Financial services is one of the most heavily regulated sectors in the world as it plays a vital role in the global economy. It’s essential that organizations within this industry operate with a high level of cybersecurity to protect consumers, prevent financial crimes, promote fair trade, and stabilize the financial system.
In this article, we’ll discuss the different cybersecurity regulations that apply to the financial industry. We’ll also look at some best practices for ensuring compliance and protecting client confidentiality.
Top Cybersecurity Regulations for Financial Services
The following are top cybersecurity regulations and compliance frameworks that apply to companies in the financial sector. Each of these has different requirements, but they all aim to protect customer data and ensure the security of financial transactions.
Payment Card Industry Data Security Standards
For: Any business that accepts card payments
The Payment Card Industry Data Security Standards (PCI DSS) is a set of security standards created by the major payment card brands — Visa, MasterCard, American Express, Discover, and JCB — to protect customer data and prevent fraud. All businesses that handle, store, or transmit credit card information must comply with PCI DSS. This includes merchants, processors, and any other entity that handles credit card data.
The compliance requirements for PCI DSS can be grouped into the following six categories:
- Build and maintain a secure network
- Protect cardholder data
- Maintain a vulnerability management program
- Implement strong access control measures
- Regularly monitor and test networks
- Maintain an information security policy
Sarbanes-Oxley Act
For: Publicly-traded companies
The Sarbanes-Oxley (SOX) Act is a federal law enacted in 2002 in response to corporate accounting scandals that occurred between 2000 and 2002. It requires public companies to maintain accurate financial records and disclose any material changes in a timely manner.
Recently, the SOX Act has evolved to include provisions for cybersecurity. In particular, SOX compliance now requires companies to have adequate controls and procedures in place to protect against cyberthreats. These include controls for access to sensitive data, network security, and incident response.
Gramm-Leach-Bliley Act
For: Financial products or services companies
The Gramm-Leach-Bliley Act (GLBA) is another federal law that requires financial institutions to protect the confidentiality of customer information. It also requires institutions to provide customers with a privacy notice that explains how their information will be used and shared. This is to ensure that customers are aware of the risks involved in sharing their personal data, thus helping them make informed decisions about whether to do business with a particular institution.
Compliance with the GLBA is achieved primarily by developing and implementing a comprehensive information security program. This program must include physical, technical, and administrative safeguards to protect customer information from unauthorized access, use, or disclosure.
Bank Secrecy Act
For: Financial institutions
Under the Bank Secrecy Act (BSA), financial institutions are required to maintain records of all transactions and report any suspicious activity to the Financial Crimes Enforcement Network, or FinCEN. This aims to prevent these institutions from being used for money laundering, terrorist financing, or other illegal activities.
The BSA requires national banks, federal savings associations, federal branches, and agencies of foreign banks to have a compliance program in place that includes, at a minimum, the:
- Implementation of internal controls
- Designation of a compliance officer
- Establishment of a training program
- Independent testing of the compliance program
- Performing customer due diligence
General Data Protection Regulation
For: Any company that hosts data of someone in a European Union territory
The General Data Protection Regulation (GDPR) is a legal framework created to protect the personal data of citizens or residents in the European Union (EU). The GDPR applies to any company that processes or intends to process the personal information of EU citizens or residents, regardless of where the company is based.
Under the GDPR, individuals have the right to know what personal data is being collected about them, the right to have that data erased, the right to object to its processing, and the right to obtain and use that data for any personal purposes. This means companies must take steps to protect personal data, which includes ensuring that data is stored securely and only accessed by authorized personnel.
Organizations that process the personal data of EU citizens must also appoint a Data Protection Officer, who is responsible for ensuring compliance with the GDPR and can be held liable for any violations.
National Institute of Standards and Technology Cybersecurity Framework
For: Any company looking for a base cybersecurity framework
The National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) is a set of best practices for managing cybersecurity risk. It provides a structure for organizations to assess their cybersecurity risks and identify the controls they need to put in place to mitigate those risks.
NIST CSF is not a mandatory compliance standard, but it is increasingly being adopted by organizations as a way to improve their cybersecurity posture. The framework is also being used by regulators as a way to assess the cybersecurity risks of financial institutions.
ISO/IEC 27001
The ISO/IEC 27001 is an international standard that specifies the requirements for an information security management system (ISMS). Organizations that implement an ISMS can use the ISO/IEC 27001 to manage their cybersecurity risks in a systematic and proactive way.
While ISO/IEC 27001 is not specific to the financial industry, it is relevant for any organization that processes, or intends to process, personal data. This is because the standard includes requirements for the security of personal data, such as ensuring that data is encrypted and stored in a secure location.
Best Practices for Ensuring Compliance
There are a number of best practices that financial institutions can follow to ensure compliance with the various cybersecurity regulations that apply to them.
These best practices include:
- Conducting regular risk assessments to identify potential vulnerabilities and threats
- Implementing strong security controls to mitigate the identified risks
- Monitoring compliance with internal policies and procedures
- Keeping track of changes to compliance requirements
- Responding promptly and effectively to any incidents that occur
Organizations should also make sure they have adequate insurance coverage in case of a data breach or other cybersecurity incident. Cyber insurance can help cover the costs related to incident response and investigation, as well as any damages that may be awarded in a lawsuit. Keep in mind, you may need specific security services in place to be eligible for a cyber insurance policy. Most recently, cyber insurance providers have started requiring Multi-Factor Authentication as a standard practice.
By complying with the relevant cybersecurity regulations and following the best practices, financial institutions not only protect their clients’ data, but also ensure that a cyberattack does not disrupt their own operations. This allows both customers and investors to have confidence in the security of their money and the organizations they entrust it to.
Enlist Expert Help
Compliance with the various cybersecurity regulations can be a complex and time-consuming process. Unfortunately, there is no one-size-fits-all solution when it comes to regulatory compliance. Every organization is different and will need to tailor its compliance program to specific risks and needs. This is why financial institutions may want to consider enlisting the help of experts, such as reputable compliance consultants or managed IT services providers, to ensure that they are meeting all of the relevant requirements.
If you have any questions about compliance with cybersecurity regulations, or if you need help implementing effective security controls, contact Charles IT today. Our team of experts can assist your business with all of your cybersecurity and compliance needs!
Interested in reading more? We’ve compiled a list of resources we think are pretty great in giving you more detailed information about some of the topics covered in today’s post!
