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CYBERSECURITY REQUIREMENTS
23 NYCRR 500 is also known as “Cybersecurity Section 500 DFS.” It refers to the New York Department of Financial Services (NYDFS) cybersecurity regulation, specifically Part 500 of the regulations. This outlines mandatory cybersecurity requirements for financial institutions operating within New York State, aiming to protect sensitive customer data and ensure the integrity of their IT systems by requiring them to implement comprehensive cybersecurity programs including risk assessments, security controls, incident response plans, and regular reporting to the NYDFS.
History
On March 1, 2017, New York Department of Financial Services enacted a regulation establishing cybersecurity requirements for financial services companies, 23 NYCRR Part 500. Part 500 was amended for the first time in April 2020 to change the date of the required annual certification filing from February 15 of each year to April 15.
Since the regulation was adopted, the cybersecurity landscape has changed tremendously as threat actors have become more sophisticated and more prevalent, cyberattacks have become easier to perpetrate (such as with ransomware as a service) and more expensive to remediate, and additional cybersecurity controls are available to manage cyber risk at reasonable cost. Moreover, the Department has found, from investigating hundreds of cybersecurity incidents, that there is a tremendous amount that organizations can do to protect themselves. As a result, Part 500 was amended again, effective November 1, 2023.
- Focus on data protection:
The primary goal is to safeguard sensitive consumer information held by regulated financial institutions.
- Risk-based approach:
Covered entities must assess their cybersecurity risks and implement a plan to mitigate them based on their specific circumstances.
- Key requirements:
- Development of a comprehensive cybersecurity policy
- Conducting regular risk assessments
- Implementing robust access controls and user privilege management
- Creating an incident response plan
- Reporting cybersecurity incidents to the NYDFS
- Designation of a Chief Information Security Officer (CISO)
FOR FINANCIAL SERVICES COMPANIES
Section 500.0 Introduction. The New York State Department of Financial Services (“DFS”) has closely monitored the ever-growing threat posed to information and financial systems by nation-states, terrorist organizations and independent criminal actors. Recently, cybercriminals have sought to exploit technological vulnerabilities to gain access to sensitive electronic data. Cybercriminals cause significant financial losses for DFS regulated entities as well as for New York consumers whose private information is revealed and/or stolen for illicit purposes. The financial services industry is a significant target of cybersecurity threats. DFS appreciates that many firms have proactively increased their cybersecurity programs with great success.
Given the seriousness of the issue and the risk to all regulated entities, certain regulatory minimum standards are warranted, while not being overly prescriptive so that cybersecurity programs can match the relevant risks and keep pace with technological advances. Accordingly, this regulation is designed to promote the protection of customer information as well as the information technology systems of regulated entities. This regulation requires each company to assess its specific risk profile and design a program that addresses its risks in a robust fashion. Senior management must take this issue seriously and be responsible for the organization’s cybersecurity program and file an annual certification confirming compliance with these regulations. A regulated entity’s cybersecurity program must ensure the safety and soundness of the institution and protect its customers.
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.
Section 500.1 Definitions
For purposes of this Part only, the following definitions shall apply:
Affiliate
(a) Affiliate means any Person that controls, is controlled by or is under common control with another Person. For purposes of this subdivision, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of stock of such Person or otherwise.
Authorized User
(b) Authorized User means any employee, contractor, agent or other Person that participates in the business operations of a Covered Entity and is authorized to access and use any Information Systems and data of the Covered Entity.
Covered Entity
(c) Covered Entity means any Person operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law. Cybersecurity Section 500 DFS.” New York Department of Financial Services Section 500 treats every licensee as a Covered Entity.
Cybersecurity Event
(d) Cybersecurity Event means any act or attempt, successful or unsuccessful, to gain unauthorized access to, disrupt or misuse an Information System or information stored on such Information System.
Information System
(e) Information System means a discrete set of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination or disposition of electronic information, as well as any specialized system such as industrial/process controls systems, telephone switching and private branch exchange systems, and environmental control systems.
Multi-Factor Authentication
(f) Multi-Factor Authentication means authentication through verification of at least two of the following types of authentication factors:
- (1) Knowledge factors, such as a password; or
- (2) Possession factors, such as a token or text message on a mobile phone; or
- (3) Inherence factors, such as a biometric characteristic.
Nonpublic Information
(g) Nonpublic Information shall mean all electronic information that is not Publicly Available Information and is:
- (1) Business related information of a Covered Entity the tampering with which, or unauthorized disclosure, access or use of which, would cause a material adverse impact to the business, operations or security of the Covered Entity;
- (2) Any information concerning an individual which because of name, number, personal mark, or other identifier can be used to identify such individual, in combination with any one or more of the following data elements: (i) social security number, (ii) drivers’ license number or non-driver identification card number, (iii) account number, credit or debit card number, (iv) any security code, access code or password that would permit access to an individual’s financial account, or (v) biometric records;
- (3) Any information or data, except age or gender, in any form or medium created by or derived from a health care provider or an individual and that relates to (i) the past, present or future physical, mental or behavioral health or condition of any individual or a member of the individual’s family, (ii) the provision of health care to any individual, or (iii) payment for the provision of health care to any individual.
Penetration Testing
(h) Penetration Testing means a test methodology in which assessors attempt to circumvent or defeat the security features of an Information System by attempting penetration of databases or controls from outside or inside the Covered Entity’s Information Systems.
Person
(i) Person means any individual or any non-governmental entity, including but not limited to any nongovernmental partnership, corporation, branch, agency or association.
Publicly Available Information
(j) Publicly Available Information means any information that a Covered Entity has a reasonable basis to believe is lawfully made available to the general public from: federal, state or local government records; widely distributed media; or disclosures to the general public that are required to be made by federal, state or local law.
- (1) For the purposes of this subdivision, a Covered Entity has a reasonable basis to believe that information is lawfully made available to the general public. This is only if the Covered Entity has taken steps to determine: (i) That the information is of the type that is available to the general public; and (ii) Whether an individual can direct that the information not be made available to the general public. And, if so, that such individual has not done so.
Risk Assessment
(k) Risk Assessment means the risk assessment that each Covered Entity is required to conduct under section 500.9. 23 NYCRR 500 DFS Regulation Information & Compliance specifies this should be conducted periodically, and no less than annually.
Risk-Based Authentication
(l) Risk-Based Authentication means any risk-based system of authentication that detects anomalies or changes in the normal use patterns of a Person. It also requires additional verification of the Person’s identity when such deviations or changes are detected, such as through the use of challenge questions.
Senior Officer
(m) Senior Officer(s) means the senior individual or individuals (acting collectively or as a committee) responsible for the management, operations, security, information systems, compliance and/or risk of a Covered Entity, including a branch or agency of a foreign banking organization subject to this Part. New York Department of Financial Services Part 500 believes leadership involvement is critical. (TEKRiSQ offers virtual or fractional CISO Services here)
Third Party Service Provider
(n) Third Party Service Provider(s) means a Person that (i) is not an Affiliate of the Covered Entity, (ii) provides services to the Covered Entity, and (iii) maintains, processes or otherwise is permitted access to Nonpublic Information through its provision of services to the Covered Entity.
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