New York Department of Financial Services Cybersecurity Regulation
The nation's first comprehensive cybersecurity regulation for financial services
// What is NYDFS Cybersecurity?
23 NYCRR Part 500 was the first US regulation to impose comprehensive cybersecurity requirements on financial services companies. The regulation applies to entities licensed or operating under New York banking, insurance, or financial services law—including many national firms due to New York's financial center status.
The November 2023 amendments significantly strengthened requirements, adding new provisions for vulnerability management, access privileges, incident response, and board accountability. Large companies face additional requirements including independent CISO and annual independent audits.
NYDFS has been an aggressive enforcer, with settlements reaching tens of millions for systemic failures. The regulation's influence extends beyond New York, as many covered entities apply its standards enterprise-wide.
// Inside the Regulation
Part 500 establishes specific technical requirements and governance obligations, distinguishing it from principle-based regulations. The 2023 amendments expanded requirements substantially.
Cybersecurity Program Requirements
§500.2-500.3Core requirements for cybersecurity programs including risk assessment, policy, and designated personnel.
Cybersecurity Program
Maintain a program designed to protect information systems and nonpublic information based on risk assessment.
Cybersecurity Policy
Written policies approved by senior governing body or officer, covering 15 specified areas including incident response, access controls, and vendor management.
Chief Information Security Officer
Designate a qualified CISO responsible for program oversight. Class A companies must have independent CISO function.
Risk Assessment
Conduct periodic risk assessment sufficient to inform cybersecurity program design. Update at least annually.
Technical Requirements
§500.5-500.15Specific technical controls mandated by the regulation, expanded significantly in 2023.
Penetration Testing and Vulnerability Assessment
Annual penetration testing from qualified internal or external party. Vulnerability scanning at least biannually and after material changes.
Multi-Factor Authentication
Required for remote access, privileged accounts, and access to nonpublic information. Expanded in 2023 amendments.
Encryption
Encrypt nonpublic information in transit over external networks and at rest. Alternative controls require CISO approval.
Access Privileges
Limit access to only what's necessary. Implement privileged access management. Disable accounts within 24 hours upon departure.
Audit Trail
Maintain systems designed to reconstruct material transactions and detect unauthorized access to nonpublic information.
Application Security
Written procedures for secure development of in-house applications and security evaluation of external applications.
Governance and Reporting
§500.4, §500.17Board-level oversight and certification requirements ensure executive accountability.
Board Oversight
Senior governing body must oversee cybersecurity risk management. Class A companies require board-level cybersecurity expertise.
Annual Certification
Annually certify compliance to NYDFS by April 15, signed by highest-ranking executive or CISO.
CISO Reporting
CISO must report at least annually to senior governing body on program status, material issues, and remediation.
Incident Notification
Notify NYDFS within 72 hours of cybersecurity events with reasonable likelihood of material harm.
Third-Party and Vendor Management
§500.11Requirements for managing cybersecurity risks from third-party service providers.
Written Policies
Implement written policies for third-party security based on risk assessment.
Due Diligence
Conduct due diligence to evaluate third-party cybersecurity practices.
Contractual Requirements
Include cybersecurity requirements in contracts with third-party service providers.
Periodic Assessment
Periodically assess third-party practices based on risk and continued adequacy of access and controls.
Note: Class A companies (those with $20M+ gross annual revenue from NY business AND either 2,000+ employees or $1B+ gross annual revenue) face additional requirements including independent CISO, annual independent audits, and board-level cybersecurity expertise.
// Who Must Comply
- 1 Banks and trust companies chartered in New York
- 2 Insurance companies licensed in New York
- 3 Licensed lenders and mortgage companies
- 4 Money transmitters licensed by NYDFS
- 5 Investment companies and check cashers
- 6 Any entity operating under NY Banking, Insurance, or Financial Services Law
// Key Requirements
CISO Designation
Designate a qualified CISO responsible for cybersecurity program implementation and reporting
Penetration Testing
Conduct annual penetration testing and biannual vulnerability assessments
Multi-Factor Authentication
Implement MFA for remote access, privileged accounts, and nonpublic information access
Encryption
Encrypt nonpublic information in transit and at rest using appropriate standards
Annual Certification
Certify compliance annually to NYDFS signed by senior executive or CISO
72-Hour Notification
Notify NYDFS within 72 hours of cybersecurity events likely to cause material harm
// Enforcement & Penalties
NYDFS has enforcement authority under New York Banking and Financial Services Law. Penalties for non-compliance can include significant monetary fines, consent orders, and restrictions on business activities. Enforcement has increased substantially since 2020.
Up to $250,000 per violation (higher in serious cases)
Examples:
- First American Title - $1 million penalty for vulnerability management failures (2021)
- Residential Mortgage Services - $1.5 million for cybersecurity violations (2021)
- Robinhood Crypto - $30 million for BSA/AML and cybersecurity failures (2022)
- OneMain Financial - $4.25 million for access control and MFA violations (2023)
// Cyber Insurance Impact
Cyber insurers serving financial services carefully evaluate NYDFS compliance. The regulation's specific technical requirements make compliance assessment straightforward. Non-compliance can result in coverage limitations, particularly given the annual certification requirement and NYDFS enforcement activity.
// How Breach Craft Helps
We help organizations achieve NYDFS Cybersecurity compliance through genuine security improvements—not checkbox exercises. Our services address the specific requirements and challenges of NYDFS Cybersecurity.
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