Risk Assessments Archives

30 Mar 2022

Banks, Compliance, Credit Unions The Safe Systems Compliance Team 0 comment

Get Prepared for the New Computer-Security Incident Notification Rule

As of April 1^st, financial institutions are expected to comply with new cyber incident notification requirements for banking organizations and their third-party service providers. The Computer-Incident Notification Rule, as it’s officially called, is designed to give regulators early awareness of emerging threats to banking organizations and the broader financial system, including potentially systemic cyber events. The final rule—approved last November by the Federal Deposit Insurance Corporation (FDIC), Federal Reserve, and Office of the Comptroller of the Currency (OCC)—takes effect on April 1, 2022, with full compliance extended to May 1, 2022. (To date, the NCUA has not adopted the new rule, although it’s possible they may at some point. Credit Unions should check with their regulator for notification expectation specifics.)

Understanding the Regulations

To meet the upcoming deadline, financial institutions need to be well versed in the intricacies of the new rule. The rule has two components:

The first part requires a banking organization to promptly notify its primary federal regulator of any “computer-security incident” that rises to the level of a “notification incident.”
The second part requires a bank service provider to notify each affected banking organization customer as soon as possible when the bank service provider determines that it has experienced a “computer-security incident” that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.

Focusing on the financial institution expectations under the final rule, a couple of definitions must be understood.

A “computer-security incident” could include almost anything: a hardware or software failure, an innocent mistake by an employee, or a malicious act by a cybercriminal. However, the incident must result in actual or potential harm to the confidentiality, integrity, or availability of an information system or the information the system processes, stores, or transmits.
A “notification incident” is defined as a significant computer-security incident that has materially disrupted or degraded a banking organization in at least one of these areas:
its ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base in the ordinary course of business
its business line(s), including associated operations, services, functions, and support that, upon failure would result in a material loss of revenue, profit, or franchise value
its operations, including associated services, functions, and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.

In the event an incident rises to the level of a “notification incident,” the banking organization’s primary federal regulator must receive this notification as soon as possible, and no later than 36 hours after the banking organization determines that a notification incident has happened.

Recognizing the Gray Areas

The words “material” and “materially” are key terms; so much so that they are used 97 times in the 79-page guidance about the ruling. But beyond an “enterprise-wide” impact, the regulation does not precisely define these concepts, so financial institutions will need to specify what this term means to their organization as a whole. And since a determination of materiality is a prerequisite to starting the 36-hour “clock” for notification, they should do so ahead of time. The undefined nature of “material” to each organization creates a gray area open for interpretation that not only allows institutions some flexibility in this area but also opens the door for differences in opinion between an institution and its regulator.

In another gray area, the rule does not impose any specific recordkeeping requirements, which is a reduced burden. However, we strongly recommend keeping at least basic documentation in case the examiners ever question why your institution did or did not decide to escalate an event from a computer-security incident to a notification incident, and why it started the “clock” when it did.

Preparing for the Unknowns

At this stage, there are some unknowns about the implications of the new cyber incident notification requirements. One of the unknowns discussed in our recent webinar was related to an official contact person and method for each primary federal regulator. This has since been addressed and we recommend incorporating the following verbiage into the regulator notification section of your Incident Response Plan:

FDIC institutions:

Notification can be made to the case manager (primary contact for all supervisory-related matters), to any member of an FDIC examination team if the event occurs during an examination, or if the primary contact is unavailable, the FDIC may be notified by email at: incident@fdic.gov.

OCC Institutions:

Notification may be done by emailing or calling the OCC supervisory office. Communication may also be made via the BankNet website, or by contacting the BankNet Help Desk via email (BankNet@occ.treas.gov) or phone (800) 641-5925.

Federal Reserve Institutions:

Notification may be made by communicating with any of the Federal Reserve supervisory contacts or the central point of contact at the Board either by email to incident@frb.gov or by telephone to (866) 364-0096.

Another unknown as of the date of this post: Will the State banking regulators also require notification if a federal regulator is notified? The unofficial initial indication we have received is ‘Yes,’ but it would be good practice for institutions to check with their state regulator. Chances are regulators will request this, but whether or not it will be a requirement is still unknown.

Steps to Take Now

There are additional steps financial institutions can take now to be better prepared to address the requirements of the computer-Security Incident Notification Rule.

Our primary recommendation is for institutions to expand the notification section of their incident response plan to include the criteria for determination of a notification incident, and to add the regulator contact information above.
Institutions should also define “materially” for their organization and predetermine the meaning of “materially disrupted or degraded,” or what constitutes a “material portion” of their customer base.
Third-party contracts should contain verbiage obligating them to notify your institution under certain circumstances as required by the new rule. We also strongly advise designating an official contact person within your institution — whether it’s the CEO, CIO, or ISO — who should receive incident notifications from your third parties. It’s also prudent to specify a backup contact person—and make sure vendors know who the primary and alternate contacts are to ensure a smooth notification process.

For more information about this important topic, access our webinar on “New Cyber Incident Notification rules: How to Get Prepared”, or this recent blog post from Compliance Guru.

08 Dec 2021

Banks, Compliance, Credit Unions The Safe Systems Compliance Team 0 comment

5 Compliance Lessons Learned in 2021 to Bring into the New Year

As the challenges presented by the COVID-19 pandemic persist, there are important compliance trends and new regulatory guidance that financial institutions should consider to ensure they are well prepared to begin the New Year.

