Top 6 Cybersecurity Regulations for Banks and How to Remain Compliant
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Why is Regulatory Compliance Important for the Financial Industry?
Regulatory compliance is vital for financial institutions to grow while avoiding risks. The financial sector operates in a highly interconnected environment where a single data leak can disrupt entire markets. Following compliance standards helps banks and other financial institutions enhance their cybersecurity, prevent disruptions, and protect their reputation. Compliance is about more than just following rules; it’s about safeguarding the foundation of financial stability.
Operational Risk in Financial Services
Operational risks can come from cyber attacks; however, they can also stem from natural disasters or pandemics. When a situation completely impedes a business’s ability to conduct its normal operations, financial institutions will lose revenue, damage customer trust, and could face legal action.
Banks and financial businesses often face operational issues due to system outages, data breaches, financial fraud, or general cyber attacks like ransomware, phishing, malware, and denial of service. All of these are becoming more advanced and harder for businesses to recover from. With so many operational risks facing financial businesses daily, it’s essential to proactively prepare your systems for the worst-case scenario.
Reputational Harm
Reputational damage often results from a cyberattack that affects a business’s customers. When a customer’s financial or personal data is compromised, they lose trust and may look for another bank or institution to work with. They might decide to withdraw all their money if they feel it is not being adequately protected. If news spreads that customer data was leaked or funds were lost, banks have a difficult time recovering and can lose a significant number of customers and revenue.
System Loss
Systemic risk involves cyberattacks that could affect more than just a single business, but an entire industry or economy. For example, large banks that are highly interconnected use technology that many other institutions also rely on. One attack on an IT system that is intertwined with numerous businesses can cause significant loss across the industry, both by costing money to repair the damage and by eroding customer trust.
To prevent this issue, financial regulators assess the safety of individual organizations and their partners. The Financial Stability Oversight Council (FSOC) highlights three areas where a cybersecurity event could threaten the stability of the U.S. financial system.
- Disruption of essential financing services or the financial market utility for which there are few substitutes (central banks, securities and derivatives, exchanges, and payment clearings).
- Causing loss of trust amongst a large group of customers or market participants.
- Compromising the integrity of sensitive data, causing information to be inaccurate or unusable.
Regulatory compliance acts as an additional layer of protection against unpredictable threats facing the financial industry. When institutions adhere to strict compliance procedures, they reduce the risk of operational downtime, reputational damage, and systemic failure. Besides meeting legal standards, compliance enhances resilience and builds trust. In a quickly changing threat landscape, maintaining compliance is essential to ensure stability and protect your customers.
Cybersecurity Compliance List for Banks Across the U.S.
The U.S. financial industry has some of the strictest cybersecurity and data protection regulations compared to other countries. These requirements are designed to protect customer data, maintain the integrity of financial systems, and ensure institutions can respond swiftly to advanced threats. From securing payment data to preventing money laundering, compliance is essential for staying ahead of regulatory expectations and maintaining customer trust.
- Payment Card Industry Data Security Standard (PCI DSS)
This standard, established by the Payment Card Industry Security Standards Council (PCI DSS), ensures that any business handling credit card information implements secure processes for processing, storing, and transmitting data. If a business manages credit card transactions, including merchants, payment processors, and service providers, compliance with this standard is mandatory.
Achieving PCI DSS compliance can be complex, as it requires detailed information on network segmentation, access controls, and vulnerability management. For small businesses, this can be a costly and time-consuming process, but it is necessary to strengthen security measures and reduce the risk of data breaches. - Federal Financial Institutions Examination Council (FFIEC)
The FFIEC was established to provide financial institutions with a uniform set of principles and standards for all banks, credit unions, and third-party service vendors to follow. It not only ensures the safety of U.S. financial systems but also utilizes a cybersecurity assessment tool (CAT) to help institutions identify and mitigate cyber risks for ongoing security.
Implementing FFIEC requirements involves detailed documentation and continuous security assessments to promote a proactive cybersecurity approach that emphasizes risk identification, board-level awareness, and advanced incident response strategies. - Gramm-Leach-Bliley Act (GLBA)
This regulation aims to protect the personal financial information held by U.S. financial institutions like banks, investment companies, and third-party service providers. It includes a “safeguard rule” that requires businesses in this industry to implement a comprehensive information security program.
GLBA enhances data protection by emphasizing secure handling of customer data and helps organizations adopt systematic risk management protocols to improve their overall security framework. Smaller firms may find this compliance rule challenging due to the detailed requirements for data inventories, ongoing risk assessments, and third-party oversight. - Bank Secrecy Act (BSA)
The BSA prevents financial institutions from laundering money, whether it is intentional, accidental, or as a victim of a cyber crime. Often referred to as the anti-money laundering law (AML), this ensures that financial institutions are not being used for illegal transactions, criminal operations, or terrorist financing.
The BSA is enforced by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network. It requires financial institutions to submit detailed reports for all cash transactions exceeding $10,000 and to report any suspicious activity involving clients or customers. This regulation is mandatory for national banks, federal savings associations, and federal branches and agencies of foreign banks. - Sarbanes-Oxley Act (SOX)
Over the past few years, this regulation has expanded from simply ensuring financial records are accurate and transparent to now also covering cybersecurity regulations that address the increasing threats against financial institutions.
This act was made to protect investors against financial fraud and is mandatory for all publicly traded U.S. companies and their wholly owned subsidiaries. Although private companies are not legally required to comply with SOX, it is highly recommended to ensure security for the business and confidence for the customers. - Computer-Security Incident Notification
Banks are required to notify their primary federal regulator of any computer security incident that qualifies as a notification incident. Issued by the Office of the Comptroller of the Currency (OCC), the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC), this regulation mandates bank service providers to inform each affected customer about a computer security incident that has caused or is likely to cause a material service disruption or degradation of four or more hours. The notification must be provided as soon as possible, within a 36-hour window after the bank or provider determines that an incident has occurred.
Navigating the complex landscape of cybersecurity regulations for financial institutions can be challenging. However, remaining compliant with these standards protects organizations from legal and financial consequences, enforces customer trust, and strengthens their security posture.
Access Regulated Security
Protect your data and maintain compliance with our regulated security services. Designed with multiple layers of defense, we improve your security posture and align your business with regulatory requirements.
How to Remain Compliant with Banking Security Standards
Remaining compliant with banking regulations requires more than simply checking some boxes; it takes ongoing vigilance, proactive monitoring, and expert guidance. As cybersecurity threats grow more complex, partnering with a trusted IT provider like Applied Tech can help financial businesses maintain compliance while reducing risks.
Our regulated security services are designed to support banks and financial institutions by providing comprehensive protection that adheres to industry-specific standards. From layered security to ongoing monitoring and compliance reports, we can ensure your business remains secure, compliant, and confident in the face of evolving threats and changing regulations.
Contact us today to learn more about our regulated security services and how we can help you stay ahead of compliance.
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