Cyber Security Concept. The Word of Red Color Located over Text of White Color.

New York state cyber security requirements for banks are expected to be applied nationally across the US next year, to include multi-factor authority, regular audits and pen-tests, and exacting third-party vendor cyber security scrutiny.

New York state regulators are prepping to release new cybersecurity guidelines for banks that are expected to set a status quo for state-level and federal banking regulators.

The guidelines coming from the New York State Department of Financial Services cover required policies for vendor management*, breach notification, implementing multi-factor authentication for customers, employees and service providers, and third-party security management policies.

This news will be a breath of fresh air for well-founded fears that banks have fallen behind in cybersecurity, although the new guidelines are expected for release in early 2016 and so far no deadline for complying with the guidelines has been revealed.

This change has strong roots in a November letter from NYSDFS, which called out the financial industry’s weakness with cybersecurity, and its problematic reliance on third-party service providers for critical banking and insurance functions.

The letter cites troubling results from internal security surveys and risk assessments, noting that financial institutions have been unable to keep up with developing attack and defense in infosec, that third-party vendors pose a serious cybersecurity risk, and that the scale of attacks is now of global import.

Regulation is on the horizon. The NYSDFS letter states, “There is a demonstrated need for robust regulatory action in the cyber security space, and the Department is now considering a new cyber security regulation for financial institutions.”

Requirements are expected to force the creation of policies for managing third-party service providers’ cybersecurity, which will include hiring qualified CISOs, insuring CISOs enforce cybersecurity procedures and standards that ensure application security, employing multi-factor authentication, maintaining cyber-incident and breach notification policies, among other requirements.

In a move that should have been made years ago, financial institutions will now be required to “conduct annual penetration testing and quarterly vulnerability assessments.”

Under the department’s terms, third-party vendor management has particular requirements that will likely prove difficult to implement, although if successful, would result in raising the difficulty levels for attackers overall. According to BankInfoSecurity, “federal banking regulators have been hammering home the need for more third-party oversight for the past 18 months.”

Those third-party requirements include at minimum that banks ensure third party vendors: Encrypt all sensitive data, both in transit and at rest; Notify the banking institution of all cyber security incidents; Contractually indemnify the banking institution against any cyber security incident that results in lost data; Allow the banking institution or its agents to perform cyber security audits of all third parties; Implementation of multi-factor authority and more.

It remains to be seen how this will be enforceable, but it’s several steps in a good direction. From a consumer point of view, it’s sad that we’ve had to wait this long for our banks to have a level of security that compares to online retail organizations and social networks… but at least it’s getting better.

Source:  Cyber Security Intelligence

*Vendor management:  This means credit information providers will be affected by the proposed cyber security regulations