Accounting for Operational Risk

During the pandemic, banks and credit unions have made necessary adjustments that have increased their operational risk. Two prime examples are switching to a remote workforce and accommodating a more remote customer base. Having employees work remotely extends an institution’s network out to that endpoint and, in effect, broadens security considerations to that point as well. Serving a remote customer base—including expanding e-banking and implementing electronic signatures—creates a similar risk. Security implications multiply as more employees and customers access services electronically.

Rapid changes in operational practices and increases in fraud and cyberthreats can cause a heightened operational risk environment if not properly managed. Examiners will want an account of how institutions determined what changes were necessary, how those modifications were implemented, whether those changes were temporary or permanent, and if controls (primary and compensating) have been adjusted for any resulting operational risk increases. They will review the steps management has taken to evaluate and adjust controls for new and modified operational processes. For instance, for permanent changes, did the institution factor in the operational risk of downtime relating to the new processes?

As a measure of governance effectiveness, examiners will also very likely:

Assess actions that management has taken to adapt fraud and cybersecurity controls to address the heightened risk associated with the altered operating environment.
Review management’s post-crisis efforts to assess the controls and service delivery performance capabilities of third parties.
Consider how imprudent cost-cutting, insufficient staffing, or delays in implementing necessary updates impacted the control environment.

Temporary vs. Permanent Changes

For the most part, because we are still dealing with the impact of the virus and its variants, institutions have chosen to maintain many of the temporary measures they implemented during the pandemic. So, because they may have rolled out the changes anticipating an eventual rollback, it may be necessary to “backfill” some documentation to address what is now permanent. Examiners will want to know if the changes were properly risk-assessed prior to implementation, including any new processes and interdependencies. Institutions should be able to provide a report to regulators if they ask—and ensure their board is appropriately updated. This could be a matter of going back and reviewing previous board reports to ensure that any gaps in their risk management reporting were addressed and properly reported to the board.

Ransomware Self-Assessment Tool (R-SAT)

With the pervasive occurrence of cyberattacks, regulators are increasingly concerned about cybersecurity, particularly reducing ransomware. Consequently, regulators in some states are more aggressive than others about having institutions fill out the Ransomware Self-Assessment Tool (R-SAT), which is based on the National Institute of Standards and Technology (NIST) cybersecurity framework. However, most state regulators we’ve spoken with are not going to make completing the R-SAT compulsory—although they may recommend it. If they do, the majority of what is asked by the 16-question tool should already be in place in the institution’s existing incident response and business continuity plans. Your decision to complete or not should be based on a self-assessment of your existing efforts in this area.

Regulatory Updates

New Architecture, Infrastructure, and Operations (AIO) Booklet

Earlier this year, the Federal Financial Institutions Examination Council (FFIEC) revamped its Information Technology Examination Handbook series with a new Architecture, Infrastructure, and Operations booklet. The revised guidance provides examiners with fundamental examination expectations about architecture and infrastructure planning, governance and risk management, and operations of regulated entities. Credit unions, banks, and non-financial, third-party service providers are expected to comply with the new guidance, which replaces the original “Operations” booklet issued in July 2004.

The FFIEC indicates that the release of the updated booklet is warranted because of the close integration between institutions’ architecture, infrastructure, and operations. “Updates to the booklet reflect the changing technological environment and increasing need for security and resilience, including architectural design, infrastructure implementation, and operation of information technology systems,” explains a June 2021 FFIEC press release.

An important component of the new booklet is the resilience and proactive measures that must be built into an institution’s AIO components. Importantly, the handbook also recognizes special treatment for smaller or less complex entities, which is reasonable because examiners are starting to indicate that smaller entities will often implement these concepts differently from large, multinational, multi-regional financial organizations, while still achieving the same objectives. The refreshed guidance also takes a different approach to data classification; it factors in value, along with criticality and sensitivity. However, (and this is consistent with all FFIEC Handbooks released in the past 3 years) the new booklet states that it does not impose requirements on entities; instead, it describes principles and practices examiners will review to assess an entity’s AIO functions. (Of course, we have always found that anything an examiner may use to evaluate, or grade, your practices becomes in effect a de facto requirement.) A much deeper dive into the booklet is here.

New Cyber Incident Notification Rules

Another big update that will impact 2022 and beyond, the new cyber incident notification rules. Officially called “Computer-Security Incident Notification Requirements for Banking Organizations and Their Bank Service Providers”, they were proposed and submitted for comment in early 2021, approved in November 2021, and become effective in April 2022. Visit our partner site, ComplianceGuru.com, to read the latest post and gain an understanding of how these rules will impact both you and your third-party providers going forward.

To learn more about these and other critical compliance topics, listen to our webinar on “2021 Hot Topics in Compliance: Mid-Year Update.”

05 Nov 2021

Banks, Compliance, Credit Unions Tom Hinkel 0 comment

Minimize Examiner Scrutiny by Automating Compliance Processes

Financial institutions can expect to receive increased auditor and examiner scrutiny over their governance and oversight practices, and inconsistencies between procedures and practices will often result in findings. However, these challenges can be minimized or even eliminated by using automation to manage compliance processes.

