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The Complex Path to Bank Compliance

by Wendy Rodriguez on June 25, 2024

Millions of us trust banks to safeguard
our hard-earned money and personal information.
Due to the continuously changing threat scenery,
ensuring security requires constant
and additional efforts by your bank.
Your firm faces the necessary,
significant pressure of complying with numerous regulations and laws,
and the risk of both financial
and reputational harm if it fails to do so.

It’s been reported
that in recent years,
the United States has seen the highest number of sanctions imposed
by various regulatory bodies.
From 2008 to 2022, banks in the U.S. paid $37 billion for violations,
which makes it the most fined country in the world.
Some of these banks include JPMorgan Chase,
BNP Paribas, HSBC and Goldman Sachs.

Compliance is important not only
for the obvious reasons of protecting your customers’ data
and avoiding fines.
Also because regulatory frameworks provide
a structured roadmap for best practices
that promote digital transformation and enhance overall security.
Many of these frameworks require a proactive approach
to identifying and addressing system weaknesses
before cybercriminals can exploit them.
As a result,
security testing becomes a top preventative method
for financial institutions like yours.
This article will explain the importance of staying ahead of cyberattacks,
the key regulations that influence banks
and how managing vulnerabilities ensures compliance.

The challenges faced by banks

Banks face numerous challenges in staying compliant
with various cybersecurity regulations and standards.
One significant challenge is the complex regulatory environment.
Banks operate under a myriad of local and national regulations,
each with its own set of cybersecurity requirements.
Keeping up with these evolving requirements can be a constant struggle.

Another challenge is the continuous evolution of cyber threats.
New vulnerabilities are found all the time,
and cybercriminals are constantly developing
creative attack methods.
These attacks can target not only the banks’ systems
but also their suppliers.
This makes the attack surface more extensive.
It requires banks to be proactive and innovative
in their security strategies.

Implementing and maintaining robust cybersecurity measures
is another area where banks often struggle.
This requires significant resources,
including skilled IT personnel,
sophisticated technology,
ongoing training and knowledgeable attorneys.
Small banks may find it challenging to secure
the necessary resources to achieve and maintain compliance.

Other challenges include the hybrid work environment
and the complexity that remote work brings.
Count as well the need for structured
and stricter accountability requirements for CEOs and CFOs.
Add to that the complexity of regulatory jargon
leading to open interpretation.
Also, the fast pace of technological advancement that requires banks
to regularly update their systems and security measures.

The benefits of compliance

The benefits of compliance go beyond avoiding ample fines.
Here are some key motivations to stay compliant:

Better data protection: The primary advantage is privacy protection.
By adhering to compliance rules, your bank can significantly mitigate
the risk of data breaches.
What’s more, protecting personal and financial information
is crucial for maintaining client trust.
Risk management: Compliance involves identifying,
evaluating and managing risks.
This enables your bank to proactively counter potential attacks.
Accountability and transparency: Compliance promotes both accountability
to regulatory bodies and transparency in banking operations.
Operational efficiency: Proper compliance can lead to smoother operations,
as it often involves streamlining processes which improves efficiency.
Competitive advantage: Banks can differentiate themselves
in the market as secure and reliable institutions.

Key regulations for banking

As was said above,
banks have to navigate a sea of laws and regulations.
Each one aims to protect customers from cybersecurity risks
by keeping the confidentiality,
integrity and availability of financial data and systems.
Violations of these regulations can lead to hefty fines,
financial losses, reputational damage and increased regulatory surveillance.
Below is a breakdown of some key regulations
and standards impacting bank cybersecurity:

Payment Card Industry Data Security Standard (PCI DSS): The PCI DSS
applies to any organization that handles credit card information.
It mandates specific controls for protecting cardholder data,
including encryption, access controls and regular security testing.

