Cybercriminals are a shared enemy in the financial world.
Every day, hackers look to exploit vulnerabilities, breach networks, and plunder data. They’re good at their trade, and they’re getting better at it all the time.
And financial institutions bear the brunt of these attacks—big, small, or mid-sized, no bank is beyond the grasp of these nefarious actors.
That’s why cybersecurity regulations are vital to the banking world: they provide a baseline of standards to protect your team, your customers, and your reputation. While banks are bound by these regulations, they have autonomy in developing their own cybersecurity compliance framework to address them.
In this article, we will explore six essential cybersecurity regulations for financial entities to apply in their cybersecurity compliance framework.
What Do We Mean by Cybersecurity Compliance?
Given the meteoric rise of online banking (and the proliferation of digital data), cybersecurity compliance has become a mainstay of the financial sector.
It’s the process of adhering to information security and data regulations established by governments, agencies, and authorities.
Cybersecurity compliance regulates the ways in which financial organizations securely access, transfer, and store sensitive data.
It goes way beyond simple “best practices.” After all, failure to observe regulatory requirements can incur hefty fines and even criminal penalties.
In August 2023, several firms were fined $549 million after failing to adequately secure electronic records.
Plus, regulation adherence can also help strengthen consumer trust and provide a minimum standard of defense on the frontlines of a costly cybersecurity war.
Though the standards in these regulations take time to apply, they offer a great starting place for banks looking to get serious about cybersecurity.
Top Six Cybersecurity Regulations in the Financial Sector
The following list features a blend of both mandatory regulations and optional certifications.
As you’ll see, there are laws particular to the United States, policies unique to Europe, and standards applied to the international banking community as a whole.
1. Federal Financial Institutions Examination Council (FFIEC)
As an interagency authority, the Federal Financial Institutions Examination Council prescribes cybersecurity standards and guidelines for financial institutions.
To maintain compliance with these standards, financial institutions must observe eleven categories ranging from business continuity planning and retail payment systems, to IT audits and technology service provider supervision.
There are five banking regulators that compose the FFIEC:
- The Federal Deposit Insurance Corporation (FDIC).
- The Board of Governors of the Federal Reserve (FRB).
- The National Credit Union Administration (NCUA).
- The Office of the Comptroller of the Currency (OCC).
- Consumer Financial Protection Bureau (CFPB).
FFIEC standards are mandatory for all federally-supervised financial institutions (along with their subsidiaries and holding companies).
To that end, any institution that is overseen by the FFIEC’s partner agencies—the FDIC, FRB, NCUA, OCC, and CFPB—are also subject to these regulations.
Non-compliance can result in fines of up to $2 million.
Banks may choose from a variety of standardized approaches and frameworks available, including the FFIEC Cybersecurity Assessment Tool (FFIEC CAT), NIST Cybersecurity Framework, or the Cyber Profile by the Cyber Risk Institute.
2. Payment Card Industry (PCI) Data Security Standards (DSS)
A defense against credit card fraud, PCI DSS standards apply to any firm that accepts, transfers, or stores customer credit or debit card information.
PCI DSS is managed by the PCI Security Standards Council, which was formed in 2006 by American Express, MasterCard, Visa Inc., Discover Financial Services, and JCB International.
Though PCI DSS standards are not U.S. federal law, they are mandatory for any vendor handling cardholder data. After all, PCI DSS is central to the contractual relationship between a merchant and the participating card company.
Some states, including Nevada, Minnesota, and Washington, have formed local laws around certain PCI DSS standards.
While merchants must comply with PCI DSS, the specific training and compliance requirements will vary depending on the company’s size and environment.
Companies in breach of PCI DSS regulation could face fines between $5,000 to $100,000 per month until resolved.
Though the PCI DSS checklist contains twelve individual steps, it can be summarized in three:
- Deploy robust security protocols.
- Protect cardholder data.
- Test your systems regularly.
Here is a comprehensive guide to the PCI DSS roadmap.
3. Gramm-Leach-Bliley Act (GLBA)
As U.S. law, the GLBA requires all financial entities to secure customer data.
Named after the lawmakers who introduced the legislation, the GLBA makes two overarching demands of financial institutions:
- The safeguards rule: utilize security protocols that reduce unauthorized access and mitigate breach exposure.
- The financial privacy rule: disclose data-sharing practices with clients at the start of their business relationship (and every year following).