Incorrect or Outdated References

One of the most widespread exam issues institutions encounter is due to policy inconsistencies, where incorrect or outdated references are used. Mentioning outdated guidance in policies is one of the most common offenses that institutions commit. For instance, referring to an older term like SAS 70 (Statement on Auditing Standards No. 70) or SSAE 16 (Statement on Standards for Attestation Engagements No. 16) instead of the newer SSAE 21 (Statement on Standards for Attestation Engagements No. 21) could be dismissed as a minor oversight, but it could also be considered a “red flag” causing examiners to question whether the institution has properly updated its policies, resulting in further scrutiny. A weakness in one area strongly suggests that there may be other weaknesses.

Another example of this type of issue is referencing “business continuity planning” (or BCP) versus “business continuity management planning” (or BCMP). Again, this would be a minor mistake because the term business continuity planning is not necessarily obsolete; still, it’s not consistent with the most recent guidance, and could lead to deeper dives in other areas. (In 2019, the Federal Financial Institutions Examination Council (FFIEC) issued the Business Continuity Management booklet. This guidance, part of the FFIEC Information Technology Examination Handbook, replaces the Business Continuity Planning booklet issued in February 2015.)

The problem with employing slightly outdated terminology also applies to phrases like “maximum allowable downtime” (MAD) and “maximum tolerable downtime,” (MTD) which is the newer reference. Examiners and auditors will accept either phrase so this is not a critical issue, but the use of dated terms can instill doubt in examiners and make them inclined to dig deeper into the institution’s policies.

Procedure and Practice Inconsistencies

Disconnects between policies and practices are another frequent exam challenge for institutions. Ideally written procedures should not contain statements that contradict the institution’s actual practices. In other words, your actual practices should as closely as possible reflect what you say you’ll do in your written procedures. For instance, there would be a procedure/practice inconsistency if the password policy of the information security program required eight characters, and the acceptable use policy (AUP) that employees signed allowed passwords of a different length. This type of inconsistency will almost certainly lead to further issues with examiners and auditors.

Another key area of focus for examiners and auditors is board reporting. Disconnects can occur if the information presented to the Board is not properly documented in Board minutes. This challenge is compounded by the sheer volume of information modern Boards are required to digest. The only way to make sure board minutes contain all pertinent details is to periodically review them. This will help ensure that the content of board meetings is consistent with both examiner expectations, and your written procedures.

Integrating Automation

In addition to changes in guidance terminology or updates to guidance policies, an institution’s procedures can and do change periodically as well. So contradictory statements resulting from policy updates are inevitable. Still, financial institutions must be aware of guidance changes and must also ensure their current procedures align with their practices and are consistent across all documents to make sure they comply with industry guidance and regulations. While this is easier said than done, technology can make it easier for institutions by providing regular updates to accommodate changing regulations and trends as well as make it more feasible for them to identify inconsistencies between their policies and procedures.

For example, a simple way to assess your potential exposure to procedural disconnects is to search through the documents in your institution’s information security program, for statements that include the words “will,” “must” or “shall.” Each of these statements contains an obligation of some sort; something you’ve committed to doing. For each occurrence, determine if A) it’s being completed exactly as indicated, B) by the group or individual assigned responsibility, and C) it’s being performed at the designated frequency or interval. Automation can help track these tasks and provide the necessary proof in the form of documentation. Additionally, most policies will make multiple references to the same task; business continuity may be referenced in information security, incident response in business continuity, vendor management in both information security and business continuity, etc. A change to a procedure or practice in one document should automatically trigger the associated changes elsewhere.

Integrating automation into the equation can help institutions streamline their methods for managing a variety of compliance changes and issues and greatly reduce the most common causes of findings due to disconnects and inconsistencies. Automation can make it easier to maintain more consistent and complete integration in areas throughout the organization, including information security, risk management, network management, vendor management, and business continuity management. Ultimately, automated updating, tracking, reporting, and other tasks can facilitate better preparation for exams and audits, and greatly reduce stress levels!

To learn more about how automating routine procedures can help financial institutions avert auditor and examiner criticism, listen to our webinar on “Managing Your Compliance Processes in 2021: Is There a Better Way?”

If you’re not certain where to begin when it comes to automating your compliance processes, check out our new service, COMPaaS™ (Compliance as a Service). This set of connected applications and powerful monitoring and reporting tools can be customized to target and eliminate your institution’s specific compliance pain points. One of our experts will help you create a solution that is unique to your institution, so you only pay for the services you need. And you can feel confident in choosing from products and services that are backed by nearly 30 years of experience in the banking industry.

09 Aug 2021

Banks, Compliance, Credit Unions Christine Ray 0 comment

Third-Party Solution Makes It Easy for Community Bank to Enhance InfoSec Program

Implementing a technology-enhanced information security program doesn’t have to be a daunting task. Working with a third-party expert can make the process easier and smoother than managing all the requirements completely in house.

Effective information security (InfoSec) allows organizations to safeguard key IT assets, business processes and data from potential threats. It involves the broad measures that ensure the confidentiality, integrity and availability of the information being processed and stored by computer systems. Most financial institutions, especially those with limited IT resources, can benefit from having an outside vendor provide additional technical expertise and solutions to enhance their existing InfoSec program.

First State Bank Improves InfoSec with Safe Systems

First State Bank of Blakely, Ga. is a prime example of how a financial institution was able to tap external resources to expand its InfoSec program. The bank, which has about 100 employees and 10 branches, was handling most of its InfoSec requirements in house. But when First State Bank’s InfoSec consultant retired, the bank opted to expand its vendor management relationship with Safe Systems to include information security.

