The State of New York is the first state to introduce a groundbreaking cybersecurity regulation to protect the financial services critical infrastructure. The NY Department of Financial Services (NYDFS) introduced the new NYDFS Cybersecurity Regulation (23 NYCRR 500) that imposes new cybersecurity requirements on all covered financial institutions.
Section 500.11 requires all financial services (covered entities) to comply with the Third Party Service Provider Security Policy regulation.
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“Section 500.11 Third Party Service Provider Security Policy.
Section 500.11 (a) Third Party Service Provider Policy. Each Covered Entity shall implement written policies and procedures designed to ensure the security of Information Systems and Nonpublic Information that are accessible to, or held by, Third Party Service Providers. Such policies and procedures shall be based on the Risk Assessment of the Covered Entity and shall address to the extent applicable:
(1) the identification and risk assessment of Third Party Service Providers;
(2) minimum cybersecurity practices required to be met by such Third Party Service Providers in order for them to do business with the Covered Entity;
(3) due diligence processes used to evaluate the adequacy of cybersecurity practices of such Third Party Service Providers; and
(4) periodic assessment of such Third Party Service Providers based on the risk they present and the continued adequacy of their cybersecurity practices.”
“Section 500.11 (b) Such policies and procedures shall include relevant guidelines for due diligence and/or contractual protections relating to Third Party Service Providers including to the extent applicable guidelines addressing:
(1) the Third Party Service Provider’s policies and procedures for access controls, including its use of Multi-Factor Authentication as required by section 500.12 of this Part, to limit access to relevant Information Systems and Nonpublic Information;
(2) the Third Party Service Provider’s policies and procedures for use of encryption as required by section 500.15 of this Part to protect Nonpublic Information in transit and at rest;
(3) notice to be provided to the Covered Entity in the event of a Cybersecurity Event directly impacting the Covered Entity’s Information Systems or the Covered Entity’s Nonpublic Information being held by the Third Party Service Provider; and
(4) representations and warranties addressing the Third Party Service Provider’s cybersecurity policies and procedures that relate to the security of the Covered Entity’s Information Systems or Nonpublic Information.”
Section 500.11 (c) Limited Exception. An agent, employee, representative or designee of a Covered Entity who is itself a Covered Entity need not develop its own Third Party Information Security Policy pursuant to this section if the agent, employee, representative or designee follows the policy of the Covered Entity that is required to comply with this Part.”