What does the "Red Flags Rule" require businesses to implement?

The "Red Flags Rule," which is part of the regulations enforced by the Federal Trade Commission, requires businesses to implement an identity theft prevention program. This rule is particularly focused on detecting and addressing potential identity theft. The program must include policies that enable businesses to identify "red flags" or warning signs of identity theft when opening new accounts or handling existing ones.

This rule is essential for safeguarding the personal information of customers and ensuring that businesses take proactive steps to prevent identity theft, which can lead to significant financial harm both for individuals and businesses. By requiring the implementation of a comprehensive identity theft prevention program, the rule helps to establish a framework that organizations must follow to mitigate risks related to identity fraud.