Editor’s Note: Last week, we introduced our new blog series titled, Third-Party Risk Management: How to Stay Off the Regulatory Radar. This week, we examine the New York Department of Financial Services (DFS): Cybersecurity Requirements for Financial Services Companies Part 500 of Title 23, highlighting the key third-party risk management requirements and what it takes to meet regulatory compliance and keep auditors at bay.
In early 2017, the New York State Department of Financial Services (DFS) instituted a regulation to establish cybersecurity requirements for financial services companies. This legislation, known as 23 NY CRR 500, was enacted after the realization that data breaches and cyber threats were rising at an alarming rate, exposing sensitive data and costing organizations millions of dollars.
According to the regulation, “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” is considered a “covered entity” and must comply.
Designed to protect the confidentiality, integrity, and availability of customer information as well as information technology systems, this regulation demands that covered entities must:
As it relates to third-party risk management, a key component of complying with 23 NY CRR 500 is managing your vendors’ IT security controls and data privacy policies.
Two sections of the regulation specifically address third-party providers. Section 500.04 relates to the appointment of a CISO who can be employed by an affiliate or third-party. If not a direct employee, the covered entity must still retain responsibility for compliance, designate a senior person responsible for direction and oversight of the third party service provider, and require the third-party to maintain a cybersecurity program that is compliant with the regulation. A report by the CISO must be provided annually regardless of whether they are a direct employee or a third party.
Section 500.11 directly addresses third-party service provider security policy. It requires covered entities to have a written policy that addresses third-party information systems security based on a risk assessment, and it requires the policy to cover:
23 NYCRR 500 specifically requires that covered entities develop written policies and procedures to ensure the security of information systems and the integrity of data accessed or held by third parties. Implementing a third-party service provider security policy should include the following elements:
Prevalent’s Third-Party Risk Management Platform enables financial institutions to fulfill these requirements across their entire vendor ecosystem. It provides a complete solution for performing vendor risk assessments – including questionnaires; an environment to include and manage documented evidence in response; workflows for managing the review and address findings; and robust reporting to give each level of management the information it needs to properly review the third party's performance and risk. It also includes cyber and business intelligence monitoring to capture ongoing potential threats to a covered entity.
The responsibility for properly overseeing the IT security of outsourced relationships lies with the covered entity’s CISO, who must present an annual report. With advanced reporting capabilities by compliance requirement and industry framework, the Prevalent TPRM platform can simplify compliance reporting and clarify risks.
To learn more about achieving NY CRR 500 compliance, as well as compliance with many of the most common industry standards, frameworks, and guidelines, download our white paper, The Third-Party Risk Management Compliance Handbook. It reviews the key third-party risk management requirements in common regulatory and security frameworks, while mapping Prevalent Third-Party Risk Management capabilities to specific mandates. It’s essential reading for anyone responsible for managing supply-chain compliance initiatives.
Stay tuned for next week’s blog as we examine key bulletins from the Office of the Comptroller of the Currency: