Financial institutions are the prime target for many cybercriminals who want to gain access to a client’s personal information and use it for fraudulent transactions. With many high-level threats happening recently, the FFIEC has created a framework to measure a financial institution’s preparedness when faced with cyber-attacks.
So how can a business improve its FFIEC compliance in 2022? To follow the guidelines set by the FFIEC correctly, make sure to evaluate the company’s risk profile based on specific risk areas, determine the cybersecurity maturity based on specific domains, reassess the position in the maturity spectrum, ask questions using the CAT assessments, and develop a good cybersecurity strategy based on the CAT.
FFIEC Compliance and Its Importance
The Federal Financial Institutions Examination Council (FFIEC) is an inter-agency organization created by the US Government to develop standards and principles for the federal examination of different financial institutions around the country. It’s made up of representatives from the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and Consumer Financial Protection Bureau (CFPB).
Enterprises must meet the FFIEC compliance set by the body because it’s essential in identifying potential threats and weaknesses within the system. Otherwise, the financial institution is asked to pay financial penalties.
Since the FFIEC is only an inter-agency body that creates guidelines and recommendations, it doesn’t have the authority to directly issue the monetary penalty. But the federal agencies that have the ability to issue fines can penalize financial institutions and make them pay around $2 million. This amount can be significantly larger if the company faces litigation in the federal judicial system.
However, it’s important to remember that compliance requirements like the one issued by the FFIEC are only guides or bare minimum when protecting the organization. Companies are encouraged to improve their security systems as much as they can to better protect their clients.
5 Steps to Improve Your FFIEC Compliance
The Cybersecurity Assessment Tool (CAT) was introduced by the FFIEC in May 2017 to integrate cybersecurity throughout the many departments of an institution. It was specially designed to be a measurable and repeatable process that evaluates the preparedness of the organization. To help you pass the assessment and improve it, make sure to follow these 5 steps:
Step 1: Evaluate the Risk Profile Based on Specific Risk Areas
The first and most important step is to get the whole company involved in reaching the FFIEC standard. Cybersecurity encompasses most aspects and departments of the institution so it’s only right that they’re fully aware of the process.
Collaboration among all the departments and functions is crucial because a single department in the organization won’t be able to cover all the elements of the FFIEC assessment in time. Talk to all key personnel across the different departments to develop a comprehensive view of the organization. Ask them to evaluate their risk profile based on these risk areas:
- Technologies and Connection Types – Connections, complexity, maturity, and other important factors affect the risk that different kinds of technologies pose. Unsecured wireless connections are extremely risky and having too many of them only increases the risk of cyber-attacks.
- Delivery Channels – All kinds of delivery channels from mobile and online to automated teller machines carry different risks. A higher variety and number of delivery channels make it easy for the organization to exchange information but it also contributes to a higher risk of cyber-attacks for them.
- Online/Mobile Products and Technology Services – This includes online payment services, retail wire transfers, remote deposit captures, and more.
- Organizational Characteristics – The number of privileged access users in the organization also increases the impact risk levels across the organization. Acquisitions, mergers, and hiring new employees increase the company’s risk so it’s important to find a way to minimize it before the deal closes.
- External Threats Management – This risk area considers the number of recent attacks and how sophisticated they were. While cybersecurity systems are becoming more advanced, hackers and other cybercriminals are also doing a good job of catching up to the latest technologies so it’s better to be extra careful when handling external threats.
Step 2: Evaluate the Cybersecurity Maturity Based on Specific Domains
A mature cybersecurity system identifies, detects, protects, and recovers data way more than cybersecurity compliance regulations require. It should also be tailored to the unique security risks that the organization faces based on the service, size, and technology architecture they have.
Measuring the cybersecurity maturity of the organization is testing how strong its response is to the threats to customer privacy and data security. Team leaders can evaluate the organization’s cybersecurity maturity by looking at these 5 domains:
- Cyber Risk Management and Oversight – This focuses on the activities of the appointed board of directors who were responsible for developing and mandating effective cybersecurity programs throughout the company. This includes governance, cybersecurity culture, training, and resource allocations.
