Regulatory Requirements Overview

Table of Contents

  1. Introduction
  2. Regulatory Comparison
  3. Global Regulations
    1. GDPR (General Data Protection Regulation)
      1. Key Principles
      2. Sovereignty-Relevant Requirements
      3. Penalties
      4. Azure Compliance
    2. FedRAMP (Federal Risk and Authorization Management Program)
      1. Impact Levels
      2. Key Requirements
      3. Azure Compliance
  4. Industry-Specific Regulations
    1. HIPAA (Health Insurance Portability and Accountability Act)
      1. Key Requirements
      2. Business Associate Agreements (BAA)
      3. Azure Compliance
    2. PCI DSS (Payment Card Industry Data Security Standard)
      1. 12 Requirements
      2. Compliance Levels
      3. Azure Compliance
    3. ITAR (International Traffic in Arms Regulations)
      1. Key Requirements
      2. Compliance Challenges
      3. Azure Compliance
  5. Regulatory Comparison Matrix
  6. Common Sovereignty Requirements Across Regulations
    1. Data Residency
    2. Access Controls
    3. Encryption
    4. Audit Logging
    5. Personnel Screening
  7. Determining Applicable Regulations
    1. By Industry
    2. By Geography
    3. Assessment Questions
  8. Azure Compliance Resources
    1. Compliance Offerings
    2. Tools and Services
    3. Trust Center
  9. Next Steps

Introduction

Digital sovereignty requirements are driven by a complex landscape of regulations, compliance frameworks, and industry standards. Understanding these regulatory requirements is essential for designing sovereign cloud solutions that meet legal and business needs.

This overview provides a high-level introduction to the major regulatory frameworks that drive sovereignty requirements.

Regulatory Comparison 

graph TB
    Regs[Regulatory Frameworks]
    
    Regs --> Global[Global Regulations]
    Regs --> Industry[Industry-Specific]
    Regs --> National[National Standards]
    
    Global --> GDPR[GDPR<br/>EU Data Protection<br/>€20M or 4% revenue]
    Global --> FedRAMP[FedRAMP<br/>US Federal<br/>Low/Mod/High]
    
    Industry --> HIPAA[HIPAA<br/>Healthcare PHI<br/>$1.5M per year]
    Industry --> PCI[PCI-DSS<br/>Payment Cards<br/>4 Levels]
    Industry --> ITAR[ITAR<br/>Defense Tech<br/>US Persons Only]
    
    National --> ISO[ISO 27001<br/>Info Security<br/>Management]
    National --> SOC[SOC 2<br/>Trust Services<br/>Type II]
    National --> NIST[NIST CSF<br/>Risk Framework<br/>5 Functions]
    
    style Regs fill:#0078D4,stroke:#004578,stroke-width:3px,color:#fff
    style Global fill:#E8F4FD,stroke:#0078D4,stroke-width:2px,color:#000
    style Industry fill:#FFF4E6,stroke:#FF8C00,stroke-width:2px,color:#000
    style National fill:#F3E8FF,stroke:#7B3FF2,stroke-width:2px,color:#000

Global Regulations

GDPR (General Data Protection Regulation)

Jurisdiction: European Union (EU) and European Economic Area (EEA)
Effective Date: May 25, 2018
Scope: All organizations processing personal data of EU residents

Key Principles

  1. Lawfulness, Fairness, and Transparency: Clear communication about data processing
  2. Purpose Limitation: Data collected for specified, legitimate purposes
  3. Data Minimization: Only collect necessary data
  4. Accuracy: Keep data accurate and up to date
  5. Storage Limitation: Retain data only as long as necessary
  6. Integrity and Confidentiality: Appropriate security measures
  7. Accountability: Demonstrate compliance

Sovereignty-Relevant Requirements

Data Residency:

  • No explicit requirement, but data transfers outside EU must meet strict conditions
  • Adequacy decisions or Standard Contractual Clauses (SCCs) for transfers
  • Schrems II decision impacts cloud provider selection

Data Subject Rights:

  • Right to access personal data
  • Right to erasure (“right to be forgotten”)
  • Right to data portability
  • Right to object to processing

Data Protection by Design:

  • Privacy considerations from project inception
  • Technical and organizational measures
  • Data Protection Impact Assessments (DPIAs)

Data Processing Agreements:

  • Contracts required with data processors
  • Processor obligations clearly defined
  • Sub-processor management

