Record Keeping in the Cloud – is it Safe?

As our lives become more intertwined with the Internet it may be only a matter of time before all of our important data is stored in this vast “cloud” of bits and bytes.  Most people are well on their way with online banking and bill paying, e-tax filing, email, document storage vaults, Social Security information, and soon we will be making payments using our smart phones.  Businesses and individuals alike are moving away from metal file cabinets to computer servers, for convenience and better data management.  Is it safe? Technically, it could be a lot safer than storing physical documents. But, there are some things you should consider with online data storage.

The potential problems of storing records on computer are often discussed with plenty of advice given for proper data backup.  Less discussed, primarily because it is relatively new territory, is the notion of “cloud” recordkeeping where records are entrusted to the internet.  The subject is beginning to receive a lot of attention and the debate on the viability of recordkeeping in the cloud is far from settled.  

Weighing the Risks

An increasing number of people and businesses are trying to move towards a paperless existence at least to the extent where non-legal or non-essential documents no longer occupy yards of file space and for the purpose of easy retrieval of data and information.  Computer hard drives and servers have become the new file drawer system for most people, and now, as more transactions and communications are conducted over the internet, the cloud is becoming an extended file drawer. 

To a certain extent, you are already storing sensitive data in the cloud. Email correspondences are records that reside in the cloud. Retail and banking relationships are established in the cloud where account information and invoices are stored.  Data that is uploaded to business partners through collaborative tools on the internet is also stored.  Certainly any information that is transmitted via your website is captive in the cloud.

Information technology is rapidly evolving. The use of data encryption makes it virtually impossible for your data to be stolen from the cloud. However, the fact of the matter is that, when data is stored in the online, you no longer control it. You may sign a privacy agreement with a vendor, but they generally aren’t responsible for your information should their servers go down, or your data gets lost. Information technology has come a long way but it’s still has some reliability issues.

Most of the information technology experts agree that records that remain in the cloud are highly susceptible to loss or becoming inaccessible due to no fault of your own.  Server outages, hacking assaults and any incident that caused your own internet to go down can happen at any time which would render your records unavailable. 

Proceed with Caution

If you are considering using any internet service for the purpose of recordkeeping, data storage or transactions, keep all sensitive documents safely stored in secure location.  Legal documents, such as wills, trusts, divorce decrees, or contracts should not be in the cloud.   Any documents that are required to be retained for any period of time should be kept in hard copy, either on site or in a secured offsite location. 

You should be able to rest easy with your data online, but it is highly recommended that you still keep physical records of your most important legal and financial information.  Ideally, your critical financial data should be backed up to a couple of alternative storage devices such as a CD, USB drive, or a hard drive with at least on being stored in a separate, secure location.  Online recordkeeping is here to stay, but, in the end, it is still you are responsible for its security.