Safe Systems made the implementation quick and easy, recommending strategic tweaks that significantly streamlined the process. Consequently, First State Bank was able to avoid “reinventing the wheel” by importing some of its existing information. And since the program elements are web-based and accessible through any internet browser, it will be easy for the bank to make future edits.

First State Bank’s IT Manager, William Barnes, specifically references Safe Systems’ expertise, saying: “The knowledge and experience of the experts I worked with during implementation were very helpful. It is good to know they are there to consult with. I think overall, we are in a good place with the new information security program.”

In addition, the program provides an easy-to-follow guide for securing the First State Bank’s operations and processes. The program is reviewed at least annually, which serves as a reminder of important security requirements. “It helps us stay on top of the risks within the bank and has all the available forms that we need for most policies and procedures,” Barnes says.

Benefits of Technology-Enabled InfoSec

Having a technology-enabled InfoSec program offers a host of benefits for institutions like First State Bank. In general, an automated security program can help banks better support the hardware, software, policies, procedures, and information assets needed to accomplish their business objectives. More specifically, incorporating technology can simplify an InfoSec program; it can streamline the process of identifying and classifying the vast number of assets institutions often have scattered across multiple branches and geographic locations. And a built-in risk assessment tool can provide pre-determined default risks for different assets based on commonly known threats and vulnerabilities.

All of this can reduce the need to create huge spreadsheets to maintain the amount of data typically required for an InfoSec program. As a result, financial institutions can have more accurate security-related information, enhanced board reporting, and better decision making and governance.

Consulting with a trusted vendor like Safe Systems allows institutions to immediately expand their information security expertise and resources. Safe Systems includes three applications in their service including Risk Assessment, Policy Manager, and Enterprise Modeling, to help banks and credit unions centralize and automate their InfoSec program. These powerful applications can make it easier for institutions to enhance their processes for assessments, notifications, reporting, policy/procedure updates and regulatory compliance so they can optimize their security posture.

22 Jul 2021

Banks, Compliance, Credit Unions The Safe Systems Compliance Team 0 comment

How Financial Institutions Can Enhance Board Reporting and Governance with Technology

As financial institutions face greater expectations for corporate accountability from regulators, effective board reporting and governance are becoming even more essential in the banking sector. While board members aren’t generally involved in the day-to-day operations, they are ultimately responsible for the success of their institution. Proper reporting can enable the board to make decisions without having to be involved in routine activities, and technology can help institutions enhance their board reporting and, in the process, help directors exercise the care, skill, and diligence required for good governance.

Five Essential Elements of Reporting

Board members need access to a range of financial and non-financial information relating to their organization’s products and services. In order to function effectively as a feedback tool for the board and senior management, the FFIEC Management Handbook states that information systems reporting should meet five essential elements:

Timeliness: To facilitate prompt decision-making, an institution’s information systems should be capable of providing and distributing current information to appropriate management or staff
Accuracy: A sound system of automated and manual internal controls should exist to ensure the validity of the information and should include appropriate editing, balancing, and internal control checks
Consistency: To be reliable, data should be processed and compiled uniformly. Variations in data collection and reporting methods can distort information and trend analysis
Completeness: Reports should contain the necessary information to inform decision-makers without voluminous detail
Relevance: Information systems should provide current, applicable, and actionable information

Reporting that contains the essential elements above can provide decision-makers with facts that support and enhance the overall decision-making process and can also “…improve job performance throughout an institution.” At the board and senior management level, information systems reporting provides the data and information to help the board and management make strategic decisions. At other levels, information systems reporting allows management to monitor the institution’s activities and distribute information to staff, customers, and members of management.

Applying Technology

Advances in technology have increased the volume of data and information available to management and directors for planning and decision-making. Converting that data into actionable knowledge is essential for the board to provide a “credible challenge” to management, which involves being actively engaged, asking thoughtful questions, and exercising independent judgment. Integrating technology into their InfoSec efforts, institutions can create a comprehensive system to generate, collect, and analyze data to support a more effective process for board reporting and a more knowledgeable board.

Heather Helms, CFO and Information Security Officer of Mount Vernon Bank, knows firsthand the importance of having an application that supports board reporting. “Before we started our partnership with Safe Systems, we were not up to par with the industry standards of reporting. Since redoing our Information Security Program and moving away from a paper-based model to automated applications, we’ve seen noticeably better results in our board reporting and regulatory updates,” said Helms. “When trying to wear numerous hats within a small community bank and stay on top of a topic so huge in a regulatory world, solutions like Safe Systems’ Information Security Program makes all of the difference.”

There are several advantages to financial institutions using technology solutions to automate and optimize board reporting and governance. The primary advantage is the ability to generate on-demand reporting on all aspects of information security management; from managing projects, to risk assessments (including risk appetite), to managing critical vendors, to mitigating operational risk through business continuity planning. Reporting should allow just enough detail to enable the board to fulfill their responsibilities, but not be so detailed that they struggle to comprehend. Ideally, technology should support high-level reporting, with the ability to “drill down” as necessary. The emphasis should be on quality, not quantity.

Another potential advantage of technology in reporting is the ability to aggregate business intelligence from multiple sources enterprise-wide. This not only gives the board a more complete picture of risk but can also stimulate internal collaboration and deeper insights, giving directors more meaningful information for analysis. The importance of timely, accurate, relevant, complete, and consistent information cannot be overstated, as the success or failure of management is often defined by the decisions they make. As the FDIC states, “The extreme importance of a bank director’s position is clearly emphasized by the fact that bank directors can, in certain instances, be held personally liable.” By having a comprehensive system in place for optimal decision-making, institutions can improve the quality of the information flowing from management to the board, and then from the board to other internal and external stakeholders—helping directors not only improve governance, but also enhance regulatory compliance and possibly even reduce lawsuits, monetary fines, and other negative consequences from inadequate board reporting.

