We have written here previously about the dramatic increase in cyberattacks on companies of all types since the start of the COVID-19 pandemic. Indeed, by some estimates, ransomware attacks have increased over 90% during the first half of 2021 compared to the same period last year. As these and other types of cyberattacks have increased, various federal and state regulators have correspondingly stepped up efforts to investigate and bring enforcement actions – which often include large fines – against companies that are perceived to have been negligent in their cybersecurity efforts. Two of the most active agencies in cybersecurity enforcement have been the New York Department of Financial Services (NYDFS) and the United States Securities & Exchange Commission (SEC), both of which have made important announcements regarding cybersecurity compliance in the past few months.
The regulation of cybersecurity remains a new and rapidly evolving space — and regulatory activity and priorities can be somewhat opaque to outside observers. In this special episode of the Faegre Drinker on Law and Technology Podcast, host Jason G. Weiss shares a discussion led by Faegre Drinker’s Peter Baldwin, who sat down with Brent Wilner, senior advisor to the Securities and Exchange Commission’s (SEC) Cyber Unit, and Justin Herring, leader of the New York Department of Financial Services’ (NYDFS) Cybersecurity Division. The two guests share their insights on each agency’s priorities in cybersecurity, data protection and enforcement.
On April 15, 2021, the New York Department of Financial Services (NYDFS) issued a report on the recent SolarWinds cyberattack. A copy of the report is available here. NYDFS called the attack a “wake-up call” to regulated financial institutions and insurers that should cause them to immediately assess and, if necessary, improve their own cybersecurity posture in order to avoid victimization in future attacks.
NYDFS characterized the SolarWinds attack as a “widespread, sophisticated espionage campaign” by Russian foreign intelligence actors that resulted in “the most visible, widespread, and intrusive information technology supply chain attack” successfully completed to date. According to the report, the attack opened back doors into thousands of organizations around the United States and involved the theft of sensitive data from over 100 private sector companies, as well as at least nine federal agencies. NYDFS noted ominously that the attack highlighted the obvious “vulnerability to supply chain attacks” within the financial services industry.
Earlier this month, the New York State Department of Financial Services (NYDFS) announced a settlement and consent order with National Securities Corporation (National Securities) for $3 million in connection with National Securities’ violations of NYDFS’s Cybersecurity Regulation, 23 NYCRR Part 500 (Part 500).
National Securities sells life insurance, accident and health insurance, and variable life/variable annuities insurance. As part of its day-to-day operations, National Securities collects personal data from its customers.
On March 3, 2021, the New York State Department of Financial Services (NYDFS) announced a settlement with Residential Mortgage Services, Inc. (RMS) for $1.5 million in connection with its violation of the NYDFS Cybersecurity Regulation, 23 NYCRR Part 500 (Part 500). This is the second publicly-announced settlement of an enforcement action brought under NYDFS’s novel cybersecurity regulation (we wrote about the first action).
According to the consent order, in March 2020, NYDFS’ Mortgage Banking Division commenced a routine examination of RMS, which included a review of its compliance with Part 500. RMS is headquartered in Maine, but it is registered as mortgage banker in New York and other states. During the examination, NYDFS determined that RMS failed to report a March 2019 data breach incident, as required by Part 500.
On April 13, 2020, the New York Department of Financial Services (NYDFS) issued new guidance to all New York State Regulated Entities to highlight “a significant increase in cybercrime” related to the COVID-19 epidemic. NYDFS’s guidance identified “several areas of heightened cybersecurity risk as a result of the crisis.” These risks include:
- Remote Working – The mass shift to remote working forced by COVID-19 has created new security threats which are being exploited by hackers. Regulated entities should take proactive steps to address these new security threats. Among other things, regulated entities should take steps to make their remote access as secure as possible by using multi-factor authentication and VPNs. Companies also should ensure that devices used to access networks are properly secured and/or controlled. Regulated entities also must take steps to ensure the security of remote working communications, like video conferencing applications. Finally, companies should ensure that employees are not accessing or sending sensitive or non-public information through personal email accounts or devices.