Investment firms in the UK must meet strict data backup regulations under UK GDPR, the Data (Use and Access) Act 2025, and the FCA's operational resilience rules. Non-compliance can result in fines, reputational damage, and operational failures. Key requirements include:
Firms also face challenges such as ransomware attacks, third-party risks under DORA, and data sovereignty issues. Solutions like Zapflow offer tools to help firms align with these regulations, ensuring data integrity and security while reducing risks.
Investment firms face a tangle of challenges when it comes to data backups, and these issues can jeopardise both regulatory compliance and data integrity. The hurdles stem from outdated retention practices, the growing sophistication of cyber threats, and the complexities of managing third-party relationships under new regulations.
Weak or outdated data retention policies often leave firms vulnerable to breaches of UK GDPR Articles 5(1)(e), 5(2), and 32, which demand consistent and secure data management practices. Many firms fail to update retention schedules as business processes evolve, and without a dedicated owner for overseeing data retention and deletion, inconsistencies creep in across the organisation. Regular data pruning is frequently neglected, and an outdated Information Asset Register (IAR) makes it hard to track where data is stored, who has access, and when it should be deleted.
Physical records that haven’t been digitised are another weak spot - they’re prone to degradation, loss, or tampering. Adding to the risk, firms often store backups alongside primary data, which increases their exposure to ransomware attacks. These gaps in data retention lay the groundwork for even bigger vulnerabilities, as explored in the sections on cyber threats and third-party risks.
Ransomware continues to top the list of cyber threats in the United Kingdom. Attackers often target backup systems early in their campaigns, deleting critical data to make recovery nearly impossible.
"Analysis of incidents shows that in the early stages of a destructive ransomware attack, actors often target backups and infrastructure, deleting or destroying the data stored there to make it harder for the victim to recover."
– National Cyber Security Centre
The rise of double extortion tactics - where attackers encrypt data and also exfiltrate it - has made the situation even more dire. Even if firms successfully restore their systems, the damage from leaked data can still be devastating. Under UK GDPR, any attack that results in lost access to data qualifies as a personal data breach, and the Information Commissioner’s Office has made it clear that paying a ransom is not an acceptable recovery strategy.
Another common misconception is that SaaS providers handle all backup responsibilities. In reality, the legal responsibility for data backups remains with the firm. Many SaaS providers retain deleted data for as little as 30 days, leaving firms exposed if they rely too heavily on these services. Such vulnerabilities can directly undermine a firm’s ability to meet regulatory standards.
The Digital Operational Resilience Act (DORA), which takes full effect on 17 January 2025, requires investment firms to maintain comprehensive oversight of their third-party ICT providers. This has driven nearly half of UK financial institutions to significantly increase their compliance budgets. However, third-party relationships often create blind spots. If a provider is breached, attackers can potentially gain access to a firm’s backup infrastructure.
A recent lawsuit underscored the dangers of failing to properly monitor third-party backup systems. As James Hughes, VP of Solutions Engineering and Enterprise CTO at Rubrik, points out:
"Understanding what data is the most critical, where that data lives, and who has access to it is essential for identifying, assessing, and mitigating ICT risks."
Managing third-party risks isn’t just about internal policies - it also involves navigating complex challenges around data sovereignty and cross-border compliance.
Using non-UK data storage providers introduces a host of challenges tied to data sovereignty and cross-border access. For instance, under the CLOUD Act, US authorities can access data stored abroad, which complicates compliance with UK GDPR. The Financial Conduct Authority has made it clear that firms failing to enforce strict data location and access controls could face substantial fines.
The EU Data Act adds another layer of complexity by introducing rules around data portability, making cross-border compliance even trickier. Investment firms must ensure their backup providers comply with UK data residency requirements while also staying flexible enough to adapt to shifting regulatory landscapes. Ambiguous contractual terms about where data is stored can easily lead to unintentional breaches of territorial data protection laws. These issues require careful oversight to avoid costly missteps.
In the UK, investment firms are required to securely manage, store, and safeguard their data backups. Both the Financial Conduct Authority (FCA) and the Information Commissioner's Office (ICO) mandate that firms implement systems designed to ensure the integrity, accessibility, and resilience of their data. These regulations form the backbone of compliance and set the stage for effective backup solutions, which will be explored in later sections.
The FCA’s SYSC 9.1.2R regulation specifies that MiFID firms must store records in a way that prevents them from being altered. This is where WORM (Write Once, Read Many) storage, also known as immutable storage, comes into play. These solutions ensure that all changes are logged and tamper-proof. The FCA Handbook clearly states:
"It must not be possible for the records otherwise to be manipulated or altered."
Articles 5(1)(f) and 32 of the UK GDPR require firms to handle personal data securely, and this extends to how backups are managed. Off-site storage must adhere to stringent security measures, such as encryption or secure VPNs, to protect sensitive information. A well-defined data residency policy works hand in hand with these technical measures, ensuring compliance with these requirements.
