Name: NY DFS 23 NYCRR 500 (amendment 2)

Type: Regulatory (Regulation)

Authoritative Source: New York Department of Financial Services (NY DFS)

Certification Available: No. There is no official certification for NY DFS 23 NYCRR 500. However, the Secure Controls Framework Conformity Assessment Program (SCF CAP) has the ability to provide a third-party conformity assessment against the NY DFS 23 NYCRR 500 requirements that can lead the following SCF-based certification: SCF Certified – NY DFS 23 NYCRR 500.

Too Long / Didn’t Read (TL/DR): 23 NYCRR Part 500 is a US state-level regulation that redefined cybersecurity regulation in the financial sector, setting a precedent for other states and federal agencies. For covered entities, it is more than a compliance obligation where it is a strategic risk management framework embedded in law. The regulation pushes organizations to mature their cybersecurity programs through governance, controls, testing and transparency.

NY DFS regulators expect actionable, measurable and testable cybersecurity programs. Enforcement actions have shown that DFS will pursue not only security failures but also governance failures, documentation failures and attestation failures.

Success under 23 NYCRR 500 demands not just technical security, but governance maturity that is driven by leadership, supported by documentation and validated through continuous assessment. Organizations that embed compliance into operational security, supported by clear evidence, will be best positioned to withstand scrutiny, manage risk and preserve trust in New York’s vital financial ecosystem.

GRC-Focused Overview of NY DFS 23 NYCRR 500

The New York Department of Financial Services (NY DFS) Cybersecurity Regulation, formally codified as 23 NYCRR Part 500, has emerged as a pioneering and influential regulatory framework for data protection and cybersecurity governance within the financial services sector. Enacted in response to persistent threats and systemic vulnerabilities in financial networks, the regulation mandates that covered entities implement and maintain comprehensive cybersecurity programs designed to protect consumers, institutions and the broader market infrastructure.

This regulation is not aspirational or advisory, it is enforceable law with prescribed controls, breach notification requirements, annual certifications and the real threat of public enforcement. For cybersecurity professionals and compliance leaders, 23 NYCRR 500 sets a high bar for cybersecurity maturity, emphasizing governance, accountability and auditability.

This page provides a cybersecurity-focused summary of NY DFS 23 NYCRR 500 from a GRC practitioner's perspective, including:

• The history of this regulation;
• The consequences of non-compliance;
• Practical compliance strategies;
• High-profile enforcement actions; and
• The role of high-quality documentation in audit readiness and breach resilience.

NY DFS 23 NYCRR 500 - Origins and Purpose

The financial industry, especially in New York, has long been a prime target for cyber adversaries due to the concentration of wealth, data and interconnectivity. High-profile data breaches at major financial institutions, such as the 2014 JPMorgan Chase breach which affected 76 million households, underscored the fragility of existing safeguards and the insufficiency of voluntary compliance.

In response, the New York Department of Financial Services (DFS), the state's banking and insurance regulator, issued the final rule for 23 NYCRR Part 500 on March 1, 2017. The regulation became effective immediately, with phased compliance deadlines stretching into 2019.

NY DFS positioned the rule as a “first-in-the-nation” cybersecurity regulation to proactively address cybersecurity threats and strengthen the state’s financial system. It applied not only to New York-chartered banks and insurance companies, but also to foreign banks licensed in New York, mortgage companies, money transmitters and virtual currency businesses.

Over time, the regulation has been amended and tightened, most notably through the 2023 amendments, which expanded requirements for ransomware defense, business continuity and board-level oversight.

The regulation applies to all DFS-regulated entities, referred to as “covered entities,” which includes:

• State-chartered banks and credit unions;
• Insurance companies;
• Licensed lenders and mortgage servicers;
• Virtual currency businesses; and
• Health insurers and life insurers operating in NY.

Some entities may qualify for limited exemptions (e.g., small businesses with under 10 employees or <$5 million in gross revenue), but they are still required to file exemption notices and comply with certain provisions.

Ramifications of Non-Compliance with NY DFS 23 NYCRR 500

DFS has demonstrated a growing appetite for enforcement and has begun issuing high-value penalties for violations of 23 NYCRR 500, especially when entities fail to meet notification obligations, provide false certifications, or lack required controls.

• Regulatory Fines. Each violation can result in per-day penalties and aggregated over time, these can become significant liabilities. DFS can impose civil monetary penalties for violations. These are not theoretical. Fines have ranged from hundreds of thousands to tens of millions of dollars. More severe penalties are typically associated with:

• Failure to report cybersecurity events within 72 hours (as required under §500.17);
• Misstatements or omissions in annual compliance certifications (§500.17(b));
• Incomplete or missing risk assessments (§500.09); and
• Lack of a functional cybersecurity program or CISO (§500.02 and §500.04).

• Reputational Damage and License Jeopardy. Given the reputational and operational importance of maintaining good standing with DFS, most financial institutions treat compliance with 23 NYCRR 500 as a board-level issue. Beyond monetary fines, DFS can:

• Require public disclosures of enforcement actions;
• Demand remediation under consent orders;
• Place institutions under heightened scrutiny; and
• In extreme cases, revoke or suspend licenses to operate in New York.

• Civil and Consumer Class Actions. Although 23 NYCRR 500 does not itself create a private right of action, non-compliance that results in a data breach may become evidence of negligence or regulatory failure in class action lawsuits. Plaintiffs increasingly cite DFS regulations in litigation against financial institutions, particularly in the wake of ransomware incidents.