Technology not only optimizes board reporting and decision-making but also makes it easier for directors to access the information they need to perform their due diligence and oversight obligations. It all boils down to implementing technology to exercise better accountability—ensuring sound policies are in place to promote strategic objectives and regulatory compliance.

Safe Systems offers a wide range of compliance-centric, innovative solutions that can help financial institutions take advantage of technology to improve their board reporting and governance.

01 Jul 2021

Banks, Compliance, Credit Unions The Safe Systems Compliance Team 0 comment

Benefits of Integrating Technology into Your InfoSec Program

Information security (InfoSec) is a critical aspect of keeping an organization’s computers, networks, sensitive information, and users safe from potential threats. Integrating technology into a financial institution’s InfoSec program can make it easier to manage risk and protect their information and infrastructure assets. Institutions can utilize automation to capitalize on a variety of other benefits, including:

Simplicity

Banking is a complex business. Banks and credit unions maintain a wide assortment of information technology devices, systems, and applications to support their operations. They also have multiple personnel, partners, and third-party providers spread across different geographic areas. The interconnectivity of their operations can make it even harder for institutions to protect the hundreds (and in some cases, thousands) of assets they must maintain. An automated system can make it easier for institutions to inventory and classify their assets—without having to create enormous, time-consuming spreadsheets. It provides a centralized solution for tracking the criticality, location, and risk exposure level of each asset. Identifying the source of risk is the essential first step to effective risk management. Technology and various Software as a Service (SaaS) applications can greatly simplify the process of inventorying assets, assessing the risk, and selecting controls. Technology can also create automatic updates to ensure that all policies and procedures are current and based on industry standards and regulatory requirements. Additionally, on-demand stakeholder reporting can be generated to provide the requisite documentation to management committees, board of directors, and regulatory authorities, respectively.

Completeness and Transparency

Integrating technology can help financial institutions get a clearer sense of their security posture, so they can develop a more complete InfoSec program. Automation makes it easier to identify and categorize each asset, along with its related risks, threats, and controls. This can enable institutions to make a more accurate assessment of where their security risks actually lie. With enhanced transparency, institutions can determine the most appropriate level of protection for each of their assets. As a result, they can more effectively use, manage, and secure these assets. Proactively identifying risks, threats and controls can also better position them to minimize the impact of security incidents in the future.

Better Intelligence and Insights

Some financial institutions rely on manual spreadsheets to manage the vast amount of information and other assets in their InfoSec program. But manual spreadsheets are not always the most effective tracking and reporting mechanism. People can inadvertently feed the wrong data into spreadsheets and produce unreliable results (“garbage in, garbage out”). Plus, since creating spreadsheets is such a repetitive and time-consuming process, information may be infrequently updated—which can make it less timely and thus less useful. However, integrating technology can help institutions enhance the accuracy of the intelligence that supports their InfoSec program. In turn, their board and management can have better insights into the important issues that impact the information security of their organization, which in turn empowers them to make better decisions.

Enhanced Reporting

To make the best decisions for their institution and perform their fiduciary oversight duties, boards and management committees need accurate, relevant, and timely information. By incorporating technology in their InfoSec program, institutions can put an efficient process in place to generate, collect, and analyze data to support board and committee reporting. This can enhance the overall quality of the information being reported to the board, shareholders, and auditors, and regulators. Optimized, on-demand reporting can improve governance, foster compliance, and potentially reduce negative consequences from inadequate board reporting.

Resource Collaboration and Augmentation

InfoSec resources are limited at many financial institutions, and most community banks and credit unions do not have a dedicated InfoSec specialist in-house. Additionally, information security officers (ISOs) tend to wear multiple hats and are often stretched thin by their broad range of responsibilities. An automated application can create a centralized solution that creates a multi-user approach to allow the ISO to leverage internal resources wherever and whenever possible. For example, a department head or process owner can be a valuable internal resource for assessing vendors impacting the department’s functionality. Similarly, the process owner (and not necessarily the ISO) would be the most logical choice to perform the process Business Impact Analysis. In this way, InfoSec becomes an “all hands on deck” operation, with all personnel sharing ownership of the process. Outsourcing additional aspects of InfoSec via a virtual ISO solution can provide an institution with additional subject matter expertise and solutions to further support their designated ISO and the overall security of their systems and information.

Read more about the benefits of integrating technology into your information security. Download our white paper on “How Financial Institutions Can Use Technology to Build an Automated, FFIEC-compliant Information Security Program.”

16 Jul 2020

Banks, Compliance, Credit Unions Tom Hinkel 0 comment

The ISO in a Crisis: The Increased Importance of Vendor Management During a Pandemic

In a previous post, we discussed the role of the ISO in a pandemic and how he or she must make sure all routine tasks are still being completed; help the institution adapt to the new circumstances; and continue providing all products and services at an acceptable risk level.

While an institution may be prepared to continue business as usual, its third-party provider partners may not be on the same page. Like the bankers they support, third-party vendors are also experiencing the impact of the pandemic and are dealing with a variety of operational issues as well. Financial institutions must be able to perform effective vendor management during a crisis and develop alternative plans in the event a critical vendor may not be able to perform the services agreed upon.

