How it works in a data room
FIPS 140-3 defines security requirements for the hardware or software component that performs encryption, such as the library that applies AES-256 to stored files or the module inside a key management service. An accredited lab tests the module, and the validation program issues a certificate listing it. A provider can say its platform uses validated modules, typically through its cloud host, without the whole application being certified. It replaced FIPS 140-2, whose validations are being phased out.
Why it matters in a deal
US federal agencies and their contractors are generally required to use validated cryptography, and many banks and defense companies apply the same rule to suppliers. A provider that relies on validated modules can more easily support FedRAMP or similar requirements. Buyers should ask which module is used, where its certificate can be found, and whether it also protects customer-managed keys. The energy and infrastructure guide discusses sectors where this comes up.
Example
A defense electronics supplier in Virginia sells a division to a larger contractor. The buyer’s security office asks every vendor touching the deal to confirm validated encryption. The data room provider points to the certificate for the key management module its cloud host uses and documents how keys protect stored files, which satisfies the review.