The New York State Department of Financial Services (DFS) ‘first-in-the-nation’ cybersecurity regulation for the financial services industry is, as of 1 March 2017, operational . One of the most highly regulated industries is now even more regulated in New York.
“New York is the financial capital of the world, and it is critical that we do everything in our power to protect consumers and our financial system from the ever-increasing threat of cyber-attacks,” Governor Cuomo said. “These strong, first-in-the-nation protections will help ensure this industry has the necessary safeguards in place in order to protect themselves and the New Yorkers they serve from the serious economic harm caused by these devastating cyber-crimes.”
The purpose of the regulation (PDF) is to provide ‘certain regulatory minimum standards’ while at the same time “not being overly prescriptive so that cybersecurity programs can match the relevant risks and keep pace with technological advances.” This is a difficult line it seeks to follow by allowing the regulated entities to define the requirements according to their own risk assessments.
In regulatory terms, there is a potential weakness in that no controlling risk framework is defined on which to base those risk assessments — leaving individual entities some scope to define the baseline for their own conformance. The NIST Cybersecurity Framework would be an obvious candidate — but NIST is large and complex. “The NIST framework is extremely comprehensive, and for medium or small organizations, the burden of implementation wouldn’t be feasible,” comments Tim Erlin, senior director of IT security and risk strategist for Tripwire.
This leaves ambiguities in conformance. An example can be found in section 500.05 (Penetration Testing and Vulnerability Assessments). It states, “The cybersecurity program for each Covered Entity shall include monitoring and testing, developed in accordance with the Covered Entity’s Risk Assessment, designed to assess the effectiveness of the Covered Entity’s cybersecurity program.” In short, the regulated organizations can choose between “effective continuous monitoring”, and annual penetration testing with “bi-annual vulnerability assessments”.
It could be argued that cyber security requires all of those. The most effective at finding vulnerabilities is perhaps the most expensive: penetration testing; but this provides only a slice-in-time. Annual pentesting would leave perhaps eleven months in which vulnerabilities could go untested — and hence the bi-annual vulnerability scanning or continuous monitoring. What isn’t defined, however, is what should happen with the results of the testing.
Consider the views of professional pentesters. A recent survey found that only 10% of pentesters “saw full remediation of all identified vulnerabilities.” Almost a third of the pentesters felt they were employed for compliance purposes only. This is a danger for all regulations, and especially those that attempt to be ‘not overly prescriptive’: the more leeway offered to the regulated entities, the more likely it is that cyber security becomes conformance box-checking rather than security fulfilment.
The authors of the new regulation are not unaware of this problem, and have sought to limit it by requiring the regulated entities to provide an annual ‘certificate of compliance’ to the superintendent of financial services. This includes, “To the extent a Covered Entity has identified areas, systems or processes that require material improvement, updating or redesign, the Covered Entity shall document the identification and the remedial efforts planned and underway to address such areas, systems or processes.”
The certificate requires that the board or senior officers have “reviewed documents, reports, certifications and opinions of such officers, employees, representatives, outside vendors and other individuals or entities as necessary.” Furthermore, the statement must be “Signed by the Chairperson of the Board of Directors or Senior Officer(s).”
In short, the new regulation provides the regulated industries with a degree of compliance wiggle room by not being overly prescriptive, but then insists that responsibility for any wiggle is taken at the highest level. Any regulated industry that decides to wiggle will need to justify that wiggle; and since this is signed by the chairman of the board, there is no hiding place for any officer. This is perhaps the real innovation in this regulation, and one that might well be copied by other regulatory bodies in the future. This simple requirement could have a greater effect on moving cyber security into the boardroom than any other form of non-intrusive evolution.
