Cloud Storage
S3 Compatible
FCA compliant storage
Secure FCA Compliant Storage with a Sovereign Cloud Architecture
UK financial institutions face increasing pressure to ensure their cloud outsourcing arrangements meet strict FCA standards for operational resilience and data sovereignty. A misstep in data governance can lead to significant compliance risks and financial penalties.
Key Takeaways
FCA compliant storage requires EU-based data centers with geofencing to meet data residency rules outlined in SYSC 8.
Immutable storage with Object Lock is a critical defense against ransomware and ensures the data integrity required for financial audits.
A cloud model with zero egress fees and full S3-API compatibility aligns with the EU Data Act and mitigates vendor lock-in risk.
The Financial Conduct Authority (FCA) mandates that firms take reasonable steps to avoid undue operational risk when outsourcing to the cloud. This includes rigorous due diligence, ensuring data security, and maintaining clear exit strategies to prevent vendor lock-in. For many, navigating these requirements while managing escalating cloud costs presents a significant challenge. This article outlines a strategic approach to achieving robust, FCA compliant storage by leveraging a sovereign-by-design cloud architecture that prioritizes data control, resilience, and cost predictability, aligning directly with the FCA's core objectives for the financial sector.
Translate FCA Outsourcing Rules into Actionable Controls
The FCA's SYSC 8 handbook requires firms to manage outsourcing risks effectively, ensuring providers have the capability to perform functions securely. This means your cloud partner must grant effective audit rights and protect confidential information without fail. Firms must demonstrate that outsourcing does not impair the quality of their internal controls or the FCA's ability to monitor compliance. A provider's failure to offer transparent operational controls is a direct compliance failure for the regulated firm. This regulatory partnership demands a new level of diligence in vendor selection.
Operational resilience is not just a suggestion; it is a core mandate that requires documented business continuity and disaster recovery plans. The FCA expects firms to test exit plans, especially for stressed scenarios, ensuring they can migrate data without service disruption. Your choice of financial services cloud must support these exit strategies inherently. This requirement shifts the focus towards providers who design for portability from day one. The next step is ensuring the physical location of data aligns with these rules.
Implement Geofenced Storage to Meet Data Sovereignty Mandates
The FCA expects firms to agree on a data residency policy with their cloud provider, ensuring data is not stored in jurisdictions that inhibit regulatory access. Storing data exclusively in certified European data centers provides a direct solution to this requirement. This approach offers legal certainty and avoids exposure to foreign laws like the CLOUD Act. Choosing an EU-only provider ensures your data remains under a consistent and predictable legal framework. This simplifies compliance with both FCA and UK GDPR rules.
Country-level geofencing offers granular control, keeping sensitive financial data within predefined regions under EU rules. This capability is a critical component of modern FCA compliant storage architecture. It directly addresses the FCA's concern about the choice and control over the jurisdictions where data is processed and managed. With this foundation of data sovereignty, firms can then build layers of technical resilience.
Leverage Immutable Storage for Ransomware Defense and Data Integrity
Financial firms are a primary target for ransomware, making data protection a board-level concern. Immutable storage, or WORM (Write Once, Read Many), ensures that once data is written, it cannot be altered or deleted for a set period. This technology provides a robust defense, allowing firms to restore untampered data without paying a ransom. Using immutable backups with Object Lock is a key strategy for protecting critical financial records.
Data integrity is essential for meeting audit and regulatory requirements in the financial sector. Immutable storage guarantees that transaction records and other sensitive information remain unaltered, providing a verifiable audit trail. This feature is crucial for demonstrating compliance and fostering trust with both regulators and clients. An always-hot storage model further enhances this by ensuring all data, including immutable backups, is immediately accessible without restore delays. This architectural choice eliminates the operational risks associated with complex data tiering. This focus on data integrity naturally leads to the need for a clear exit strategy.
Design a Clear Exit Strategy to Mitigate Vendor Lock-in
The FCA and other UK regulators have identified vendor lock-in as a significant barrier to competition and resilience in the cloud market. Technical barriers and egress fees often make switching providers difficult and expensive. A provider built on the S3 API standard ensures that existing applications, scripts, and tools continue to work without code rewrites. This compatibility protects past investments and minimizes migration risk.