Regarding the latter,
PCI DSS requirement 11: Test Security of Systems and Networks Regularly
emphasizes the need for continuous security testing.
PCI DSS v4.0.1
mandates internal and external vulnerability scans
quarterly and after significant changes,
and penetration tests at least annually
and after significant changes.
Violations can result in increased credit card processing costs,
loss of account privileges and even criminal charges,
with fines ranging from thousands to millions of dollars depending
on the severity of the violation and the presence of data breaches.

We, at Fluid Attacks,
have established for our tests these software requirements
using this standard.
Gramm-Leach-Bliley Act (GLBA): The GLBA requires financial institutions
to protect customers’ nonpublic personal information.
It mandates the implementation of security measures
to protect customer data from breaches and unauthorized access.
The act is enforced by bodies such as the Federal Trade Commission (FTC),
Federal Deposit Insurance Corporation (FDIC), and others.

As of 2023,
GLBA mandates security measures like penetration testing
and vulnerability scanning.
Its Safeguards Rule
requires financial institutions to develop,
implement and maintain a comprehensive information security program.
Pentesting is required annually,
with best practices suggesting more frequent testing.
Vulnerability scanning must be performed every six months.
Noncompliance can lead to fines of up to $51,744 per violation by the FTC,
lawsuits, reputational damage and increased regulatory scrutiny.

Here at Fluid Attacks,
we have created for our tests these software requirements
based on this law.
New York Department of Financial Services (NYDFS) Cybersecurity
Regulation:
The NYDFS Cybersecurity Regulation
mandates specific cybersecurity controls
for financial institutions operating in New York.
It includes guidelines for incident response plans,
notification requirements in case of breaches,
multi-factor authentication and vendor security policies.

23 NYCRR 500
requires annual penetration testing
and quarterly vulnerability assessments to identify
and mitigate risks.
It also mandates continuous monitoring
and secure development practices for in-house applications.
Noncompliance can result in ample fines,
increased inspections and audits, lawsuits and reputational damage.

We established for our tests
these software requirements
using this regulation.
Bank Secrecy Act (BSA): The BSA focuses on anti-money laundering (AML)
and combating financial terrorism (CFT).
It requires financial institutions to implement programs
to detect and report suspicious activities.
While the BSA does not explicitly mandate security testing,
it requires robust security measures to ensure the integrity
and confidentiality of data used in AML compliance.
Regulators that administer BSA,
like the Financial Crimes Enforcement Network (FinCEN),
do impose requirements that call for security testing.

Fines for willful violations
can reach up to $100,000 per violation,
with additional consequences including criminal charges,
reputational damage,
increased oversight and potential revocation of banking licenses.
SWIFT Customer Security Controls Framework: The Society
for Worldwide Interbank Financial Telecommunication (SWIFT)
provides a global financial messaging system for international transactions.
Its Customer Security Program (CSP)
and Customer Security Controls Framework (CSCF)
outline mandatory and advisory controls to secure local SWIFT environments.

Principle 2 mandates annual vulnerability scanning
and remediation documentation,
while Principle 7 recommends proactive penetration testing.
Noncompliance can increase the risk of cyberattacks
and may result in exclusion from the SWIFT network,
disrupting international transactions.
A notable example
is Russia’s exclusion from SWIFT
due to the European Union’s sanctions related to the war against Ukraine.

From our end,
we set up for our tests these software requirements
using this framework.
Federal Information Security Management Act (FISMA) FISMA
requires federal agencies and their contractors,
including banks that work with federal systems, to develop, document
and implement an information security program.
Regular security assessments, continuous monitoring
and incident response plans are essential for compliance.
Noncompliance can lead to federal contract termination,
financial penalties and reputational damage.

We established for our tests these software requirements
using this act.
California Consumer Privacy Act (CCPA): CCPA,
primarily a data privacy law,
impacts cybersecurity practices for banks operating in California.
It grants California residents rights over their personal data
and imposes requirements on businesses to protect that data.
Data protection measures,
breach notifications and consumer rights management
are essential for compliance.
Fines for violations can reach up to $7,500 per intentional violation
and $2,500 per unintentional violation,
along with potential lawsuits.

