FIPS Compliance: A Practical Guide for Your Organization

This article will explain the significance of FIPS, both for federal agencies and private organizations.

Published on February 14, 2025

FIPS Compliance: A Practical Guide for Your Organization

FIPS, or Federal Information Processing Standards, are essential guidelines by the National Institute of Standards and Technology (NIST) to protect sensitive data. Developed initially to establish minimum requirements in sensitive government applications, such as government hospitals, they provide a rigorous and reliable framework that can be applied to sensitive data in any application or industry. If you’re wondering what FIPS is and why it’s important, this article will explain its significance both for federal agencies and private organizations. You’ll also learn steps to achieve FIPS compliance and how it applies across different sectors.

FIPS compliance has been continuously redefined since it was introduced. The currently accepted FIPS standard is FIPS 140-2. In September of 2026, FIPS 140-2 validations will no longer be active and FIPS 140-3 will be required. Ezurio's FIPS validated cryptographic module is compliant to FIPS 140-2 level 1, with a roadmap to FIPS 140-3 compliance. Learn more about our FIPS offerings within the Summit Suite here.

Key Takeaways

What FIPS Is: FIPS are U.S. government-issued security standards (developed by NIST) that ensure data is encrypted and handled in a secure, standardized way . Originally aimed at federal agencies, FIPS guidelines are now widely used in private sectors like healthcare and finance to protect sensitive information.
FIPS 140 & Cryptographic Modules: FIPS 140-2/140-3 standards define rigorous requirements for cryptographic modules (hardware or software that perform encryption) across four levels of security . Compliance means using NIST-approved algorithms (e.g. AES, RSA, SHA) and robust key management to safeguard data. Higher levels enforce stricter controls such as tamper-evident hardware and identity-based user authentication.
Why Compliance Matters: FIPS compliance is mandatory for U.S. federal agencies and contractors handling sensitive data, and it’s increasingly adopted in industries like healthcare, financial services, and critical infrastructure for the added trust and security it provides . Using FIPS-validated encryption signals that your organization takes data protection seriously, enhancing credibility with customers and partners.
Achieving FIPS Compliance: Implementing FIPS isn’t a one-click task—it’s an ongoing process involving careful selection of cryptographic tools, system configurations, and possibly a formal validation process. Key steps include using FIPS-validated modules, enabling FIPS mode in software, phasing out non-compliant algorithms, training staff in security policies, and undergoing testing by accredited labs if certification is needed.
Challenges and Best Practices: Certification can be time-consuming and costly, often taking up to a year (or more) and significant investment . To ease the burden, engineers often use precertified components – for example, hardware security modules or libraries that already have FIPS validation . Regular audits and monitoring are essential to maintain compliance over time . The payoff is a hardened security posture with reduced risk of data breaches.

Understanding FIPS and Its Importance

Federal Information Processing Standards (FIPS) are a set of security standards published by NIST (National Institute of Standards and Technology) to protect sensitive data in computer and telecommunication systems . Think of FIPS as an official rulebook for cryptography and data security, born out of U.S. federal government requirements but now influential far beyond Washington.

Originally, FIPS guidelines established minimum security requirements for federal agencies, ensuring that even the most sensitive government information (e.g. military communications or patient records in VA hospitals) was safeguarded by vetted encryption methods . Over time, private industries recognized the value of these standards and started adopting them voluntarily . In sectors like finance, healthcare, and manufacturing, FIPS provides a trusted framework to maintain data integrity and confidentiality . For example, a hospital network might use FIPS-validated encryption to protect electronic health records, both to comply with regulations and to assure patients their data is safe.

One reason FIPS is so important is that it’s pivotal to maintaining trust. Government contractors are often required to demonstrate FIPS compliance to win contracts . Even outside the government, companies embracing FIPS show that they meet a high security bar, which can set them apart. Implementing FIPScompliant solutions signals a dedication to data protection that stakeholders — from customers to partners — find reassuring . In an era of frequent data breaches and ransomware, following FIPS standards is like having an elite security badge: it tells the world your product or network has been secured to a rigorous, independently vetted standard.

