The 180-day transitional period under the New York Department of Financial Services (NYDFS) Cybersecurity Requirements for Financial Services Companies is set to expire Aug. 28, 2017. Financial services companies must achieve compliance with the cybersecurity regulations prior to this deadline or face substantial monetary penalties and reputational harm.
Cybersecurity Regulation Overview
The cybersecurity regulations became effective March 1, 2017. In its official introduction to the regulations (23 NYCRR 500), NYDFS observed that the financial services industry has become a significant target of cybersecurity threats and that cybercriminals can cause large financial losses for both financial institutions and their customers whose private information may be stolen for illicit purposes. Given the seriousness of this risk, NYDFS determined that certain regulatory minimum standards were warranted but avoided being overly prescriptive, to allow cybersecurity programs to match the relevant risks and keep pace with technological advances.
The cybersecurity regulations require each financial services company regulated by NYDFS to assess its specific risk profile and design a program that addresses its risks in a robust fashion. The required risk assessment, however, is not intended to permit a cost-benefit analysis of acceptable losses where an institution faces cybersecurity risks. Senior management must be responsible for an organization’s cybersecurity program and file an annual certification confirming compliance with the regulations. A regulated entity’s cybersecurity program must ensure the safety and soundness of the institution and protect its customers.
NYDFS has issued a clear warning of its intent to pursue strong enforcement of the Cybersecurity Regulations: “It is critical for all regulated institutions that have not yet done so to move swiftly and urgently to adopt a cybersecurity program and for all regulated entities to be subject to minimum standards with respect to their programs. The number of cyber events has been steadily increasing and estimates of potential risk to our financial services industry are stark. Adoption of the program outlined in these regulations is a priority for New York State.”
To learn more about who is affected, required actions to comply, possible penalties and upcoming deadlines, click here.