Penalties

  • Up to €20 million or 4% of global annual turnover (whichever is higher)
  • Significant reputational damage
  • Potential legal actions from data subjects

Azure Compliance

  • EU Data Boundary: Supports GDPR data localization needs
  • Standard Contractual Clauses: Available for data transfers
  • Data Processing Agreement: Included in Microsoft terms
  • Compliance Documentation: Extensive GDPR resources

Reference: GDPR Compliance on Azure

FedRAMP (Federal Risk and Authorization Management Program)

Jurisdiction: United States Federal Government
Effective Date: June 2011
Scope: Cloud services used by US federal agencies

Impact Levels

Low Impact:

  • Public information
  • Minimal impact if compromised
  • Example: Public websites

Moderate Impact:

  • Internal government information
  • Moderate impact if compromised
  • Example: Email, collaboration tools
  • Most common authorization level

High Impact:

  • National security information
  • Severe impact if compromised
  • Example: Law enforcement, intelligence data
  • Strictest security requirements

Key Requirements

Security Controls:

  • Based on NIST SP 800-53
  • Extensive security control families (18 families)
  • Continuous monitoring required

Authorization Process:

  • Agency authorization (ATO - Authority to Operate)
  • Joint Authorization Board (JAB) authorization
  • Significant time and resource investment

Sovereignty Requirements:

  • Data stored in US regions
  • US-based operations personnel for High impact
  • Segregated infrastructure for government

Continuous Monitoring:

  • Monthly security scanning
  • Annual assessments
  • Incident reporting

Azure Compliance

  • Azure Government: Dedicated environment for FedRAMP
  • FedRAMP High: Authorized at High impact level
  • Separate Regions: US Gov regions (Virginia, Texas, Arizona)
  • Restricted Access: Screened personnel only

Reference: FedRAMP on Azure Government

Industry-Specific Regulations

HIPAA (Health Insurance Portability and Accountability Act)

Jurisdiction: United States Healthcare Industry
Effective Date: 1996 (Privacy Rule: 2003, Security Rule: 2005)
Scope: Healthcare providers, payers, and their business associates

Key Requirements

Protected Health Information (PHI):

  • Any health information that can identify an individual
  • Includes medical records, billing information, test results
  • Electronic PHI (ePHI) covered by Security Rule

Privacy Rule:

  • Limits use and disclosure of PHI
  • Gives patients rights over their health information
  • Sets boundaries on PHI use for marketing and research

Security Rule:

  • Administrative safeguards (policies, procedures)
  • Physical safeguards (facility access, device controls)
  • Technical safeguards (access controls, encryption, audit logs)

Breach Notification:

  • Notification required for breaches affecting 500+ individuals
  • Individual notification within 60 days
  • HHS and media notification for large breaches

Business Associate Agreements (BAA)

Required for:

  • Cloud service providers
  • Any organization handling PHI on behalf of covered entity

Key Terms:

  • Permitted and required uses of PHI
  • Safeguards implementation
  • Breach reporting obligations
  • Termination provisions

Azure Compliance

  • HIPAA BAA: Available for Azure services
  • Compliance Documentation: Extensive HIPAA guidance
  • Encryption: At rest and in transit
  • Access Controls: Robust IAM capabilities
  • Audit Logs: Comprehensive logging for compliance

Reference: HIPAA on Azure

PCI DSS (Payment Card Industry Data Security Standard)

Jurisdiction: Global (Payment Card Industry)
Version: 4.0 (March 2022)
Scope: Organizations that store, process, or transmit cardholder data

12 Requirements

Build and Maintain Secure Network:

  1. Install and maintain network security controls
  2. Apply secure configurations to all system components

Protect Account Data:

  1. Protect stored account data
  2. Protect cardholder data with strong cryptography during transmission

Maintain Vulnerability Management Program:

  1. Protect systems and networks from malicious software
  2. Develop and maintain secure systems and software

Implement Strong Access Control:

  1. Restrict access to system components and cardholder data
  2. Identify users and authenticate access
  3. Restrict physical access to cardholder data

Monitor and Test Networks:

  1. Log and monitor all access to system components and cardholder data
  2. Test security of systems and networks regularly

Maintain Information Security Policy:

  1. Support information security with organizational policies and programs

Compliance Levels

  • Level 1: 6+ million transactions annually - Annual on-site audit required
  • Level 2: 1-6 million transactions - Annual Self-Assessment Questionnaire
  • Level 3: 20,000-1 million e-commerce transactions - Annual Self-Assessment Questionnaire
  • Level 4: <20,000 e-commerce transactions - Annual Self-Assessment Questionnaire

