Today's the day the much-anticipated new cybersecurity regulations for the financial industry go into effect in the state of New York.
Security experts say the new regulations by the state's Department of Financial Services (DFS) set a minimum baseline for security best practices, and acknowledge that small- to midsized businesses with fewer resources and smaller IT staffs may find compliance more challenging.
The regulations require that banks, insurance companies, and other financial institutions establish and maintain a cybersecurity program. The new rules are widely viewed as the first of their kind and potentially a baseline model for other states.
"These new regulations will push companies to have a basic level of cybersecurity, but it doesn’t create an unfair competitive situation because it's generally applied across the board," says Tim Erlin, senior director, product management and IT risk and security strategist at Tripwire.
The new regulations will be phased in over the next two years. Companies with less than $5 million in revenues and $10 million in assets are exempt from many of the more costly, technical aspects of the regulations, such as pen testing and vulnerability assessments, but still must document that they have implemented a security policy and program.
The vast majority of companies are now on the hook to develop an incident response plan and a training program in the next 180 days. Companies must also notify DFS of a security breach within 72 hours and have a CISO or a similar person responsible for protecting private data. The breach-notification portion requires companies to start the clock on notification from the time they have determined that a breach would cause material harm to the business.
By one year from today, companies must also demonstrate that they have pen testing, risk assessment, and multifactor authentication practices in place. In 18 months, they must have developed audit trail capabilities, application security, data retention (five years for financial, three years for non-financial), and encryption. The DFS requirements for third parties will be phased in over two years.
David Murray, chief business development officer at Corvil, says the vast majority of the large banks and financial institutions are well on their way to having implemented many of the best practices outlined by the DFS regulations.
While smaller hedge funds, retail banks, and credit unions have expressed concerns that implementing these security technologies will be too costly, he points out that many of these companies already have security analytics technologies that provide visibility into their operations.
"What we’re saying is that you can start by getting a better read on what’s happening within your organization and you don’t necessarily have to spend more money and time deploying new technology," Murray says. "We see this as pushing companies to be more proactive, because they are now tracking incidents and attacks versus just looking for a piece of malware."
Tripwire's Erlin adds that the strength of these regulations will be to what extent they are enforced. He points to recent cases where New York’s DFS fined Deutsche Bank $425 million and Mega Bank $180 million for violating state money-laundering laws.
"While those fines are not related to cybersecurity, it does indicate that the agency is capable of imposing those type of fines and that they actually might do it," he says.