Here are a few things the ISO must consider to effectively evaluate the institution’s vendors during a crisis like a pandemic:

Identify Vendor Risks

During a pandemic, the ISO must anticipate several different risk scenarios that can adversely impact the institution’s daily operations. With vendors, there are two interrelated key risk factors to consider:

“Supply chain risk” is related to the interconnectivity among the entity and others. In a pandemic, critical vendors may receive an overload of requests for products and services from a variety of industries and may not be able to keep up with demand. For example, many financial institution employees have been working remotely due to Coronavirus and to keep the network secure, financial institutions have provided company laptops to staff. However, if the FI’s laptop provider runs out of inventory, the institution is then put in a difficult situation – if they allow the use of personal devices, they must still make sure all employees can work safely from home and ensure the network remains secure.
“Cascading impact risk” is an incident affecting one entity or third-party service provider that then impacts other service providers, institutions, or sectors. For example, if the vendor that manages the bank’s perimeter security has a large case of absenteeism and an inadequate succession plan, real-time alerting may be negatively impacted, and the institution could be exposed.

Evaluating these risks with third-party vendors in advance will help ensure that they have the proper personnel redundancies in place, so these situations don’t impact the institution.

Managing Third-Party Risks

According to the Federal Financial Institution Examination Council (FFIEC), open communication and coordination with third parties, including critical service providers, is an important aspect of pandemic planning. A current SOC 2 report that covers the “availability” trust criteria is the best way to determine if the vendor has the capability to respond and recover its systems. In the absence of a SOC report, the first thing the ISO should request is a copy of the business continuity plan. Since the SOC report may not cover the service providers’ vendors (also referred to as sub-service providers), the ISO will also want to gain some awareness of the possibility of supply-chain risk. For example, how might a provider failure two to three layers deep affect the institution?

In addition to vendor business continuity plans, the ISO should ask additional questions about how the vendor is managing the pandemic. Here are a few examples:

When was the last time you updated and tested your BCM plan? Have you incorporated the possibility of a failure of a critical sub-service provider?
Is the likelihood and impact of a pandemic evaluated as a part of your risk assessment?
How do you plan to continue providing services in the event of the loss of key employees?
Have you been in communication with your critical third-party providers?
Are you financially prepared to withstand a long-term pandemic event?

Critical third parties are often either overlooked or under-managed during normal circumstances, but because of the current high level of interdependency among financial institutions and their third-parties, operational events such as pandemics call for much closer scrutiny. Depending on responses received, ISOs may choose to accelerate their oversight efforts, revisit their vendor risk assessments, and make adjustments accordingly.

For more information on responding to pandemic events, view our pandemic resources.

12 Jun 2020

Banks, Compliance, Credit Unions Tom Hinkel 0 comment

The “Inherited” Risk – Assessing and Reporting on Vendor Risk

Vendors are the largest source of non-preventable risk for a financial institution, so it is critical that banks and credit unions carefully evaluate, monitor, and manage all vendor relationships to remain compliant and reduce risk. Additionally, institutions must be able to accurately assess risk, implement adequate controls, and provide all stakeholders (including regulators, management, and the Board) with appropriate reporting to convey the overall status of the vendor management program at any point in time.

Assessing Vendor Risk

The first step in vendor risk management is to perform a risk assessment to evaluate your level of inherent risk. This must always be done first so that you can then identify and implement the proper controls. If the controls selected do not completely offset the risks identified, then alternate or compensating controls would need to be identified in order to achieve a level of residual risk that is within your risk appetite.

Depending on the information you get from the risk assessment, you can clearly map out the level of inherent risk based on the vendor’s access to data and systems and the level of criticality for each vendor. These results will provide the information you need to control the risks, and ultimately report the overall results of your vendor management program to your key stakeholders.

When conducting a risk assessment you want to include all vendors but focus particularly on your critical vendors. A critical vendor is defined as one that either provides a product or service that is a key interdependency of one or more of your products or services, or one that stores, processes, or transmits non-public customer or confidential information.

Once you’ve established the initial or inherent risk level, you can identify one or more controls to off-set the risks. Typically, you want the vendor’s third-party audit report or SOC report; audited financials; insurance binders; a copy of their incident response and disaster recovery plans; and any testing the vendor has done on these plans. If you can’t obtain a SOC report, you’ll need compensating controls to determine their network security. Ask if they have an information security program and if they’ve conducted any vulnerability and penetration testing. You should also request a report of examination (ROE) from your primary federal regulator on your core provider.

Reporting to Stakeholders

When reporting to the various stakeholders within your institution, many of the reports are relatively similar, but the level of detail will be slightly different for each stakeholder group.

Board

The primary stakeholder that financial institutions must report to is the Board. When presenting to the Board, reporting does not generally need to be highly detailed and should provide a brief, high-level summary of the overall program.

Additionally, it is not necessary for the Board to see this report every time they meet. The requirement is to present an annual update, but we recommend reporting more often if the pace of internal change dictates (whether twice a year or quarterly) to show you are adequately managing vendor risk on an on-going basis. Here is an example of what a Board report should look like:

Management

The management committee (i.e. IT Steering) requires a bit more detailed information than the Board does, and unlike Board reporting frequency, IT should report to the management committee every time they meet. If your management committee meets on a monthly basis, you should produce a report each month as well and communicate this information to the committee. Management needs to know what you’re doing; what you’re not doing; what you’re behind on; and have a good understanding of your progress.

