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February 22, 2018

New York Cybersecurity Rules Go Into Effect Next Week

Last year we covered Cybersecurity Requirements for Financial Services Companies (FFIEC): What You Need to Know, a detailed cybersecurity strategy directive from New York State. Financial Services Superintendent Maria Vullo also announced that DFS will now incorporate cyber-security in all examinations, adding questions related to cyber-security to “first day letters,” notices the Department issues to commence its examinations of financial services companies, “including examinations of banks and insurance companies for safety and soundness and market conduct.”

If you have 10 or more employees and over $5 million in gross annual revenue, these rules apply (check with your lawyer to be sure). Also covered are HMOs and CCRCs.

The following is also worth noting:

The Department believes that analysis of unsuccessful threats is critically important to the ongoing development and improvement of cybersecurity programs, and Covered Entities are encouraged to continually develop their threat assessment programs. Notice of the especially serious unsuccessful attacks may be useful to the Department in carrying out its broader supervisory responsibilities, and the knowledge shared through such notice can be used to timely improve cybersecurity generally across the industries regulated by the Department. Accordingly, Covered Entities are requested to notify the Department of those unsuccessful attacks that appear particularly significant based on the Covered Entity’s understanding of the risks it faces. For example, in making a judgment as to whether a particular unsuccessful attack should be reported, a Covered Entity might consider whether handling the attack required measures or resources well beyond those ordinarily used by the Covered Entity, like exceptional attention by senior personnel or the adoption of extraordinary non-routine precautionary steps.

The Department recognizes that Covered Entities’ focus should be on preventing cybersecurity attacks and improving systems to protect the institution and its customers. The Department’s notice requirement is intended to facilitate information sharing about serious events that threaten an institution’s integrity and that may be relevant to the Department’s overall supervision of the financial services industries. The Department trusts that Covered Entities will exercise appropriate judgment as to which unsuccessful attacks must be reported and does not intend to penalize Covered Entities for the exercise of honest, good faith.

New York branches are required to comply with New York state law, and DFS maintains the right to examine branches located in New York.  With respect to DFS’s cybersecurity regulation, given the ever-increasing cybersecurity risks that financial institutions face, DFS strongly encourages all financial institutions, including New York branches of out-of-state domestic banks, to adopt cybersecurity protections consistent with the safeguards and protections of 23 NYCRR Part 500.

As of March 1st, 2018, the following portions of the regulations become effective (we have bolded the important areas to draw your attention):

Section 500.04 Chief Information Security Officer.

(b) Report. The CISO of each Covered Entity shall report in writing at least annually to the Covered Entity’s board of directors or equivalent governing body. If no such board of directors or equivalent governing body exists, such report shall be timely presented to a Senior Officer of the Covered Entity responsible for the Covered Entity’s cybersecurity program. The CISO shall report on the Covered Entity’s cybersecurity program and material cybersecurity risks. The CISO shall consider to the extent applicable:

(1) the confidentiality of Nonpublic Information and the integrity and security of the Covered Entity’s Information Systems;

(2) the Covered Entity’s cybersecurity policies and procedures;

(3) material cybersecurity risks to the Covered Entity;

(4) overall effectiveness of the Covered Entity’s cybersecurity program; and

(5) material Cybersecurity Events involving the Covered Entity during the time period addressed by the report.

Section 500.05 Penetration Testing and Vulnerability Assessments.

The cybersecurity program for each Covered Entity shall include monitoring and testing, developed in accordance with the Covered Entity’s Risk Assessment, designed to assess the effectiveness of the Covered Entity’s cybersecurity program. The monitoring and testing shall include continuous monitoring or periodic Penetration Testing and vulnerability assessments. Absent effective continuous monitoring, or other systems to detect, on an ongoing basis, changes in Information Systems that may create or indicate vulnerabilities, Covered Entities shall conduct:

(a) annual Penetration Testing of the Covered Entity’s Information Systems determined each given year based on relevant identified risks in accordance with the Risk Assessment; and

(b) bi-annual vulnerability assessments, including any systematic scans or reviews of Information Systems reasonably designed to identify publicly known cybersecurity vulnerabilities in the Covered Entity’s Information Systems based on the Risk Assessment.

Section 500.09 Risk Assessment.

(a) Each Covered Entity shall conduct a periodic Risk Assessment of the Covered Entity’s Information Systems sufficient to inform the design of the cybersecurity program as required by this Part. Such Risk Assessment shall be updated as reasonably necessary to address changes to the Covered Entity’s Information Systems, Nonpublic Information or business operations. The Covered Entity’s Risk Assessment shall allow for revision of controls to respond to technological developments and evolving threats and shall consider the particular risks of the Covered Entity’s business operations related to cybersecurity, Nonpublic Information collected or stored, Information Systems utilized and the availability and effectiveness of controls to protect Nonpublic Information and Information Systems.

(b) The Risk Assessment shall be carried out in accordance with written policies and procedures and shall be documented. Such policies and procedures shall include:

(1) criteria for the evaluation and categorization of identified cybersecurity risks or threats facing the Covered Entity;

(2) criteria for the assessment of the confidentiality, integrity, security and availability of the Covered Entity’s Information Systems and Nonpublic Information, including the adequacy of existing controls in the context of identified risks; and

(3) requirements describing how identified risks will be mitigated or accepted based on the Risk Assessment and how the cybersecurity program will address the risks.

Section 500.12 Multi-Factor Authentication.

(a) Multi-Factor Authentication. Based on its Risk Assessment, each Covered Entity shall use effective controls, which may include Multi-Factor Authentication or Risk-Based Authentication, to protect against unauthorized access to Nonpublic Information or Information Systems.

(b) Multi-Factor Authentication shall be utilized for any individual accessing the Covered Entity’s internal networks from an external network, unless the Covered Entity’s CISO has approved in writing the use of reasonably equivalent or more secure access controls.

Section 500.14 Training and Monitoring.

As part of its cybersecurity program, each Covered Entity shall:

(b) provide regular cybersecurity awareness training for all personnel that is updated to reflect risks identified by the Covered Entity in its Risk Assessment.


  • Department of Financial Services 23 NYCRR Part 500
  • Full Regulation (PDF)
  • FAQ

To ensure your organization is safe – even if you have internal IT, hire an experienced MSP or MSSP like Apex Technology Services. The company acts as an outsourced CISO and have experience helping numerous financial companies including in the Fortune 200

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