The EU Data Act, fully applicable from September 2025, strengthens data portability and mandates the removal of switching obstacles. It requires providers to facilitate a switch within a 30-day transitional period and phases out egress fees entirely. Choosing a provider that already offers zero egress fees aligns your firm with the future of regulation and ensures long-term freedom of action. This commitment to open standards is a core tenet of true regulatory readiness. Beyond portability, the security of the supply chain itself is under scrutiny.
Strengthen Supply Chain Security for NIS-2 Alignment
The NIS-2 directive imposes stricter cybersecurity requirements on the financial sector's supply chain, even for UK firms operating within the EU. It mandates robust risk management, incident reporting within 24 hours, and greater accountability for senior management. Financial institutions must conduct thorough due diligence on their cloud vendors to ensure they meet these heightened standards. This includes verifying multi-layer encryption, strong identity and access management (IAM), and processes for vulnerability management.
A secure cloud platform should provide the tools to meet these obligations by design. Here are key features to look for:
Granular IAM with Multi-Factor Authentication (MFA) and Role-Based Access Control (RBAC).
Support for external identity providers via SAML/OIDC for secure integration.
End-to-end encryption for data in transit and at rest, with keys held under EU control.
Continuous monitoring and documentation to support incident reporting timelines.
Aligning with a provider that bakes these NIS-2 principles into its operations is a competitive advantage. This proactive stance on security also benefits channel partners who serve regulated clients.
Enable MSPs with a Predictable and Partner-Ready Platform
For Managed Service Providers (MSPs) offering BaaS or archiving solutions to financial clients, cost predictability is essential for maintaining margins. A pricing model with no egress fees, no API call costs, and no minimum storage duration removes the financial uncertainty common with hyperscalers. This transparent economic model allows MSPs to build defensible and profitable services around FCA compliant storage. This predictability is a cornerstone of a strong channel partnership.
A partner-ready platform must also simplify management and accelerate onboarding. The availability of a multi-tenant console with robust RBAC and MFA allows MSPs to securely manage multiple clients from a single interface. With UK distribution through partners like Northamber plc, local resellers and MSPs gain streamlined access to a sovereign storage solution. This ecosystem approach empowers partners to confidently address the complex compliance needs of the UK financial sector. Now, let's put this into practice.
Implement a Practical 4-2-2 Backup Strategy for Financial Data
More Links
Bundesbank provides information on Banking Supervisory Requirements for IT (BAIT) and the Digital Operational Resilience Act (DORA).
Bitkom offers insights from their Cloud Report 2024, presented in charts.
Bundesbank shares information on digital banks, associated risks, and new methods in banking supervision.
FCA provides finalised guidance for firms outsourcing to cloud and other third-party IT providers.
FAQ
How can I ensure my cloud provider is FCA compliant?
You must conduct thorough due diligence. Verify that the provider operates in certified EU data centers, offers geofencing, provides immutable storage (Object Lock), has no egress fees to ensure a viable exit strategy, and can supply documentation for audits. Their contract should clearly allocate rights and obligations as required by SYSC 8.
What is the benefit of a 'sovereign by design' cloud for UK financial firms?
A 'sovereign by design' cloud, based exclusively in Europe, ensures your data is governed by EU law, avoiding exposure to foreign legislation like the US CLOUD Act. This provides legal certainty and simplifies compliance with both FCA data residency expectations and UK GDPR.
Does using an S3-compatible API help with FCA compliance?
Yes, indirectly. Full S3-API compatibility reduces technical barriers to switching providers, which addresses the FCA's concerns about vendor lock-in. It allows you to maintain a clear exit strategy, as your tools and applications can be migrated to another S3-compatible service with minimal disruption.
Why are zero egress fees important for financial services?
Zero egress fees are critical for two reasons. First, they provide predictable, transparent costs, which is important for financial planning. Second, they remove a major financial barrier to switching providers, helping you meet the FCA's requirement for a practical and testable exit plan.
How does your storage solution help with ransomware protection?
Our solution provides Immutable Storage with S3 Object Lock. This feature allows you to make your backups unchangeable for a defined period. Even if your systems are compromised, ransomware cannot encrypt or delete these immutable backups, ensuring you can always restore clean data.
Is your service suitable for MSPs serving the financial sector?
Absolutely. Our platform is partner-ready with a multi-tenant console, robust security controls (RBAC/MFA), and automation via API/CLI. The predictable pricing model with no egress or API fees allows MSPs to build profitable, compliant BaaS and archiving services for their financial clients.