These are
the software requirements
we have set with this act for our tests.

Some useful frameworks for bank compliance

Banks can leverage several cybersecurity frameworks
to enhance their security posture
and ensure robust protection against cyber threats.
Here are some key frameworks whose implementation can be beneficial:

Federal Financial Institutions Examination Council (FFIEC) resources:
The FFIEC
is an interagency body that provides extensive guidance
on cybersecurity and security testing for financial institutions.
While the FFIEC does not enforce specific regulations,
its guidelines are used by federal banking regulators
(such as the FDIC, OCC and Federal Reserve)
to evaluate the cybersecurity practices of financial institutions.
National Institute of Standards and Technology (NIST)
Cybersecurity Framework: This framework provides guidance
for managing cybersecurity risks.
Although voluntary, the NIST
framework can be a valuable tool for banking institutions
to build a comprehensive cybersecurity program.
The framework emphasizes identifying vulnerabilities,
implementing security controls, continuous monitoring and regular testing.
ISO 27001: This international standard
provides structured methods for protecting sensitive data,
including financial information, intellectual property,
employee information and information entrusted to third parties.
A bank’s information security management system (ISMS)
must be established, implemented, maintained
and continuously improved according to the criteria outlined in
ISO 27001.
General Data Protection Regulation (GDPR): This European regulation
applies for EU banks and non-EU banks
that have business with clients in Europe.
Its focus is on protecting personal data and ensuring data privacy.
This regulation provides excellent examples
of the measures banks should implement
to safeguard their customers’ information.
GDPR
requires appropriate technical and organizational measures
for financial institutions,
therefore helping them build their security posture
and fostering excellence in operations.

Recommendations for cybersecurity compliance for banks

Prioritizing a robust cybersecurity posture can be challenging,
but with a proactive approach,
banks can achieve compliance
and in this way create strong security measures in software development.
We had previously discussed how banks,
and indeed financial institutions
in general,
should follow best practices to build secure services.
But here,
we provide some key recommendations
to develop secure software applications for banks:

Establish security requirements at the beginning of the SDLC:
Using threat modeling early in the development process
can help identify potential security risks and create countermeasures.
Integrate secure coding practices throughout development:
Secure code review,
both manual and automated, can reduce security risks before deployment.
Identify vulnerabilities within the application:
Implement static application security testing (SAST)
and dynamic application security testing (DAST).
Run vulnerability assessments:
Conduct penetration testing
and vulnerability scans to identify exploitable weaknesses
in the bank’s software system.
Create a vulnerability management strategy: This process
involves the identification, evaluation, prioritization
and reporting of vulnerabilities throughout
various stages of the development cycle to minimize risk exposure.
Implement security controls for third-parties: To ensure the security
of software components and libraries, use control measurements,
like keeping an updated SBOM.
It’s also imperative to evaluate the security practices
of third-party vendors.
Implement a patch management process: Ensure all software and systems
are up-to-date with the latest security patches.
Develop a compliance map: Identify the cybersecurity regulations
that apply to your bank,
outline the steps required to achieve compliance
and continuously review cybersecurity policies.
Document your bank’s cybersecurity policies and procedures clearly:
These policies should outline roles and responsibilities,
technology used and incident reporting procedures.

Fluid Attacks offers a comprehensive solution
that addresses most of the aforementioned recommendations.
Our all-in-one solution aims to identify all vulnerabilities
throughout the SDLC and, most importantly,
enable their remediation before deployment.
Ideal for banks looking to stay compliant,
our Continuous Hacking solution
helps identify issues
and provides detailed reports necessary for accurate management.
Our platform has a section to display these details.
When integrated with other systems,
it offers significant remediation options than
if the platform were on its own.