The Data (Use and Access) Act 2025, which came into effect on 19th June 2025, introduced updated guidelines for business continuity, backup protocols, and incident reporting. In line with UK GDPR Article 32, firms are required to restore access to personal data promptly following an incident. The definition of "timely" restoration is based on the level of risk involved. The ICO also notes that temporary loss of access to data - such as during a ransomware attack - constitutes a breach. As the ICO emphasises:
"The ICO does not consider the payment of a ransom as an 'appropriate measure' to restore personal data." – Information Commissioner's Office
Furthermore, retention periods vary depending on the type of record. MiFID-related business records must be kept for a minimum of five years, non-MiFID records for at least three years, and records tied to pension transfers or conversions must be retained indefinitely. Firms are also obligated to maintain schedules for all electronic communications, ensure off-site storage of backup copies to protect against localised disasters, and routinely test recovery processes to confirm their effectiveness.
On-Premises vs Cloud Backup Solutions for Investment Firms
Creating a backup system that meets regulatory standards requires more than just storing data; it demands robust technical measures to ensure the integrity and reliability of that data. Under the FCA's SYSC 9.1 rules for "unchanged reproduction", the system must maintain data integrity that can be verified. This means investment firms need to adopt technologies and processes that are resilient against both external cyber threats and internal risks. Below, we’ll break down the essential steps to achieve this.
One of the key components of a compliant backup system is immutable storage. WORM (Write-Once, Read-Many) technology ensures that data cannot be altered, overwritten, or deleted during a defined retention period. However, not all WORM systems meet regulatory requirements. To comply fully with FCA SYSC 9.1, systems should operate in Compliance Mode, which prevents even administrators from altering data during retention periods.
"True WORM compliance is a system‑level control that prevents even privileged users from altering or deleting records before their retention period has expired." – SteelEye
Major cloud providers like AWS (S3 Object Lock), Azure (Immutable Blob Storage), and Google Cloud (Bucket Lock) offer solutions for technical immutability. Automating retention periods based on data type is a best practice - for instance, retaining MiFID communications for five years and CASS records for seven years. This approach balances compliance with GDPR requirements for data disposal.
However, relying solely on vendor promises isn’t enough. Regulators require technical controls, not just contractual assurances. Encryption is another critical layer of protection - ensure all backups are encrypted at-rest and in-transit using AES-256 encryption. Additionally, multi-factor authentication (MFA) should secure access to all backup systems.
The UK Data (Use and Access) Act 2025 has reinforced the importance of clear data residency policies. Firms should use geofenced, UK-based storage to reduce exposure to foreign jurisdictions and comply with evolving data standards. When using SaaS platforms, it’s essential to understand the shared responsibility model. While providers secure the infrastructure, the responsibility for backing up data remains with the firm.
The Digital Operational Resilience Act (DORA) mandates that firms maintain an Information Asset Register (IAR), which logs all software and hardware assets, their locations, owners, retention policies, and security measures. This register is essential for managing ICT risks effectively.
Third-party providers are also under increased regulatory scrutiny. Firms must establish formal contracts with vendors, including performance tracking and documented exit strategies. With nearly 50% of EU financial incidents in 2023 linked to third-party failures, regulators are taking a hard stance. Non-compliance can result in fines of up to 2% of global annual turnover.
Significant ICT incidents must be reported to regulators within 24 hours, including a root cause analysis and impact classification. Automated logging can help meet this tight timeline and provide evidence of any data breaches or exfiltration.
Ransomware remains a major threat, targeting 94% of corporate backup environments. The ICO has made it clear that even temporary loss of access to data during a ransomware attack is considered a breach. Paying a ransom is not seen as an acceptable solution to restore data.
To mitigate these risks, segregate backups either offline or in isolated environments. Conduct threat assessments to identify which accounts or IP addresses can access or delete backup repositories. Implement a "four-eyes principle" to ensure no single person has full control over sensitive data.
Establish clear Recovery Point Objectives (RPO) and Recovery Time Objectives (RTO). These metrics determine how often backups are created and how quickly data must be restored. Regular testing is crucial - conduct everything from simple read-only tests to full system recovery simulations in non-live environments. This proactive approach helps identify vulnerabilities before they become real issues.
| Factor | On-Premises | Cloud-Based |
|---|---|---|
| Initial Cost | High upfront investment in hardware | Lower initial costs with pay-as-you-go pricing |
| Scalability | Limited by physical capacity | Automatically scales with demand |
| Data Sovereignty | Full control over location and jurisdiction | Requires geofenced UK storage |
| Maintenance | Requires dedicated IT support | Provider handles infrastructure; firm manages data security |
| Recovery Speed | Faster for local restores; slower off-site | Dependent on internet speed; improving with DRaaS |
| Compliance Control | Directly implement technical safeguards | Must verify provider features like Compliance Mode WORM |
The trend is moving towards cloud-based solutions. Public cloud SaaS now holds a 53.55% market share, while private cloud options are growing at a rate of 33.4% annually. Additionally, 88% of organisations plan to adopt Disaster-Recovery-as-a-Service (DRaaS) within the next two years. The integration of backup and disaster recovery functions into unified platforms is driving this shift. However, rising egress fees and data sovereignty concerns are encouraging some firms to explore private-cloud Backup-as-a-Service options.