- Threat Intelligence and Collaboration – These are for discovering, analyzing, monitoring, and understanding the threats. It may also include the effective ways used in information sharing across stakeholders and outside parties.
- Cybersecurity Controls – These processes and practices are meant for protecting data, assets, and the IT infrastructure. They’re also divided into 3 main categories: Preventative to fend off attacks, Detective to find threats and vulnerabilities, and Corrective to resolve the found threats.
- External Dependency Management – This aspect is concerned with the organization’s relationship and connection with different third parties like suppliers, partners, and vendors.
- Cyber Incident Management and Resilience – This domain focuses on the organization’s capability to plan and respond to attacks, as well as recover from them.
Step 3: Reassess Your Position in the Maturity Spectrum
Organizations that rank well based on the CAT cybersecurity maturity assessment might feel that their preparations are good enough to keep until the following year. However, this shouldn’t be the case because there’s a chance that the company might not pass the compliance the following year.
Internal changes, cybersecurity threats, insufficient resources, and other business changes may lead to inconsistent performance in the CAT and FFIEC compliance. It’s normal for risk profiles and maturity scaling to change as new threats, vulnerabilities, and operational environment changes show. The best thing that companies should do is to reevaluate themselves while considering the new threats, products, services, or connections.
The FFIEC has a 5-level scale which helps institutions gauge where they stand in the maturity spectrum:
- Baseline – Meeting the minimum expectations set by the law and regulation
- Evolving – Adding another level of protection through documented processes and procedures that aren’t required by law
- Intermediate – Integrating consistent, detailed, and formal risk-management processes
- Advanced – Automating risk management processes and incorporating powerful cybersecurity practices across all departments of the business
- Innovative – Using new controls or tools to lead innovations across processes, technology, and people for the organization, as well as the industry
Step 4: Ask Key Questions with CAT Assessments
CAT has key questions that help organizations evaluate the state of their cybersecurity. Answering these key questions helps companies find and address gaps in their preparedness against different cyber threats. Here are some important questions to include in the regular evaluation:
- Has the organization been a direct target of cyberattacks?
- Does cybersecurity preparedness receive enough time and attention from the appropriate board committee?
- Are there enough resources like tools, budget, and staffing to ensure that the resources and staff expertise are fit for the level of risk?
- Are there consistent programs that regularly audit the effectiveness of the main controls?
- How does the ongoing process for gathering, monitoring, analyzing, and reporting risks go?
- Who’s responsible for managing and assessing the risks brought by changes to the business strategies and technologies?
- Which third parties does the organization rely on when it comes to supporting critical activities?
- What process does the company employ to oversee these third parties and understand their risks and cybersecurity maturity?
- What kind of testing and planning activities does the organization have in place to ensure that the concerned authorities can effectively respond to cyber-attacks and improve overall resilience?
Step 5: Develop a Cybersecurity Strategy Based on CAT
CAT is more than just a tool for assessment – it’s also a useful framework that companies use to enhance their resilience and fend off attacks. If the cybersecurity levels don’t match the inherent risk profile after the evaluation, then the organization should come up with an effective strategy to get a better score next time and protect the institution better.
The FFIEC suggests that financial firms and institutions should:
- Evaluate the maturity levels and ensure that they’re aligned with the level of risk that the institution faces
- Organize a gap analysis to start improvements based on the company’s current maturity level versus the target maturity level
- Plan different actions and decide which steps are necessary to greatly improve the cybersecurity readiness of the organization
- Implement all changes and put the strategy in action across all domains and departments within the organization
- Reassess the organization’s readiness regularly to further improve the cybersecurity measures in place
- Report the results and make sure to keep the executive and board members updated about the progress
Experience the Abacus Advantage with Your FFIEC Requirements
Complying with the FFIEC requirements is crucial nowadays as cybercriminals always find new ways to target and take advantage of the weaknesses in the security systems of organizations in the financial sector. For financial institutions that have limited resources and can’t hire an in-house team, meeting the FFIEC compliance requirements is especially challenging.
At Abacus, we offer our clients a comprehensive set of programs and services that help protect them from cyber threats and enhance their productivity. You can count on us to help you ace your FFIEC compliance in 2022, so don’t hesitate to contact us today.