Table of Contents
- What is the NYDFS Cybersecurity Regulation (23 NYCRR 500)?
- Who Must Comply with NYDFS 500?
- What Are the Core Requirements of NYDFS 500?
- NYDFS 500 Risk Assessment: Core Requirements
- NYDFS 500 Compliance Timeline (Second Amendment, 2023)
- How Does NYDFS 500 Compare to NIST CSF?
- Isora GRC for NYDFS 23 NYCRR 500 Compliance
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NYDFS 500 FAQs
- What are the penalties for failing NYDFS cybersecurity compliance?
- How frequently must cybersecurity policies be reviewed under 23 NYCRR 500?
- Do NYDFS 500 rules apply to cloud vendors?
- Why is risk assessment critical to NYDFS cybersecurity compliance?
- What documents are needed for a NYDFS 500 audit?
The New York Department of Financial Services (NYDFS) Cybersecurity Regulation, officially known as 23 NYCRR Part 500, outlines strict cybersecurity requirements for organizations operating in New York’s financial sector. Introduced to strengthen the state’s digital defenses, the regulation focuses on protecting both consumers and institutions from growing cyber risks.
First enacted in 2017, the NYDFS Cybersecurity Regulation has become a central part of cybersecurity compliance in the financial industry. The recent 23 NYCRR 500 amendments, finalized in late 2023, expand on key areas like governance, risk assessment, third-party oversight, and incident response. These updates reflect the evolving nature of cyber threats and the increasing expectations for financial services cybersecurity.
For organizations subject to NYDFS oversight, including banks, insurance companies, and mortgage providers, understanding these requirements is essential. One of the core pillars of NYDFS 500 requirements is a comprehensive and documented risk assessment—a step that influences every other part of a covered entity’s cybersecurity program.
In this guide, you’ll learn:
- Who must comply with the regulation
- What the updated NYDFS 500 requirements include
- How to approach risk assessment as expected by NYDFS
- How solutions like Isora GRC can simplify NYDFS compliance
Whether you’re part of a compliance, infosec, or risk management team, this article will help you confidently navigate the cybersecurity regulations New York enforces for financial institutions.
What is the NYDFS Cybersecurity Regulation (23 NYCRR 500)?
The NYDFS Cybersecurity Regulation, officially known as 23 NYCRR Part 500, sets baseline cybersecurity standards for financial institutions operating under the supervision of the New York Department of Financial Services (NYDFS). This regulation applies to organizations licensed, registered, or chartered under New York’s Banking, Insurance, or Financial Services Law.
Designed to strengthen financial services cybersecurity, 23 NYCRR 500 requires covered entities to implement specific controls, policies, and governance structures to protect nonpublic information (NPI) and ensure the reliability of their information systems. These standards apply to a wide range of organizations, including banks, insurers, mortgage lenders, and licensed financial service providers.
The Purpose Behind NYDFS 500
The regulation was created in response to escalating cybersecurity threats targeting the financial sector. NYDFS led the development process in close collaboration with industry stakeholders to ensure the rules addressed both existing and emerging risks.
The goal: to create a strong defense framework for the state’s financial institutions and the sensitive data they manage.
Key Milestones and Amendments
NYDFS 500 has undergone three key updates since 2017:
| Date | Milestone | Details |
| March 1, 2017 | Initial Implementation | Introduced core cybersecurity requirements |
| April 2020 | First Amendment | Adjusted compliance deadlines |
| November 1, 2023 | Second Amendment | Introduced Class A firms and stricter controls |
Who Must Comply with NYDFS 500?
The NYDFS Cybersecurity Regulation (23 NYCRR Part 500) applies to a wide range of financial institutions operating in New York. This broad scope reflects the state’s commitment to enforcing strong cybersecurity regulations in New York and ensuring consistent standards across the financial sector.
Applicability and Scope
23 NYCRR 500 is mandatory for any organization operating under or required to operate under a license, registration, charter, permit, certificate, or similar approval issued under New York’s Banking Law, Insurance Law, or Financial Services Law.
Covered entities include:
- Commercial and savings banks
- Foreign banks with branches in New York
- Insurance companies and licensed insurance agents
- Mortgage lenders and mortgage brokers
- Trust companies, credit unions, and virtual currency firms
- Other licensed or registered financial services providers in New York
These entities must meet all relevant NYDFS 500 requirements to achieve and maintain NYDFS compliance.
Classification of Covered Entities (2023 Amendments)
The 23 NYCRR 500 amendments introduced three key categories of covered entities to tailor compliance expectations based on company size and complexity:
| Entity Category | Criteria | Notes |
| Class A Companies | – At least $20M in gross annual revenue from NY operations (each of the past two fiscal years)
– AND either: – More than 2,000 total employees – OR more than $1B in gross annual global revenue |
Applies to large, complex financial organizations |
| Standard Companies | – Do not qualify as Class A
– Do not meet exemption thresholds |
Most midsize financial institutions |
| Exempt/Small Companies | Qualify for limited exemptions if any of the following apply:
– Fewer than 20 employees (including affiliates and independent contractors) – Less than $7.5M in gross annual NY revenue – Less than $15M in total year-end assets |
Subject to reduced compliance requirements under NYDFS 500 |
Employees, agents, designees, and wholly owned subsidiaries of covered entities are fully exempt from the regulation.