Zapflow provides a tailored approach to ensure data backup compliance, particularly suited for investment firms handling venture capital, private equity, or alternative investments.
With the Zapflow Compliance plan (£995/month), the platform delivers high standards of data integrity and security. It is ISO 27001 certified and undergoes independent third-party audits, offering peace of mind for firms prioritising compliance. Additionally, Zapflow supports flexible data residency options, which is a key consideration for firms with specific regulatory needs.
Data is stored in secure EU data centres. For firms with strict UK data residency requirements - especially post-Brexit - a country-specific residency option is available for an additional fee. This ensures data remains within UK borders, reducing risks associated with foreign jurisdictions and supporting regulatory alignment.
To further strengthen security, Zapflow includes multifactor authentication (MFA) and detailed access controls, meeting the requirements of DORA Article 12 for protecting ICT systems from unauthorised access. The platform can be implemented within 1–2 weeks and includes dedicated account management along with unlimited training.
Operational efficiency is enhanced through features like automated KYC/AML checks, sanction screening, and routine compliance task automation. These functions are integrated with APIs that centralise business intelligence and reporting, streamlining workflows for investment firms. This is particularly important given that poor data quality and governance can cost organisations up to 20% of annual revenue.
Zapflow’s pricing model is straightforward, with a fixed team fee and no additional charges for extra users. Its modular design allows firms to combine compliance features with tools for portfolio monitoring and investor relations, creating a unified system that addresses multiple regulatory requirements without duplicating infrastructure. By aligning with DORA, UK GDPR, and FCA standards, Zapflow equips modern investment firms with the tools needed to integrate compliance seamlessly into their operations.
Data backup compliance isn't just a box to tick for UK investment firms - it’s a critical part of staying on the right side of regulations and maintaining operational stability. With the Data (Use and Access) Act 2025 coming into effect on 19 June 2025, firms must reassess and update their backup protocols to meet these new requirements.
The stakes for non-compliance are high. For instance, records related to pension transfers, conversions, or opt-outs must be kept indefinitely. Failure to implement measures like immutable storage, data residency controls, or regular recovery testing can lead to severe regulatory penalties and reputational harm. Even more alarming, around 25% of businesses fail to reopen after a major disaster, often because they’re unable to restore operations within the critical 48-hour window.
To stay compliant, firms need a risk-based backup strategy. This includes aligning backup frequency with data sensitivity, encrypting data both in transit and at rest, and routinely testing recovery systems[1, 4]. Off-site storage, whether through secondary cloud providers or geographically separated data centres, is also crucial for safeguarding against localised disruptions.
It’s important to note that outsourcing backup services doesn’t absolve firms of their regulatory responsibilities. Investment firms remain fully accountable for ensuring their third-party providers meet FCA and ICO standards. This requires thorough due diligence and strong security measures.
For those looking to streamline compliance, Zapflow provides a comprehensive solution. With features like flexible data residency, automated compliance tools, and integrated record-keeping, it helps firms not only meet their obligations but also turn regulatory challenges into opportunities for growth.
UK investment firms are obligated to establish a risk-based Business Continuity Plan and a Disaster Recovery Plan in line with the Data (Use and Access) Act 2025. These plans are designed to ensure the protection and accessibility of critical data and operations. Key elements include:
By adhering to these measures, firms strengthen their ability to comply with regulations while minimising the risk of data loss or operational setbacks.
When dealing with third-party ICT providers under DORA, investment firms need to prioritise detailed due diligence. This means verifying that providers meet all necessary security and compliance standards before entering into agreements. Contracts should clearly outline terms for ongoing monitoring, audit rights, and well-defined service-level agreements (SLAs) to ensure accountability.
It's also essential to regularly test backup and restore processes to protect critical data. For added security, firms should keep backup systems logically and physically separate. Additionally, having clear exit strategies in place is key to smoothly and safely transitioning away from providers when needed. These measures not only help firms stay compliant but also minimise the risks linked to third-party ICT services.
To comply with data sovereignty regulations, businesses must treat the location of their backup data as a critical regulatory choice. Start by mapping and categorising your data, identifying its origin and determining which jurisdiction’s laws apply (such as UK GDPR or the Data (Use and Access) Act 2025). Once this is clear, select storage locations within jurisdictions that meet approved protection standards, like the UK or other regions with equivalent safeguards. If storing data across borders is unavoidable, use standard contractual clauses and ensure that all sub-processors adhere to the same legal obligations. Reinforce this with strong encryption and strict access controls to prevent unauthorised access.
From an operational standpoint, implement a risk-based backup schedule tailored to the sensitivity of your data, ensuring at least one off-site backup is stored in a compliant location. Clearly document your backup frequency, retention policies, and restoration tests as part of your Business Continuity and Disaster Recovery Plans. Regularly test these plans to confirm that data recovery processes work as intended. Maintain an audit trail that tracks storage locations, security measures, and any cross-border data transfers, updating it to reflect changes in regulations. Tools like Zapflow can make compliance easier by centralising data management and automating policy enforcement, ensuring businesses meet their regulatory responsibilities efficiently.