Physical separation of Custom Objects data in report

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I have a requirement in which customer is asking for the physical separation of their employees data. Their employees have multiple departments. They want each departments data to be physically separated. We are thinking to store this data in custom objects. Let we have two departments dep1 and dep2. Each department has its own administrator who can create custom reports for their own department. Now here, users and administrators of dept1 should not be able to see data of dept2 no matter what. Even when administrators are creating reports they should not be able to see each other's department's data.