Top Cybersecurity Regulations for Financial Services: Compliance Roadmap for FinServ and Banks

What Is Banking Regulatory Compliance?

Banking regulatory compliance encompasses adhering to the policies put in place to ensure the stability and integrity of financial systems. These requirements are enacted by government institutions, or governing bodies of financial institutions themselves.

Stable economies depend on trustworthy and resilient financial systems. Banking regulations exist to protect the assets entrusted to these firms by governing transactions, cybersecurity, data security, and more.

Key stakeholders in financial compliance include the CISO, as the head, along with the executive suite, board members, and employees who must be trained on and implement secure compliance policies in their day-to-day work.

Key Regulations Governing Banking Compliance

The primary regulations—and useful frameworks—facilitating banking compliance today include:

• GLBA (Gramm-Leach-Bliley Act): The FTC Safeguards Rule (stemming from the GLBA) states that financial institutions must create and maintain a written information security program. The GLBA Privacy rule requires these same institutions to provide customers with notice of the firm’s information privacy policies and practices.
• Computer-Security Incident Notification Rule (36-hour): Banks and their service providers are required to notify the Federal Deposit Insurance Corporation (FDIC) no later than 36 hours after a computer-security incident has occurred that is severe enough to be classified as a “notification incident:” an incident causing significant damage to the institution’s ability to do business, or jeopardizing the stability of the United States financial system.
• NIST Cybersecurity Framework 2.0 | NIST 2.0 is a FFIEC recommended framework for improving the cybersecurity awareness and resilience of U.S. financial organizations. It offers a structured approach to identifying, assessing, prioritizing, and communicating cyber risks, and is often used for its alignment with a broad range of industry cybersecurity standards.
• CISA’s Cyber Performance Goals (CPGs) | These voluntary measures provide “high-impact security actions” that address and improve the highest-priority security baselines across an organization.

Additional financial services compliance standards and resources include ones endorsed by the:

• National Credit Union Administration (NCUA)
• Office of the Comptroller of the Currency (OCC)
• Consumer Financial Protection Bureau (CFPB)
• Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA)
• And some larger state regulations like NYDFS 500 (New York) and CCPA/CPRA (California)

Consequences of Non-Compliance

The penalties for non-compliance with banking industry privacy laws can be severe. For not adhering to the GLBA, for instance, institutions can be fined up to $100,000 per violation, and an additional $10,000 for violations committed by directors and officers.

Failing to comply with established financial services data privacy rules also results in significant reputational damage and loss of customer trust, especially when these failures come to light following a data breach. For instance, when a major credit reporting agency was breached due to an unpatched vulnerability, their failure to comply with the FTC Safeguards Rule not only cost them a $575 million dollar settlement with the FTC, but an agreement to invest $1 billion improving their information security practices.

And the consequences didn’t stop there: the incident also resulted in the loss of the CEO, CSO, and CIO. While this is an extreme case, it is a perfect case study to show the worst-case scenario of failing to comply with industry-standard financial data security regulations.

8-Step Compliance Roadmap for Banks

Preventing costly compliance errors—and everything that comes with them—starts with a systematic approach to achieving banking cybersecurity compliance.

Step 1: Conduct Cyber Risk Assessment using NIST CSF

Leverage the  NIST CSF framework to perform your financial institution’s initial cyber risk assessment. Understand your baseline, identify gaps, and prioritize key areas of risk.

Step 2: Develop and Maintain a Written Information Security Program (FTC Safeguards Rule)

As your financial firm follows FTC Safeguards Rule guidelines by creating a written information security program, understand that it must be:

• Appropriate to the size of your organization and the scope of your activities
• Reflective of the sensitivity of your information

And that its objectives are to secure the confidentiality of that information by guarding against threats and unauthorized access. It should also factor in “administrative, technical, and physical” safeguards.

Step 3: Establish a 36-hour Cyber Incident Response Plan & Contact Protocol

Banks (and their service providers) are required to report significant cyber incidents to the FDIC (or their bank-designated point of contact, for providers) within 36 hours of discovery, or face mandatory corrective action, penalties, and fines.

To meet the inflexible day-and-a-half deadline, protocol for emergency chains of command should be put in place, along with communicating to key stakeholders the points of contact and how to submit the notification.

Step 4: Ensure Board Oversight and Cyber Risk Governance Documentation

Decisions must be made as to who is in charge of what: When a cyber incident occurs, whose responsibility is it to communicate that to governing authorities, and how does that work? Among the board, management, and in-house cybersecurity professionals, do all stakeholders understand their role in governance and security oversight, and do they have the proper expertise to carry out their functions?

Step 5: Implement Controls: MFA, Data Encryption, Secure Access, Patching

Once roles have been assigned, security controls like MFA, industry-standard encryption, strong IAM, and patch management need to be put in place. Those overseeing the implementation of these projects must be accountable to board-level oversight and held responsible for adhering to sensible timelines; they also need to be able to advocate for the resources they need, if other than what the board originally planned or was prepared for.

Whether this means additional staff, training, technology, or outsourcing, those at the tip of the spear need open communication with decision makers until these projects are put into place.

Step 6: Test Incident Response and Business Continuity Plans

Banks cannot afford downtime. The average cost of downtime per minute is often quoted as being $5,600 per hour, according to Gartner. Recent research moves that figure up to $9,000. However, the costs per industry can be much higher still, with figures for finance and healthcare skyrocketing to as much as $5 million per minute in some scenarios.

The point: Business continuity matters, and for that, incident response plans need to be firmly established and foolproof.

Step 7: Ensure Vendor Risk Management Policies Are in Place

Both banks and their third parties are required to adhere to breach notification and data privacy rules where customer data is concerned. Nevertheless, a breach caused by a vendor of a large financial institution will nonetheless reflect negatively on the host organization itself, and data privacy policies are beginning to codify this trend in writing.

Ensuring vendor risk management policies are in place is becoming just as important as maintaining an in-house risk management program. And every good program starts with baselining the risks; for that, companies need strong vulnerability management, followed by offensive security.

Step 8: Maintain Ongoing Security Awareness Training

Lastly, banks need to constantly train their employees to see things through security-first lenses. Human risk management through security awareness training (SAT) will ensure that these workers on the front lines—tellers, managers, regional heads, and more—understand the consequences of failing to comply with industry compliance standards. Just as importantly, they need to know and recognize cyberattacks in progress, such as via phishing emails, BEC attempts, and other forms of digital financial fraud.

Conclusion: Compliance for Financial Services & Banking

As banks continue to grow in their digital prowess, cybercriminals are going to continue targeting them for lucrative financial gain—and highly sensitive information. Financial services compliance standards exist as a preemptive strike against these inevitable attacks (now, made even stronger by AI).

As financial institutions choose to put compliance first, they can not only avoid regulatory fines but maintain a strong reputation as an entity that can successfully navigate the cyber challenges of a dangerous digital era.

And more than a compliance checkmark, this is what customers really want to see.