NYDFS report shows need to tighten cyber security at banks' third-party vendors

[Audrey McNeil <audrey () riskbasedsecurity com>]

http://www.automatedtrader.net/news/at/153558/nydfs-report-shows-need-to-tighten-cyber-security-at-banks--third_party-vendors

Benjamin M. Lawsky, Superintendent of Financial Services, announced that
the New York State Department of Financial Services (NYDFS) has released a
report finding significant potential cyber security vulnerabilities with
banks' third-party vendors. Banks rely on third-party vendors for a
broad-range of services - such as law firms that provide them with legal
advice or even companies contracted to run their HVAC systems. Those
third-party firms often have access to a financial institution's
information technology systems, providing a potential point of entry for
hackers.

Among other findings, the NYDFS report uncovered that nearly 1 in 3 banks
surveyed do not require their third-party vendors to notify them of cyber
security breaches. In the coming weeks, NYDFS expects to move forward on
regulations strengthening cyber security standards for banks' third-party
vendors, including potential measures related to the representations and
warranties banks receive about the cyber security protections in place at
those firms.

Superintendent Lawsky said: "A bank's cyber security is often only as good
as the cyber security of its vendors. Unfortunately, those third-party
firms can provide a backdoor entrance to hackers who are seeking to steal
sensitive bank customer data. We will move forward quickly, together with
the banks we regulate, to address this urgent matter."

NYDFS conducted a survey of 40 banking organizations - including many of
the largest institutions it regulates - about the cyber security standards
those firms have in place for their third-party vendors. Key findings
outlined in the report NYDFS issued today include:

Nearly 1 in 3 (approximately 30 percent) of the banks surveyed do not
require their third-party vendors to notify them in the event of an
information security breach or other cyber security breach.

Fewer than half of the banks surveyed conduct any on-site assessments of
their third-party vendors.

Approximately 1 in 5 banks surveyed do not require third-party vendors to
represent that they have established minimum information security
requirements. Additionally, only one-third of the banks require those
information security requirements to be extended to subcontractors of the
third-party vendors.

Nearly half of the banks do not require a warranty of the integrity of the
third-party vendor's data or products (e.g., that the data and products are
free of viruses).

NYDFS is in the process of conducting a similar survey regarding the cyber
security of third-party vendors at the insurers it regulates. The
Department also expects to put in place higher cyber security standards for
vendors providing services to insurance companies.

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