Banks and financial institutions lack stronger security measures when it comes to doing business with third-party vendors, according to a recent report.
On Thursday, the New York State Department of Financial Services (NYDFS) revealed that about one in three banks currently do not require third-party vendors to notify them when a data breach or intrusion occurs.
The survey, conducted by the NYDSF, was comprised of 40 regulated banking organizations in an effort to gain insight on their due diligence processes, policies and procedures with third-party vendors, as well as protections for safeguarding sensitive data.
Fewer than half of the banks surveyed conduct any on-site assessments of their third-party vendors.
Approximately one in five banks surveyed do not require third-party vendors to represent that they have established minimum information security requirements. Additionally, only one-third of the banks require those information security requirements to be extended to subcontractors of the third-party vendors.
Nearly half of the banks do not require a warranty of the integrity of the third-party vendor’s data or products (e.g., that the data and products are free of viruses).
“A bank’s cyber security is often only as good as the cyber security of its vendors,” said DFS Superintendent Benjamin Lawsky, who referred to the report findings as an “urgent matter.”
“Unfortunately, those third-party firms can provide a backdoor entrance to hackers who are seeking to steal sensitive bank customer data.”
As a result of the findings, the NYDSF announced it plans to move legislation forward to enhance its oversight of third-party vendors that serve the banking sector, including check and payment processors, trading and settlement operations, as well as data processing companies.