The Red Flags Rule is an anti-fraud regulation, requiring “creditors” and “financial institutions” with covered accounts to implement programs to identify, detect, and respond to the warning signs, or “red flags,” that could indicate identity theft. The financial regulatory agencies, including the FTC, developed the Rule, which was mandated by the Fair and Accurate Credit Transactions Act of 2003 (FACTA).

In an August 5 letter to FTC Chairman Jonathan Leibowitz, MACPA President and CEO Peggy Dzierzawski expressed concern about the potentially broad application of the Red Flags Rule to the accounting profession. She stressed that CPAs already adhere to strict privacy requirements related to identifying information.

“Creating an additional requirement for any CPA that defers payments for services, even in the normal course of business, to develop and implement a written Identity Theft Prevention Program, seems excessively burdensome,” she said.

The FTC recently launched this web site, www.ftc.gov/redflagsrule, offering resources and information related to the Red Flags Rule.

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