GDPR, and for the sustainability of the company.

Although the regulation mentions pseudonymization as one of the data protection processes, its use should depend on the circumstances, the technology used, or even the level of risk involved.

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