Third-Party Service Provider Requirements
NYDFS 500 also extends to third-party service providers that access or process nonpublic information (NPI) on behalf of covered entities. Organizations must:
- Conduct due diligence on third-party vendors
- Ensure proper cybersecurity protections through contracts
- Monitor third-party compliance with applicable NYDFS 500 requirements
This ensures consistent financial services cybersecurity, even when data is shared with external partners.
What Are the Core Requirements of NYDFS 500?
The NYDFS Cybersecurity Regulation (23 NYCRR Part 500) outlines a structured set of cybersecurity requirements designed to protect NPI and ensure the security of New York’s financial services sector. Each section of the regulation focuses on a specific area of governance, control, or risk mitigation.
NYDFS 500 Requirements at a Glance
| Section | Requirement | Description |
| 500.02 | Cybersecurity Program | Build a program to protect the confidentiality, integrity, and availability of information systems and NPI. |
| 500.03 | Cybersecurity Policy | Establish a written, board-approved policy covering data governance, security, access controls, and incident response. |
| 500.04 | Chief Information Security Officer (CISO) | Designate a qualified CISO responsible for oversight and annual reporting on program effectiveness. |
| 500.05 | Penetration Testing & Vulnerability Assessments | Conduct annual penetration testing and bi-annual vulnerability scans. |
| 500.06 | Audit Trail | Maintain systems to log and retain user and system activity for detection and response. |
| 500.07 | Access Privileges | Enforce access restrictions to sensitive data based on role responsibilities. |
| 500.08 | Application Security | Secure internal application development and vet third-party software for vulnerabilities. |
| 500.09 | Risk Assessment | Perform a documented annual risk assessment to guide security controls and policies. |
| 500.10 | Cybersecurity Personnel | Employ trained professionals or partners to manage cybersecurity obligations. |
| 500.11 | Third-Party Security | Require vendors to meet security standards and enforce them contractually. |
| 500.12 | Multi-Factor Authentication (MFA) | Implement MFA for external access and privileged internal users. |
| 500.13 | Data Retention & Asset Management | Define asset inventory and disposal processes for NPI. |
| 500.14 | Training & Monitoring | Train staff regularly on cyber hygiene and emerging threats. |
| 500.15 | Encryption | Apply encryption for NPI both in transit and at rest. |
| 500.16 | Incident Response Plan | Create and test a formal plan for cyber event response and recovery. |
| 500.17 | Notices to Superintendent | Report cybersecurity events within 72 hours of determination. |
| 500.18–500.22 | Legal/Transitional | Cover legal confidentiality, exemptions, enforcement, and transition timelines. |
NYDFS 500 Risk Assessment: Core Requirements
Risk assessment is the foundation of a compliant cybersecurity program. Section 500.09 requires all covered entities to:
- Perform and document a risk assessment annually
- Update the assessment when business or tech changes cause a material impact
- Use results to adjust policies, controls, and procedures
While NYDFS 500 is framework-agnostic, regulators favor alignment with nationally recognized frameworks like NIST SP 800-30. Below is a step-by-step alignment example:
NYDFS Risk Assessment Lifecycle (NIST-Aligned)
| Step | Key Activities | NYDFS Alignment |
| 1. Prepare | Designate CISO, define scope, document methodology | 500.2, 500.3, 500.4, 500.9(b) |
| 2. Identify Risks & Gaps | Identify threats, assess current controls | 500.9(a) |
| 3. Analyze & Prioritize Risks | Rate risk levels and develop mitigation plans | 500.9(b)(1)–(3) |
| 4. Document & Update | Maintain documentation, board reporting | 500.4(b), 500.9(a), 500.9(b) |
NYDFS 500 Compliance Timeline (Second Amendment, 2023)
The 2023 NYDFS amendments introduced deadlines for new and updated requirements. Here’s a breakdown:
Key Compliance Dates
| Date | Deadline | Sections Impacted | Key Requirement |
| Nov 1, 2023 | Effective Date | Entire Amendment | Regulation officially active |
| Dec 1, 2023 | +30 days | 500.17 | New event notification and extortion payment reporting |
| Apr 29, 2024 | +180 days | Multiple | Expanded third-party risk, vulnerability policies, and training |
| Nov 1, 2024 | +1 year | 500.4, 500.15, 500.16, 500.19(a) | Encryption, incident response, governance, and updated exemptions |
| May 1, 2025 | +18 months | 500.5(a)(2), 500.7, 500.14 | Automated scanning, advanced threat protection, and access reviews |
| Nov 1, 2025 | +2 years | 500.12, 500.13(a) | MFA for all, asset inventory for Class A & others |
Annual & Ongoing NYDFS 500 Requirements
| Requirement | Section | Frequency | Details |
| Annual Certification | 500.17(b) | By April 15 each year | Certify material compliance or submit a non-compliance acknowledgment |
| Policy Review | 500.3 | At least annually | Reviewed/approved by board or senior officer |
| CISO Report | 500.4(b) | At least annually | Report on risks, effectiveness, and status of controls |
| Penetration Testing | 500.5(a)(1) | Annually | Test for vulnerabilities from internal and external angles |
| Risk Assessment | 500.9(a) | Annually or upon material change | Update risk findings and controls |
| Access Review | 500.7(a)(4) | Annually | Remove unnecessary or outdated access rights |
| Cyber Training | 500.14(a)(3) | Annually | Cover cyber hygiene, phishing, and social engineering |
| IR Plan Testing | 500.16(d) | Annually | Simulate response and recovery from attack scenarios |
Event-Driven NYDFS 500 Requirements
| Trigger Event | Section | Deadline | Required Action |
| Cybersecurity Event | 500.17(a) | Within 72 hours | Report incident to NYDFS |
| Extortion Payment | 500.17(c)(1) | Within 24 hours | Report ransomware/extortion payment |
| Extortion Payment Justification | 500.17(c)(2) | Within 30 days | Submit full rationale and response alternatives |
| Notice of Exemption | 500.19(f) | Within 30 days | File exemption notice upon qualification |
| Loss of Exemption | 500.19(h) | Within 180 days | Comply fully with non-exempt requirements |
How Does NYDFS 500 Compare to NIST CSF?
