Financial sector cybersecurity regulations are essential in today’s digital age, where the financial industry relies heavily on technology and data management. There may not be a one-size-fits-all solution that guarantees financial services firms’ cybersecurity. Nonetheless, specific regulations mandatory by law can help manage such monumental risks.
In this blog, we’ll go over why compliance with the financial sector cybersecurity regulations are important for these companies and what the regulations demand.
[Related: Accounting Firms’ Guide to Safeguarding Client Data]
Why Are Compliance and Regulatory Frameworks Essential for Financial Services Companies?
First and foremost, financial services companies rely on quality IT to ensure they deliver services safely and retain secure systems, which usually handle extremely sensitive information.
These financial institutions include the following, among others:
- Commercial banks
- Investment banks
- Insurance companies
- Brokerage firms
- CPA firms
- Wealth management services
- Mutual funds
- Credit unions
Such firms handle highly confidential data, including names, addresses, bank account information and credit card information.
Disruption or unauthorized access of financial services firms’ systems can result in devastation. Dollars aren’t the only matter at risk. If cybercriminals breach confidential information, it can easily shatter financial services firms’ reputations.
It’s critical that financial institutions remain diligent in mitigating cybersecurity risks and complying with mandatory regulatory frameworks.
[Related: Healthcare HIPAA Compliance Checklists]
Key Laws and Regulations
Financial sector cybersecurity regulations are absolutely essential for financial firms, staying up to date on all the latest regulations and knowing which ones are mandatory can be difficult.
The following laws and regulations aim to support customer data security and information breach resilience.
1. The European Union General Data Protection Regulation (EU-GDPR)
What is it?
The EU-GDPR is a security framework to protect the personal data of EU citizens.
Who must comply?
All businesses processing any EU citizen’s data must comply with the EU-GDPR. This data may come from web form submissions, cookie data, marketing emails, IP address storage, posted photos and shredded documents.
Is it mandatory?
Regardless of location, if a business processes any EU citizen’s data, it must comply with the EU-GDPR. A recent survey reports that 92% of U.S. companies categorize EU-GDPR compliance as a top priority.
Learn more about EU-GDPR guidelines here.
2. The United Kingdom General Data Protection Regulation (UK-GDPR)
What is it?
The UK-GDPR is a security framework that focuses solely on protecting the personal data of U.K. citizens. Since Brexit removed the U.K. from any EU policy affiliations, the country has created a separate version of the EU-GDPR.
Who must comply?
All businesses processing the data of any U.K. citizen must comply with the UK-GDPR.
Is it mandatory?
Regardless of location, if a business processes any U.K. citizen’s data, it must comply with the UK-GDPR.
Learn more about UK-GDPR guidelines here.
[Related: Phishing vs. Spoofing: Similarities, Differences and How To Prevent Them]
3. The Sarbanes-Oxley (SOX) Act
What is it?
Legislators created the SOX Act in 2002 to protect investors from financial scams. SOX includes best security practices and internal checks for avoiding fraud, as well as guidelines to ensure financial institutions address common cybersecurity risks (e.g., phishing attacks).
Who must comply?
All public companies and organizations in the U.S., including those in the financial sector, must comply with the SOX Act.
Is it mandatory?
Yes. If a public company or organization does not comply with SOX, it could risk public stock exchange delisting, loss of officers liability insurance, removal of directors and/or additional penalties.
Learn more about SOX Act guidelines here.
4. Payment Card Industry (PCI) Data Security Standards (DSS)
What is it?
The PCI DSS is a set of standards aiming to reduce credit card fraud and protect credit cardholders’ personal information. Additionally, the PCI DSS controls focus on protecting data at these three stages:
- Processing
- Storage
- Transfer
Who must comply?
All businesses or organizations that process customer credit card data must comply with the PCI DSS.
Is it mandatory?
Yes. Institutions worldwide recognize the PCI DSS, and it is mandatory for all organizations, merchants and payment solution providers who handle customer credit card data.
Learn more about PCI DSS guidelines here.
[Related: How Managed IT Can Help Ensure HIPAA Compliance]
5. The Bank Secrecy Act (BSA)
What is it?
The BSA, also known as the Currency and Foreign Transactions Report Act, centers on preventing financial firms from laundering money (either willingly or via cyberattack).
Who must comply?
All national banks and other financial institutions in the U.S. accepting money from customers must comply with the BSA. They must use controls to detect and deter laundering, identify terrorist financing and implement a plan for post-incident control.
Is it mandatory?
The BSA is mandatory for national banks, federal branches, foreign bank agencies, federal savings associations and all other U.S. financial institutions that accept money from customers.
Learn more about BSA guidelines here.
6. The Gramm-Leach-Bliley Act (GLBA)
What is it?
The GLBA requires all financial institutions to establish security controls to protect customer information. Institutions must also tell their customers what types of data they gather and share.
Who must comply?
All U.S. organizations that take part in the following must comply with the GLBA:
- Selling financial products or services
- Selling financial or investment advice
- Offering financial products or services
- Offering financial loans
- Offering financial or investment advice
- Selling insurance
Is it mandatory?
Yes. If you are a U.S. company or organization that deals with the exchange of financial information, you must comply with the GLBA. If you do not, you risk dealing with costly penalties or even imprisonment (up to five years).
Learn more about GLBA guidelines here.
7. The Payment Services Directive (PSD 2)
What is it?
The PSD 2 includes regulations for protecting online payments, customer data security and strong customer authentication in the EU.
Who must comply?
All banks and financial institutions operating in the EU must comply with PSD 2.
Is it mandatory?
Yes. All EU companies in the financial sector must comply with PSD 2 or risk receiving a fine of up to EUR 20.000.000 or 4% of their annual revenue.
Learn more about PSD 2 guidelines here.
[Related: The Importance of Cybersecurity for Engineering Firms]
8. The Federal Financial Institutions Examination Council (FFIEC)
What is it?
The FFIEC is an interagency body that offers financial institutions uniform cybersecurity practices.
The following entities govern the FFIEC:
- The Board of Governors of the Federal Reserve
- The Federal Deposit Insurance Corporation
- The Office of the Comptroller of the Currency
- The National Credit Union Administration
- The Consumer Financial Protection Bureau
The FFIEC outlines best practices in a variety of categorized handbooks, including those focusing on audits, information security, tech services outsourcing, technology service provider supervision and more.
Who must comply?
All federally supervised financial institutions and their U.S. subsidiaries must comply with FFIEC regulations and guidelines.
Is it mandatory?
The FFIEC is mandatory for federally supervised financial institutions in the U.S. Noncompliance can result in fines of up to $2 million.
Learn more about FFIEC guidelines here.
Stay Up to Date With CMIT Solutions of Bellevue
Compliance with financial sector cybersecurity regulations is not just a legal obligation but also a crucial aspect of building and maintaining trust in the financial industry.
Working with professionals, such as those at CMIT Solutions of Bellevue, streamlines your financial firm’s cybersecurity processes and keeps your business current on all cybersecurity regulations and laws.
At CMIT Solutions, we have years of experience with a variety of professional industries, including those in the finance sector. We understand that each company has its own unique requirements and goals.
Want to learn more about what we offer? Get in touch with us today to see how our cybersecurity services help your business thrive.
Featured image via Unsplash
