The New York State Department of Financial Services issued a Cybersecurity Regulation (23 NYCRR 500)(“Regulation”) that went into effect on March 1, 2017. The Regulation carried with it several compliance milestones applicable to “Covered Entities” under the Regulation, which includes those entities that are operating or required to operate under the New York insurance, finance and banking laws.
SUMMARY OF COMPLIANCE MILESTONES TO DATE
The Regulation first required Covered Entities to establish a number of Cybersecurity and IT policies and procedures by August 28, 2017. Next,Covered Entities were required to submit a Certification to the Department of Financial Services by February 5, 2018, that they complied with the first milestone under the Regulation. By March 1, 2018, the Regulation required Covered Entities to additional CISO reporting,Annual Penetration Testing and Vulnerability Assessments, Risk Assessments and implement Multi-Factor Authentication where necessary based on the results of the Risk Assessments.
The most recent milestone was on September 3, 2018. Covered Entities were responsible for establishing audit trails to reconstruct material financial transactions creating policies and procedures around in-house developed applications and assessing the security of externally developed applications. In addition, Covered Entities were required to establish policies on Data Retention limitations, continue Cybersecurity training and monitoring and develop procedures for the encryption of Non-Public Information that is transmitted over external networks and at rest, unless infeasible.
NEW MILESTONE - MARCH 1, 2019 DEADLINE
The next compliance milestone pertains to Third Party Service Providers. This milestone must be met by March 1, 2019 and involves the oftentimes complex process of evaluating the Third-Party Service providers utilized by your company. This process can be a cumbersome and time-consuming given to the complexity of the relationships your company may have with a variety of Third-Party Service Providers. Accordingly, it is recommended that you begin this process as soon as possible as there are often several components to the analysis.
SUGGESTED NEXT STEPS
Moving towards the March deadline, Covered Entities should assess the risk that each Third-Party Service Provider poses to their data and systems and then determine an effective solution to address those risks. It is insufficient to rely solely on the Certification of Compliance submitted by theThird-Party Service Providers the DFS under the Regulation as their only means of evaluating their compliance with this milestone.
Covered Entities should take steps to determine what, if any, Third Party Service Providers are being utilized by the company, evaluate them as it relates to security, and review the relevant policies and procedures. Covered Entities should consider whether or not it makes sense to require Third Party Service Providers to carry adequate insurance including Cyber Insurance to cover both the entity and the Covered Entity should a breach occur.
ADDITIONAL INSIGHT INTO THE REGULATION
It is helpful to note that the DFS regularly answers FAQs pertaining to the DFS Cybersecurity Regulation that provide valuable insight. The complete list of FAQs can be found at the following link: https://www.dfs.ny.gov/about/cybersecurity_faqs.htm
The contents of 23 NYCRR Part 500 can be found here: https://www.dfs.ny.gov/legal/regulations/adoptions/dfsrf500txt.pdf
The attorneys at Octillo Law PLLC are fully equipped to help you navigate through the Third-Party Service Provider Risk Assessment and all other components required under the Regulation by offering practical legal advice that will help arm your company with the knowledge to assist in making sound business decisions.
DISCLAIMER: This alert is for general information purposes only. It does not constitute legal advice, or the formation of an attorney-client relationship, and may not be used and relied upon as a substitute for legal advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or practitioner licensed to practice in the jurisdiction where that advice is sought. If you have any questions, please contact an attorney at Octillo: octillolaw.com or [email protected].
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