Although the NYDFS Cybersecurity Regulation (23 NYCRR Part 500) does not explicitly map to any one framework, it shares several foundational principles with the NIST Cybersecurity Framework (CSF). The 2023 amendments to 23 NYCRR Part 500 reference NIST in the enforcement section, noting that regulators may consider a company’s alignment with recognized frameworks, like NIST, when determining penalties or assessing the strength of cybersecurity programs:
Practical Takeaway
For financial organizations working toward NYDFS compliance, aligning internally with NIST CSF can:
- Make audits and board reporting easier
- Improve risk assessment structure
- Demonstrate a proactive cybersecurity posture in case of enforcement actions
Although not required, using NIST CSF as a companion framework can enhance program maturity and streamline financial services cybersecurity operations, without compromising compliance with NYDFS 500 requirements.
Isora GRC for NYDFS 23 NYCRR 500 Compliance
Key Capabilities for 23 NYCRR 500 Compliance
- Risk Assessments: Run repeatable assessments aligned with all NYDFS 500 requirements using structured workflows
- Asset & Vendor Inventory: Maintain live catalogs of systems, vendors, and applications to meet Sections 500.11 and 500.13
- Remediation Management: Document risks, assign ownership, and track remediation progress using a collaborative risk register
- Third-Party Oversight: Conduct due diligence and enforce controls across service providers with vendor-specific security records
- Audit-Ready Reporting: Generate real-time dashboards and executive reports to support annual certification under Section 500.17
- Secure Documentation: Store evidence securely in one place with automated version tracking, alerts, and access control
Benefits for Infosec and Compliance Teams
- Faster response to audits, board inquiries, and regulatory reviews
- Fewer blind spots thanks to unified risk and asset visibility
- Streamlined workflows that replace manual tracking with automation
- Confidence in compliance through continuous monitoring and evidence generation
Built for NYDFS; Ready for the Real World
Isora GRC is built for how financial institutions actually work, streamlining NYDFS compliance without unnecessary complexity. Whether you manage compliance internally or across business units, Isora GRC delivers the clarity and control needed to stay secure and compliant.
NYDFS 500 FAQs
What are the penalties for failing NYDFS cybersecurity compliance?
Noncompliance with NYDFS 500 can result in regulatory investigations, penalties, and reputational damage. NYDFS has the authority to enforce civil fines and demand corrective actions. Covered entities must demonstrate a good-faith effort toward compliance or risk disciplinary actions based on the severity and scope of violations.
How frequently must cybersecurity policies be reviewed under 23 NYCRR 500?
Cybersecurity programs should be reviewed and updated at least annually. However, updates are also required whenever material changes in business operations, technology, or threat environment occur. This ensures that the program continues to align with the organization’s current risk landscape and satisfies Section 500.2 requirements.
Do NYDFS 500 rules apply to cloud vendors?
Yes. Cloud providers are classified as third-party service providers if they access, store, or process nonpublic information (NPI) on behalf of a covered entity. Organizations must vet these providers for adequate security controls and document contractual obligations as outlined in Section 500.11.
Why is risk assessment critical to NYDFS cybersecurity compliance?
Risk assessments are foundational. They directly inform cybersecurity policies, control implementations, third-party oversight, and incident response planning. Without a current, documented risk assessment, it’s difficult to justify the adequacy of other compliance actions under NYDFS 500.
What documents are needed for a NYDFS 500 audit?
Organizations should maintain a current risk assessment, documented cybersecurity policies, incident response plans, and evidence of employee training. Audit readiness also includes access controls, vendor management records, and proof of board oversight. Tools like Isora GRC can streamline documentation and reporting to support smoother audit experiences.