Common Methods to Achieve and Maintain NY DFS 23 NYCRR 500 Compliance

23 NYCRR 500 demands a mature cybersecurity program, not a reactive or paper-based one. Organizations that succeed typically implement the following:

• Develop A Comprehensive Cybersecurity Program. This includes adopting a reasonable cybersecurity framework to structure governance, risk and operational controls.
• Maintain and Test Incident Response Plans. DFS expects documented, role-specific incident response plans that are:

• Simulated via tabletop or live exercises
• Aligned to real-world threats such as ransomware
• Integrated with legal, compliance and PR teams

• Enforce Role-Based Access and MFA. Identity and access management must be centralized, policy-driven and auditable. Multifactor authentication (MFA) is mandatory for external and privileged internal users.
• Conduct Regular Risk Assessments. DFS views stale or templated risk assessments as non-compliant. Risk assessments should:

• Cover all business units and third parties;
• Inform changes in security posture; and
• Be reviewed annually or after material changes.

• Engage Third-Party Assessors. Independent audits and assessments add credibility and help identify compliance gaps proactively.

The regulation is structured around prescriptive cybersecurity program mandates. The following sections are particularly significant from a cybersecurity controls and risk management perspective:

500.02 – Cybersecurity Program

Covered entities must implement a cybersecurity program based on a risk assessment that protects information systems and nonpublic information from unauthorized access, use, or disclosure. The program must cover:

• Data governance;
• Access control;
• Asset inventory;
• Physical and environmental controls; and
• Network and application security.

This requirement serves as the operational baseline and must be “adequate” to the risk profile of the institution.

500.03 – Cybersecurity Policy

An institution must maintain a written cybersecurity policy, approved by the board or a senior officer, that addresses 18 required topics, including:

• Data governance;
• Business continuity;
• Incident response;
• Vendor management;
• Risk assessment; and
• Access controls.

This document forms the backbone of the entity’s internal cybersecurity governance.

500.04 – Chief Information Security Officer (CISO)

Organizations must designate a qualified CISO responsible for implementing, managing and reporting on cybersecurity risks and controls. The CISO must:

• Report annually to the board or equivalent governing body;
• Provide risk-based evaluations of the program; and
• Monitor and adjust controls based on threat intelligence.

500.05 – Penetration Testing and Vulnerability Assessments

Penetration testing must be conducted at least annually and vulnerability assessments must occur periodically, based on risk. This codifies a best practice and makes testing an enforceable obligation.

500.06 – Audit Trail

Institutions must implement mechanisms to:

• Reconstruct material financial transactions to support legal obligations;
• Retain audit logs for at least five years; and
• Ensure logs cannot be altered retroactively.

This requirement is increasingly relevant in the context of ransomware and business email compromise incidents.

500.07 – Access Privileges

Access privileges must be:

• Reviewed and updated regularly;
• Based on least privilege and Role-Based Access Control (RBAC); and
• Managed through automated systems where feasible.

500.09 – Risk Assessments

Risk assessments must be conducted periodically and inform the design of the cybersecurity program. They must be:

• Documented and repeatable;
• Tailored to the entity’s business operations; and
• Updated as threat landscapes evolve.

DFS expects the risk assessment to be a living process, not a one-time activity.

500.14 – Training and Monitoring

Covered entities must implement:

• Cybersecurity awareness training for all personnel; and
• Continuous monitoring or regular testing of systems to detect unauthorized activity.

500.17 – Incident Notification and Certification of Compliance

• Covered entities must notify DFS within 72 hours of discovering a cybersecurity event that either:
• Impacts operations materially; and
• Requires reporting to another government body; and
• Must submit an annual certification of compliance by April 15 each year.

Misrepresentation or omission in these certifications has been a central issue in several enforcement actions.

Public Examples of NY DFS 23 NYCRR 500 Enforcement Actions

 EyeMed Vision Care – $4.5 Million (2022)

• Incident: Phishing attack compromised an EyeMed mailbox that contained nonpublic information on over 1.3 million individuals.
• Violations:
• Failure to implement MFA;
• Lack of sufficient logging; and
• Delayed breach notification.
• Outcome: DFS imposed $4.5 million in penalties and required third-party oversight of remediation.

 First American Title Insurance Company – $1.05 Million (2021)

• Incident: A vulnerability in a public-facing application exposed 880 million documents, including sensitive financial records.
• Violations:
• Inadequate vulnerability management; and
• Failure to follow internal risk policies.
• Outcome: DFS cited inadequate controls and failure to remediate known risks.

Robinhood Crypto – $30 Million (2022)

• Incident: DFS determined that the firm lacked adequate cybersecurity protections and Bank Secrecy Act (BSA) compliance.
• Violations:
• Lack of cybersecurity governance;
• Incomplete risk assessments; and
• Failure to maintain logs or a CISO structure.
• Outcome: Largest crypto-related fine under DFS to date.

Understanding The Value of Quality Cybersecurity Documentation in NY DFS 23 NYCRR 500 Success

Perhaps the most underestimated requirement under 23 NYCRR 500 is the demand for current, auditable and accurate cybersecurity documentation. DFS examiners routinely request:

• Cybersecurity policy (as defined in §500.03);
• System architecture and data flow diagrams;
• Incident response and BCDR plans;
• Risk assessment reports;
• CISO board reports and governance minutes;
• Training logs and access recertification records; and
• Annual certification justifications.

The ability to produce these documents quickly and confidently during a regulatory review is often the difference between a clean examination and a formal enforcement action.

Documentation must not only exist, but it must reflect reality. Boilerplate templates, outdated policies, or disconnected governance structures are easily identified by regulators and may increase enforcement risk.

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