Overview of FIPS 140-2

When people discuss “FIPS compliance,” they’re often referring to the FIPS 140 series, which are the standards governing cryptographic modules (the components or software that perform encryption/decryption). The current version in use is FIPS 140-2, with FIPS 140-3 as its successor coming into full effect. These standards define four levels of security for crypto modules, Level 1 being the most basic and Level 4 the most stringent. Each increasing level adds extra layers of protection and requirements:

FIPS 140-2 and 140-3 define four progressive security levels for cryptographic modules. Higher levels add stricter requirements for tamper resistance, authentication, and environmental protections.

Level 1 – Basic Security: Crypto modules can be implemented in software running on a generalpurpose OS, with no special physical security mechanisms required. This level ensures that approved algorithms are correctly implemented, but it doesn’t demand extra hardware protection. It’s essentially a minimum baseline – use good encryption algorithms and standard best practices, but no fancy safeguards.
Level 2 – Tamper-Evident: At Level 2, things get more serious. In addition to correct algorithms, the module must have tamper-evident coatings or seals on hardware components, so any unauthorized physical access attempts can be detected. Level 2 also introduces role-based authentication – users or processes must have roles with defined permissions (though not individual identity verification). A common scenario for Level 2 would be a network appliance that has a security seal; if someone opens the case, you’ll know it, and the firmware might restrict functions until re-certified.
Level 3 – Tamper-Resistant & Identity-Based: Level 3 builds on the prior level by requiring tamperresistance (not just detection). The module should actively attempt to prevent intrusions – for example, zeroizing (erasing) cryptographic keys if it detects someone probing the hardware. Also, identity-based authentication becomes mandatory , meaning each operator must authenticate with a unique ID (not just a role) before using the cryptographic module. Level 3 devices often include hardened secure elements or HSMs (Hardware Security Modules) that will self-erase keys if someone tries to pry them open.
Level 4 – Advanced Protection: This is the highest level, designed for extremely sensitive scenarios (think military or critical infrastructure). Level 4 modules provide the highest security, including robust tamper-active responses – if any form of tampering is detected, the module can erase keys and halt operation immediately. They also must resist environmental attacks; for instance, they shouldn’t divulge secrets even if subjected to extreme voltage or temperature beyond normal operating range. In short, a Level 4 crypto device is hardened against physical, electrical, and environmental threats to an impressive degree.

The major components defined by FIPS standards are:

Approved algorithms for cryptography

Validation process for securing FIPs compliance

Role-based or identity-based authentication mechanisms for authorized device access

Physical security requirements to protect sensitive hardware

Achieving FIPS compliance boils down to meeting all the criteria that the FIPS 140 standards demand. At a high level, the major components defined by FIPS include cryptographic algorithms, module design and documentation, authentication controls, and physical security measures. Here are some of the key requirements:

Use of Approved Algorithms: FIPS doesn’t allow just any encryption scheme. It maintains a list of approved cryptographic algorithms and methods (documented in FIPS 140-2 Annex A) that are known to be secure. To comply, your systems must use only these vetted algorithms for encryption, hashing, digital signatures, etc. Some examples of FIPS-approved algorithms are AES (Advanced Encryption Standard) for encryption, TDEA (Triple DES) for encryption (legacy use), RSA and ECDSA for digital signatures, DSA for digital signing, SHA-1/2/3 for hashing, and HMAC for message authentication. If you’re currently using something exotic or outdated (say, MD5 hashes or proprietary ciphers), you’ll need to replace those with FIPS-approved equivalents.

FIPS-Approved Algorithms (Examples) :

AES (Advanced Encryption Standard) – Symmetric encryption (replaces older DES)
Triple DES (TDEA) – Symmetric encryption (legacy support)
RSA, ECDSA, DSA – Public-key algorithms for digital signatures and key exchange
SHA-1, SHA-256, SHA-3 – Secure hash algorithms for data integrity
HMAC (using SHA family) – Keyed hash for message authentication

Using these algorithms in approved modes (certain ciphers modes, padding schemes, etc., as specified by NIST) is mandatory. For instance, AES in CBC or GCM mode is FIPS-approved, whereas a weak cipher like RC4 or MD5 hashing is not FIPS-approved and would violate compliance. Ensuring your software libraries (OpenSSL, Windows CryptoAPI, etc.) are configured to use only the FIPS modes is a big part of compliance.