Regulators

Regulators typically review the same reports as your board and committee. However, auditors and examiners will tend to take a deeper dive into your vendor management program and want to review everything you have on your critical vendors. They are looking to see if you’ve done a risk assessment and if you have identified the reports from the vendor that will line up with, control, and offset the risks you identified in the risk assessment. The report you present to examiners and auditors may have more of a narrow but deeper focus, taking a more detailed view of your most critical vendors.

01 May 2020

Banks, Credit Unions, Technology Brendan McGowan 0 comment

Combating Business Email Compromise and Protecting Your Remote Workforce

Over the last two months, there have been more people working remotely than ever before, and with more being done outside the branch, financial institutions cannot rely on their usual firewall and anti-malware solutions to protect their staff. Today, the single most common attack used to target remote users is what is known as “business email compromise” (BEC).

Safe Systems hosted a live webinar earlier this month discussing how BEC works; the main techniques used in these types of attacks; and the cost-effective solutions needed to mitigate them. In case you missed it, here are a few key points from the webinar:

What is business email compromise and how does it work?

Business email compromise is a security exploit where an attacker targets an employee who has access to company funds or other non-public information and convinces the victim to transfer money into a bank account controlled by the attacker.

These attacks have two main categories:

Phishing emails – this is just a spoofed email that seemingly comes from someone you trust within the organization (like the CFO or CEO) instructing an employee to wire money to a specific account.
Account takeover – the attacker procures your real username and password and then logs into your mailbox where they are then able to send and receive emails at will from your actual account.

Using these attack methods, cybercriminals can commit many different types of fraud, including wire fraud, non-public information (NPI) theft, and spreading of malware.

There are also a number of different attack “types” that cybercriminals commonly use to take over accounts:

A single-stage attack is a social engineering email directing a user to complete a certain action. For example, an email may include a link that leads to a rogue website where the attacker is trying to capture login information. This is a fairly simple, one-step attack.

The more sophisticated variation on this type of attack is the multi-stage method. In this attack, we often see that instead of having a link in the email that goes to a suspicious website that could potentially be blocked by other security layers, attackers use a link in the email that goes to a highly trusted place like a Citrix share file or some other trusted site. If the user clicks the link, they’ve now stepped outside of any email security layers the institution might have in place. Most often these sites are SSL encrypted so this underscores the importance of having SSL inspection performed on your traffic to ensure links in emails do lead to legitimate, secure websites. The problem with this, however, is that it can be an increasingly difficult job for some financial institutions to implement and manage.

How Can Financial Institutions Defend Against These Threats?

Prevent

The first line of defense against business email compromise is to stop the user from being exposed in the first place, and the single most effective measure financial institutions can implement is user training. It’s important for financial institutions to regularly conduct penetration testing and use security awareness training to educate their employees. Over the years, we’ve seen a distinct correlation between the frequency of user security awareness training and the success rate of phishing attacks. Some institutions leverage self-testing tools such as KnowBe4, but there are many other services that financial institutions can use to test their employees.

Mitigate

The second line of defense is to stop the user from causing damage. To mitigate the threat, financial institutions can use a variety of effective tools, including:

Email Filtering – a tool that filters out suspicious emails to ensure no spam, malicious content, or sensitive data makes it out of the institution unauthorized.
DNS Filtering – is the process of using the Domain Name System lookup to find the IP address of a website to block malicious websites and filter out harmful or inappropriate content.
URL Rewrite – if an email has a link, the system rewrites the destination of the link to go to a security company first before the real session is connected.
Multifactor Authentication – this tool requires more than one method of authentication to verify a user’s identity for a login or other transaction. The methods include something you know (pin); something you have (phone) and/or something you are (biometrics).

These are just a few of the tools that can help strengthen your institution’s security posture and ensure users do not fall victim to malicious attacks. However, if they do, it is critical to have a plan to respond.

Respond

The last line of defense is to stop the expansion of damages if a threat has occurred. In this case, financial institutions must conduct an investigation into the cyberattack and have thorough logs of their mail system to understand exactly what occurred; how far it has spread; and determine the next steps. Community banks and credit unions should have an incident response plan in place and perform regular tabletop testing to confirm the plan works and will be useful when a real attack occurs.

To learn more ways to protect your institution from business email compromise, watch our recorded webinar, “Business Email Compromise – Preventing the Biggest Risk from Remote Users.”

23 Apr 2020

Banks, Credit Unions, Technology Jamie Davis 0 comment

Managing Banking IT Operations During a Pandemic: Your Top Questions Answered

For many financial institutions, it has been a challenge to keep IT operations moving efficiently during this pandemic. Since community banks and credit unions are considered an essential business, they are required to continue to serve customers and members. This can be difficult when employees are unavailable or are forced to work remotely from their homes for the first time. Many financial institutions have questions about how to efficiently manage their remote workforce, while keeping the institution secure and employees, customers, and members safe.