Azure Compliance

  • PCI DSS Attestation of Compliance (AoC): Azure maintains Level 1 compliance
  • Shared Responsibility: Clear guidance on customer vs. Microsoft responsibilities
  • Compliance Manager: Tools to track PCI DSS compliance
  • Secure Services: Pre-configured compliant architectures available

Reference: PCI DSS on Azure

ITAR (International Traffic in Arms Regulations)

Jurisdiction: United States Defense Industry
Authority: US Department of State
Scope: Export-controlled defense articles and services

Key Requirements

US Persons Only:

  • Access restricted to US citizens and permanent residents
  • Non-US persons require specific authorization
  • Documented access controls and personnel screening

Export Controls:

  • Technical data cannot be exported without license
  • Includes electronic transmission to foreign nationals
  • “Deemed exports” (access by foreign nationals in US)

Physical and Logical Segregation:

  • ITAR data separated from non-ITAR data
  • Documented security boundaries
  • Access logging and monitoring

Registration:

  • Organizations must register with DDTC (Directorate of Defense Trade Controls)
  • Annual fees and reporting requirements

Compliance Challenges

Cloud Computing:

  • Traditional ITAR guidance assumed on-premises
  • Cloud requires careful architecture
  • Service provider personnel access must be controlled

Global Operations:

  • Challenging for multinational organizations
  • Separate systems often required
  • Complex access management

Azure Compliance

  • Azure Government Secret: Supports ITAR workloads
  • US Persons Access: Restricted to screened US persons
  • Dedicated Regions: Separate infrastructure
  • Compliance Documentation: ITAR implementation guidance

Reference: ITAR Compliance on Azure Government

Regulatory Comparison Matrix

Regulation Jurisdiction Primary Focus Data Residency Access Controls Key Penalties
GDPR EU/EEA Privacy, data protection Not required but common Strong consent requirements Up to €20M or 4% revenue
FedRAMP US Federal Security authorization US regions Role-based, US persons for High Loss of federal business
HIPAA US Healthcare Health information protection Not specified PHI access restrictions $50K per violation, criminal charges
PCI DSS Global Payments Cardholder data protection Not specified Need-to-know access Fines, loss of payment processing
ITAR US Defense Export control US regions US persons only Criminal penalties, debarment

Common Sovereignty Requirements Across Regulations

Data Residency

Requirement: Data must be stored in specific geographic regions

Regulations: GDPR (implicit), FedRAMP, ITAR
Azure Solution: Regional deployment, EU Data Boundary, Azure Government regions

Access Controls

Requirement: Restrict who can access data and systems

Regulations: All
Azure Solution: Azure AD/Entra ID, RBAC, Customer Lockbox, Privileged Identity Management

Encryption

Requirement: Protect data at rest and in transit

Regulations: All
Azure Solution: Encryption by default, customer-managed keys, confidential computing

Audit Logging

Requirement: Comprehensive logs of access and changes

Regulations: All
Azure Solution: Azure Monitor, Log Analytics, audit logs, immutable storage

Personnel Screening

Requirement: Background checks for personnel with access

Regulations: FedRAMP, ITAR, HIPAA (BAA terms)
Azure Solution: Screened personnel for Azure Government, documented processes

Determining Applicable Regulations

By Industry

Healthcare: HIPAA (US), GDPR (EU)
Financial Services: PCI DSS, GDPR, local banking regulations
Government: FedRAMP (US), GDPR (EU), national security frameworks
Defense: ITAR (US), GDPR (EU), export controls
Retail: PCI DSS, GDPR, consumer protection laws

By Geography

European Union: GDPR mandatory
United States Federal: FedRAMP for government work
United States Healthcare: HIPAA if handling PHI
Global Payments: PCI DSS if processing payments
US Defense: ITAR for defense articles and services

Assessment Questions

  1. What industry does your organization operate in?
  2. What geographic regions do you operate in?
  3. What type of data do you handle? (Personal, health, payment, classified)
  4. Who are your customers? (Consumers, businesses, government)
  5. Do you process payments or handle financial transactions?
  6. Do you work with defense or export-controlled information?

Azure Compliance Resources

Compliance Offerings

Tools and Services

Trust Center

Next Steps

Last Updated: October 2025