Cryptographic Module Validation: It’s not enough to just use good algorithms; the implementation of those algorithms (the cryptographic module) must be validated. This is where the Cryptographic Module Validation Program (CMVP) comes in. Under CMVP, vendors submit their cryptographic modules (hardware chip, software library, or firmware) to independent NVLAP-accredited labs for testing. The lab runs through a test suite to ensure the module correctly implements approved algorithms, handles keys securely, enforces roles/authentication as required, and so on. Only after passing these tests does NIST issue a FIPS 140 certificate for the module. In essence, FIPS validation is like a rigorous quality check specifically for cryptographic components. If you’re an organization aiming to be FIPS compliant, you will want to procure products or libraries that have this validation. Many operating systems and network devices have FIPS-validated crypto modules available – for example, OpenSSL has a FIPS-validated module, Windows has a FIPS mode for its cryptographic API, and Cisco VPNs often have FIPS-validated cryptography options. Always check for a module’s certificate on the NIST CMVP list to be sure. And if you are building your own device or software that needs certification, be prepared for the formal validation process (covered in the next section).

Authentication and Access Control: FIPS 140 also dictates how users or processes gain access to cryptographic modules. Depending on the security level, you might implement role-based authentication (Level 2) or identity-based authentication (Level 3+) for administrators/operators of the crypto system. Role-based means a user is assigned a role (like “Crypto Officer”) and the module checks that the Crypto Officer password is used – multiple people might share that role. Identity-based means each user has a unique login and the module tracks each identity separately, providing finer accountability. The goal is to ensure that only authorized individuals (or software processes) can use the cryptographic functions or access keys. In practical terms, this may involve managing user accounts on the device, implementing multi-factor authentication for administrative access, and setting up proper access control lists in software. For many embedded or IoT devices, the crypto module might just run internally with no external users, but even then, identity-based access can apply to software components or firmware modules calling into the crypto APIs.

Physical Security Measures: As described in the levels, FIPS requires physical protections at higher levels. Even at Level 2, tamper-evident features are mandatory – for example, a network router certified to FIPS Level 2 might have holographic tamper seals on its case, so if someone opens it, you can tell. At Level 3 and 4, it goes further with tamper-resistance and tamper-response hardware. For anyone deploying IoT or medical devices in the field, this means you need to consider the enclosure and hardware design as part of compliance. Simple measures like epoxy potting over memory chips, intrusion sensors, or special screws and locks on device cases can fulfill these requirements. FIPS validation will examine the physical design if you’re seeking Level 2+ certification, so be prepared to document how your device resists or detects physical tampering. Even if you’re not certifying your own device, using a FIPS-validated hardware security module (HSM) or secure element in your design can offload this requirement – for instance, a FIPS 140-2 Level 3 certified secure element can store your keys and you don’t have to independently secure the main device to that level, as long as all crypto runs inside that secure element.

Self-Tests and System Integrity: FIPS-compliant modules must regularly test themselves to ensure they’re functioning properly. This includes power-on self-tests, where every time the module starts it will run known-answer tests for each cryptographic algorithm (to catch any malfunction or tampering). If any of these tests fail, the module must enter an error state and not perform any cryptographic operations (better to fail secure than operate insecurely). Modules also perform conditional tests, like continuous random number generator tests to ensure the RNG hasn’t failed, or firmware integrity checks if new firmware is loaded. As an engineer, you need to ensure these selftests are implemented and cannot be skipped. For example, the OpenSSL FIPS module will automatically run its self-test on load. If you’re writing your own module, you must implement these checks. From an organizational standpoint, if you enable FIPS mode on an OS, these self-tests happen under the hood. It’s good practice to monitor logs for any self-test failures because those indicate something is wrong (possibly a security issue that needs immediate attention).

How To Secure Compliance: The Cryptographic Module Validation Program (CMVP)

The Cryptographic Module Validation Program (CMVP) is a collaborative initiative between NIST and the Communications Security Establishment (CSE) of Canada, designed to validate cryptographic modules used by federal agencies and contractors. This program ensures that cryptographic modules adhere to the stringent security requirements outlined in FIPS 140-2. Validation testing is conducted by laboratories accredited by the National Voluntary Laboratory Accreditation Program (NVLAP).

