New York's Historic FinSec Regulation Covers DDoS, Not Just Data

As of today, banks, insurers, and other financial services companies in the state of New York must officially report the kind of cybersecurity incidents that until now most organizations have been able to sweep under the carpet.

The new rules will apply to entities covered by the New York Department of Financial Services' (DFS) new cybersecurity regulation, 23 NYCRR 500, which officially went into effect in March, but hit its first compliance deadline today.

Under 23 NYCRR 500, covered entities must report to the DFS Superintendent within 72 hours any cybersecurity incidents "that have a reasonable likelihood of materially harming any material part of the normal operation of the Covered Entity." 

The regulation does not state under what conditions, if any, an incident needs to be reported to law enforcement, customers, or to the general public. "The regulation specifically relates to the authority that DFS has over its regulated entities. A regulated entity may have other reporting obligations depending on the facts and circumstances, " a DFS spokesperson said.

The regulation requires covered entities to report any incident covered by other regulations as well - therefore, a bank that suffers a PII breach that triggered a PCI violation would also now need to tell DFS.   

More importantly, the new rules would capture many of the significant cybersecurity incidents that currently go uncatalogued and unreported because they are not covered by any formal regulation. Disruptions and denials of service caused by WannaCry, NotPetya, Mirai, or the recent attacks on the SWIFT network, for example, would now be covered (as well as smaller incidents that do not make their way into the news cycle).

However, 23 NYCRR 500 extends beyond operational damage. Any cybersecurity incident that could materially damage the business - like a BEC fraud that cost millions of dollars or an intellectual property theft that jeopardizes the company's market advantage - must also be reported, a DFS representative confirmed. 

Last month, DFS launched a new online portal for reporting incidents. Businesses covered by the regulation must also submit to the Superintendent an annual compliance report, due Feb. 15 each year.

The regulation is the first of its kind in the US. It officially went into effect in March with a series of compliance deadlines staged over two years. Today marks the end of the first transitional period. 

As of today, covered organizations must have a cybersecurity program, a cybersecurity policy, a chief information security officer (who could be employed by either the covered entity or a third party), a security incident response plan, and a process to begin limiting user access priviliges. They also must begin reporting incidents.

By March 2018, covered entities must complete a full infosec risk assessment, conduct penetration testing, conduct end-user awareness training, issue an annual cybersecurity report to internal board-level management, and as a risk assessment deems fit, deploy multi-factor authentication. The regulation specifically calls out multi-factor authentication for any individual accessing internal networks from an external network, unless the CISO has approved reasonably equivalent or more secure controls.

More deadlines hit in September 2018. Organizations will need a secure application development program in place for in-house apps and a process for assessing security of commercial software. This is also when processes for maintaining adequate audit trails (some for at least three years, others for at least five years) data retention, end-user monitoring and data encryption must be in place.

The final piece comes in March 2019, two years after the initial enactment of the regulation, when covered entities must have a third-party service provider security policy. The policy must include due diligence when selecting providers, contractional protections with each third party, and minimum cybersecurity baseline requirements for each third party, including use of access controls and encryption.   

See the full text of 23 NYCRR 500 at DFS.ny.gov.

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