To address these questions, Safe Systems’ Information Security Officer, Chuck Copland, VP of Compliance Services, Tom Hinkel, and Chief Technology Officer, Brendan McGowan held a live panel discussion last week covering ways financial institutions can manage banking IT operations during a pandemic. In this blog, we’ll cover a few of the top questions from the panel:

1. How would you suggest making sure that remote access vendors are vetted quickly but thoroughly?

For many financial institutions, remote access was limited before the pandemic because this technology either didn’t support critical functions or wasn’t a priority at the time. Now, remote access is very important to continue business operations efficiently, and many community banks and credit unions are evaluating options for larger scale use. To do this effectively, you first need to consider all of the risks associated with remote access and the potential impact on your organization. This helps you get a quick baseline of the controls you’re going to require, which will then inform your vendor review.

While some institutions may be in a rush to get remote access tools up and running, it is important to stick to your normal vendor review process and take the time to thoroughly evaluate third-party risk. If you do have to sacrifice the integrity of your normal due diligence process and cut some corners to choose a vendor quickly, understand that there will be a resulting change in your institution’s risk appetite, or your acceptable risk. Make sure this is updated and that the executive management team including the Board sign off on the your new risk appetite.

2. What are some lessons learned about remote access for financial institutions during this pandemic?

It can be difficult to determine which remote access tool fits best with your institution’s unique security and regulatory needs. First, you should identify the best way for your staff to access the network whether it’s through a virtual private network (VPN) or an application for remote access, like a telecommute remote control tool. A VPN is a piece of software that lives on a computer that your user has at home — preferably a bank or a credit union asset and not their personal home PC.

When a user connects through a VPN tunnel, typically the computer gives access to the local network at the institution. With telecommute remote control tools, like LogMeIn and Splashtop, the user is working from a local computer at the office. These tools limit the abilities of the computer from interacting with the institution’s local network, often, making it a secure option for organizations that don’t want employees to have direct access to the network. Because each tool achieves a different goal, you will want to determine exactly what your team needs to conduct remote work efficiently, effectively, and securely.

There are also several collaboration tools and meeting tools to consider which can help different teams within your institution communicate and collaborate on projects internally and meet with each other or speak with external users outside of your organization.

What are you hearing from examiners? How are exams continuing during the pandemic?

We’re seeing that all examinations have either been pushed back to a later date or changed to a remote visit. In the climate that we are in, examiners are expecting institutions to make accommodations to customers that may be negatively affected by this pandemic and ensure they have access to other critical products and services.

But what happens when the dust settles, and we go back to a more normal set of circumstances? What will examiners expect then?

Most likely, we expect them to be looking for a mature “lessons learned” document that financial institutions create to show what they have learned over the course of this particular pandemic event. We can certainly see guidance changes coming out of this, with regulators having a new set of expectations for financial institutions going forward. Right now, we are all concerned with just getting through this challenging time but all financial institutions need to document what they are doing and the lessons they have learned along the way. They also need to create a report for the Board and the executive management team recommending any necessary changes to mitigate the impact of a pandemic, should one happen again in the future.

If you’d like to find out what other questions were answered during the live panel, watch our recorded webinar, “Ask Our Experts: Managing Banking IT Operations During a Pandemic.”

09 Apr 2020

Banks, Compliance, Credit Unions Christine Ray 0 comment

American Pride Bank Tackles Information Security Responsibilities with Safe Systems’ ISOversight Virtual ISO Solution

With ongoing cybersecurity threats; increased use of third-party providers; and constantly evolving regulatory and reporting requirements, the role of the information security officer (ISO) is even more important in today’s complex banking environment than ever before. However, community bank and credit union ISOs often struggle to keep up with the growing number of responsibilities this role requires – often forced to manage critical tasks with limited resources and a lack of segregation of duties.

The Challenge

Nicole Rinehart, Chief Operations Officer at American Pride Bank, ran into this very issue as the sole IT admin at American Pride Bank. Managing all of the ISO responsibilities, including critical activities such as Board reporting and the production of comprehensive reports for examiners, was difficult to manage due to the many manual processes required.

During a regulatory examination, an examiner recommended the bank focus on having more independence within its ISO duties. The Federal Financial Institution Examination Council (FFIEC) states that all financial institutions must have separation of duties for the ISO role. To accomplish this, the bank began evaluating solutions to help streamline processes and ensure complete oversight of all information security activities.

The Solution

Implementing a Virtual ISO to Improve Compliance Posture Complimentary White Paper

After consideration, American Pride Bank decided to partner with Safe Systems and implement its ISOversight virtual ISO solution. The service includes a suite of applications and programs to help institutions streamline management of key compliance duties including the CAT, BCP, Vendor Management and Information Security.

In this case, the bank was already leveraging individual components of ISOversight. By converting to the virtual ISO service, they gained additional tools, reports, and expert compliance support. An important part of the solution includes monthly meetings with the Safe Systems compliance team to assess the bank’s information security activities and provide guidance.

The Results

With ISOversight, American Pride Bank has improved its overall preparation and communication of the information security program. All key stakeholders in the bank have access to ISO-related items in real-time, and the information security program is more organized and streamlined, enabling the bank to save time on monitoring and reporting.

“The ISOversight solution has been a game-changer for our bank because now we have a robust process in place working with Safe Systems and a full committee of our team members to ensure all tasks are completed accurately and nothing slips through the cracks,” said Rinehart. “It’s so important to have a process like this, especially when you have limited resources. Safe Systems has truly become an extension of our internal team, helping us to stay on track with ISO responsibilities and ensuring we comply with all regulatory requirements.”

To learn more, read the full case study, “American Pride Bank Streamlines Processes and Improves Compliance Reporting with Safe Systems’ ISOversight Virtual ISO Solution.”