At security Level 2 and higher, cryptographic modules must undergo rigorous testing on the operating platform level including representative hardware configurations, such as Windows 10 and Windows Server operating systems.

This is the "how" of FIPS compliance. Once a manufacturer has established a FIPS plan, they'll need to work with an approved test laboratory to validate that plan. One way manufacturers can accelerate this process is to work with a pre-validated cryptographic module, such as those we supply as part of our Summit Suite Security Solutions.

Benefits of FIPS Compliance Across Industries

Why go through all this trouble? Simply put, FIPS compliance brings tangible security and business benefits, especially in certain industries. Let’s look at how FIPS is applied in different sectors, and why it’s often considered a must-have:

Government and Defense

This is the home turf of FIPS. In U.S. federal agencies (and their contractors), FIPS compliance isn’t optional – it’s mandated by law for any system handling sensitive but unclassified data (under FISMA, the Federal Information Security Management Act). Departments like Defense, Homeland Security, Treasury, etc., all require that any cryptographic module used is FIPS-validated. For example, if you sell a software product to the U.S. government that encrypts data, you’ll typically need to show a FIPS 140 certificate for the crypto component. The benefit here is straightforward: FIPS provides a baseline assurance of security. Agencies can trust that a FIPS-validated solution meets a known standard for confidentiality and integrity of data. It’s also a matter of interoperability – if everyone uses standard algorithms and modules, different agencies and departments can securely communicate, which is crucial for national security. In the defense world, FIPS compliance (often at higher levels) is part of a larger mosaic of requirements alongside things like Common Criteria and DoD-specific standards. But FIPS is foundational – it ensures the cryptography in use won’t be the weak link.

Healthcare and Medical Devices

The healthcare sector deals with extremely sensitive personal data and is subject to regulations like HIPAA in the U.S. While HIPAA doesn’t explicitly mandate FIPS, it does require using “industry-standard” methods for protecting data at rest and in transit – and FIPS-approved encryption meets that definition emphatically. Many healthcare providers and software vendors therefore adopt FIPS 140-2 validated encryption to protect electronic health records and medical information. For example, a hospital might insist that all laptops use FIPS-compliant full disk encryption (like Microsoft BitLocker in FIPS mode) so that patient data is safe even if a device is lost. Medical IoT devices (like remote patient monitors or lab equipment that transmits data) are increasingly using FIPS-validated secure communication, especially if they might connect to government healthcare networks or simply to give assurance that patient data won’t be compromised in transit. FIPS compliance in healthcare not only helps meet regulatory requirements but builds trust with patients—nobody wants their medical data exposed, and using federally vetted encryption shows a commitment to privacy. Additionally, if a healthcare technology company wants to sell to government hospitals (e.g., the VA or DoD medical facilities), FIPS compliance will almost certainly be required, so it opens business opportunities.

Financial Services

Banks, insurance companies, and financial institutions have long been concerned with data security. Regulations from bodies like the SEC and FINRA push for strong encryption and access controls. Here, too, FIPS provides a reliable benchmark. Many financial firms require that any cryptographic module (be it an HSM securing an online banking platform or the VPN connecting branch offices) is FIPS 140-2 validated. For example, credit card processors often use HSMs that are both FIPS 140-2 Level 3 and PCI-HSM certified. The benefit is protection against fraud and breaches – if your transactions and customer records are encrypted with FIPS-validated modules, you significantly reduce the risk of a hacker decrypting stolen data. Also, global financial companies dealing with governments or regulated markets find that using FIPS compliant security eases compliance audits. In essence, FIPS compliance in finance helps safeguard money and personal financial data, and it signals to regulators and customers that strong security controls are in place. It’s a form of reputational insurance as well – being able to say “we use FIPS 140-2 validated encryption for all sensitive data” can mitigate concerns when you’re under scrutiny.

