SAS 70 vs. SSAE 16 from the service provider perspective

SAS 70 vs. SSAE 16 from the service provider perspective

Although it’s unclear what, if anything, the FFIEC* will say about the new standard before it is officially adopted in June of next year, one thing is certain…both vendors and financial institutions will need to become familiar with the differences in the interim.  And one of the most significant differences between the two reporting standards from the service provider’s perspective is the wider scope of the new standard.  While the SAS 70 auditing standard only called for a description of “controls”, the SSAE 16 standard requires a description of the service provider’s “system”.  A “system” is defined as the services provided, along with the supporting processes, policies, procedures, personnel and operational activities that constitute the service organization’s core activities that are relevant to user entities...including third-party providers.   A SAS  70 report, on the other hand, does not, and might in fact contain language similar to “our examination did not extend to controls of the third-party service organizations…”

The implication of this expansion from “controls” to “system” is more than conceptual.  On the plus side for the financial institution, a more expansive report allows for a more accurate representation of the actual risk, resulting in a more thorough risk assessment.  The primary advantage for the service provider is that they won’t be required to re-issue a report if they add additional products or services, only if there are material changes in the supporting infrastructure.  This makes sense, because the adequacy and effectiveness of controls depends more on the environment in which the controls operate, and less on the specific services the environment supports or provides.

The new standard definitely places a bigger burden on the service provider, but the financial institution is still required to carefully and critically evaluate whether the new report adequately supports their oversight responsibilities.

*The term “SAS 70” is used 30 times, and in 8 of the 12 FFIEC Examination Handbooks.

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Tom Hinkel
As author of the Compliance Guru website, Hinkel shares easy to digest information security tidbits with financial institutions across the country. With almost twenty years’ experience, Hinkel’s areas of expertise spans the entire spectrum of information technology. He is also the VP of Compliance Services at Safe Systems, a community banking tech company, where he ensures that their services incorporate the appropriate financial industry regulations and best practices.

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