The GLBA is primarily enforced by the Federal Trade Commission (FTC), and is mandatory for any business selling financial products or services within the U.S. This includes any institution that promotes loan products, insurance products, investment recommendations, or financial advice.
While organizational non-compliance can incur fines of up to $100,000, violating individuals may be charged up to $10,000 per incident and receive up to five years in prison.
4. Bank Secrecy Act (BSA)
The Bank Secrecy Act prevents financial entities from laundering money—whether done accidentally, deliberately, or under cybercriminal duress.
Often referred to as an anti-money laundering (AML) law, the BSA ensures financial institutions aren’t used to facilitate illegal transactions, criminal operations, or terrorist financing.
Through regular audits, the BSA is overseen and enforced by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
As a general rule, BSA law requires financial institutions to provide detailed reports for all cash transactions in excess of $10,000. They are also expected to report any suspicious activity from clients.
BSA regulations are mandatory for national banks, federal savings associations, federal branches, and agencies of foreign banks.
As with other regulations, willful violation of the BSA can incur criminal fines of up to $250,000, five years in prison, or both.
5. Sarbanes-Oxley Act (SOX)
Codified in 2002, the Sarbanes-Oxley Act was created to protect investors against financial fraud.
As a framework of financial checks and balances, SOX was built to ensure the accurate and transparent management of financial records.
In more recent years, however, SOX legislation has been expanded to include cybersecurity regulations that address the rising tide of threats against financial institutions.
Today, SOX compliance is mandatory for all publicly-traded U.S. companies (and their wholly-owned subsidiaries). Any foreign companies doing business in the U.S. must also establish SOX financial reporting standards.
While privately-held companies are not required to comply with SOX, adherence to their standards are recommended for both the security they provide and the confidence they give consumers.
Though there are many individual components to meeting SOX compliance, the compliance process can be summarized in three steps:
- Provide the U.S. Securities Exchange Commission (SEC) with financial records that have been audited by a third party (not by the same firm that oversees company accounting).
- Deliver prompt public reporting of material changes in either business operations or financial health, including data breaches or cyberattacks of any kind.
- Ensure comprehensive implementation of internal security protocols with regular testing and updates—this entails providing an annual statement of these controls, which must be signed by management and vetted by a third party.
SOX non-compliance is costly and includes fines and delisting from public stock exchanges.
Defrauding of shareholders or falsification of a SOX certification can incur fines of up to $5 million and 20 years imprisonment.
Check out the official nine-step SOX checklist to learn more.
6. Computer-Security Incident Notification
Jointly issued by the Office of the Comptroller of the Currency (OCC), the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC), this rule requires:
- Banking organizations (banks) to notify their primary federal regulator of any computer-security incident that rises to the level of a notification incident.
- Bank service providers (provider) to notify each affected banking organization customer if they experience a computer-security incident that has caused—or is likely to cause—a material service disruption or degradation for four or more hours.
The notification must be provided as soon as possible and no later than 36 hours after the bank or provider determines that an incident has occurred.
To read the complete background, definitions, and other details regarding the Computer-Security Incident Notification Requirements for Banking Organizations and Their Bank Service Providers (its full name), click here.
Unfortunately, cyberattacks in the financial sector are common, so it’s essential that your bank is prepared to receive notifications from your bank service provider, and assess the impact that the notified incident has on your bank.
You should also have in place a proper framework to trigger your bank’s own notification requirements, in the event of a qualifying computer-security incident.
In addition to the rule and its resources, the OCC, Board, and FDIC have issued guidance for banks in relation to risk management for third-party relationships. Given the ever-increasing reliance on third-party services, this guide is very handy to protect your bank and customers.
Goodbye to Open Domains, Hello to .Bank
Cyber criminals want your bank’s data, and they’ll do anything to get it.
Attack methods continue to expand, and spoofing is on the rise.
By stealing your company logos, fonts, and resources, hackers impersonate your bank to fool customers (and even your employees) into divulging sensitive data.
They accomplish this with counterfeit websites, fake emails, and everything in between.
Fortunately, there’s a better path forward—and you can take it right now to fortify your firm.
By moving from an unrestricted domain to a .Bank domain name, you can stop hackers in their tracks.
In fact, .Bank domains are built exclusively for banks, so you, your team, and your clients always know what’s real (and what’s not).
.Bank isn’t a cybersecurity regulation, but like the regulations covered above, it adds an essential layer of protection to your business.
After all, whenever you see .Bank, you’ll know it’s your bank.
End of spoofing. End of story.
Join the growing list of banks who have changed their domain to .Bank.