Abstract—In today’s digital world, maintaining electronic medical and biometric records is an effective way to store, disseminate, and analyze information for a person. However, protection of privacy of the person is also of paramount importance. In this paper, we propose an encryption scheme which is transparent to watermarking. Encryption is used to secure the contents of the images while watermarking can be used for tagging those images for effective indexing, retrieval and other operations. By making encryption transparent, we ensure that the information in the watermarked ‘tags’ can be accessed without having to decrypt and disclose the content of the images. The watermark is embedded in the quantized Discrete Cosine Transform (DCT) coefficients during image compression while encryption is carried out by using a combination of transposition and a modified Hill cipher. Experimental results confirm that the watermark can be read with complete success from sufficiently encrypted images.