Industrial IoT and Embedded Systems

The rise of the Internet of Things has brought many new devices into networks – some monitor infrastructure, others control equipment, and some track valuable assets. Many IoT devices operate in critical roles (smart grid sensors, industrial control systems, smart city infrastructure) where a compromise could have physical consequences. FIPS compliance is increasingly relevant for IoT to ensure that the data these devices collect and transmit is secure, and that commands sent to them can’t be maliciously altered. For instance, an IoT sensor in an oil refinery might use FIPS-validated encryption to send readings to the control center, guaranteeing that the data wasn’t tampered with en route and remains confidential. Likewise, a smart door lock for a government building would be expected to use FIPS-approved cryptography for its access control communications, to prevent spoofing or replay attacks.

Embedded engineers are adopting FIPS by using microcontrollers or secure elements that have FIPS validated cryptographic libraries. As mentioned earlier, IoT vendors often prioritize FIPS compliance even if not selling directly to the government, because it gives end-users confidence in the product’s security In fact, integrating a pre-certified secure element or crypto library is a popular approach: for example, NXP’s EdgeLock SE050 secure element comes FIPS 140-2 Level 3 certified out of the box. By dropping such a component into an IoT design, developers get strong encryption, key storage, and physical tamper resistance handled in one go, making it much easier to deliver a device that meets strict security requirements. Overall, FIPS compliance in IoT helps protect against the very real threat of hacks on critical devices, and it’s becoming a selling point as industries realize the importance of securing the IoT ecosystem.

Cloud and Software Services

It’s worth noting that cloud service providers and software-as-a-service platforms also adhere to FIPS when serving regulated clients. Major clouds like AWS, Azure, and Google Cloud offer FIPS 140-2 validated endpoints or cryptographic modules in their services. If you enable FIPS mode in AWS, for example, it ensures that data going in and out of storage or over the network uses only approved algorithms. This is crucial for government cloud deployments (like GovCloud offerings) and for any enterprise that extends their FIPS compliance into the cloud. Software companies targeting government customers often need to ensure their applications only use FIPS-certified libraries (for instance, a messaging app for government might use the BoringCrypto module – the FIPS 140-2 validated core of Google’s BoringSSL). The benefit here is being able to serve a wider market, including government and highly regulated industries, because you meet their stringent security requirements.

In summary, across all these sectors – from federal agencies to healthcare, finance, industrial IoT, and cloud services – FIPS compliance serves as a universally recognized benchmark for cryptographic security. It reduces risk by ensuring strong, vetted encryption and has become synonymous with trust and excellence in protecting data. Organizations that achieve FIPS compliance often find it not only improves their security but also enhances their reputation and opens doors to new business where security credentials matter.

Summary

In summary, FIPS compliance is crucial for ensuring the security of sensitive data. From understanding the importance of FIPS to implementing practical steps to be FIPS compliant, this guide provides a comprehensive overview. By adhering to FIPS 140-2, organizations can enhance their security posture and gain trust among clients and stakeholders.
Achieving FIPS compliance requires a commitment to rigorous standards and continuous improvement. By following the outlined steps and leveraging validated cryptographic modules, organizations can protect their data and maintain high levels of security.

Frequently Asked Questions

What is FIPS compliance?

FIPS compliance involves demonstrating security requirements for cryptographic processes on a device. Manufacturers must follow the guidelines established by NIST to maintain data security, particularly within federal and regulated sectors. This adherence is crucial for safeguarding sensitive information. It's a requirement in many US federal applications, and a best-practice to be observed in other applications and industries as well.

Why is FIPS 140-2 important?

FIPS 140-2 is important because it establishes standards for cryptographic modules, ensuring the confidentiality and authenticity of sensitive data. Compliance with these standards is essential for safeguarding information in various applications. Very sensitive data is best served by validating your solution to be FIPS compliant.

How long does it take to secure FIPS 140-2 validation?

FIPS 140-2 validation can take up to a year and may cost around $100,000, making it a significant investment for ensuring the reliability of cryptographic modules. The easiest way for manufacturers to achieve FIPS compliance is to leverage a partner's FIPS-validated modules, such as those provided by Ezurio.

What is the difference between role-based and identity-based authentication?

The primary difference is that role-based authentication provides access based on predefined roles, whereas identity-based authentication relies on unique user credentials for enhanced security. Therefore, the latter is generally considered more secure.