Financial institutions hold a huge amount of sensitive personal and financial information, which makes cybersecurity one of their biggest concerns. They face phishing, social engineering, malware, ransomware, DDoS attacks and more. The financial sector is part of every country’s critical infrastructure, so it has to defend against these threats while meeting strict regulatory requirements.
Banks, insurers and fintechs need strong defenses, including web application firewalls (WAF), DDoS protection, advanced threat protection (ATP) and identity and access management (IAM). Cyber incidents cost the financial sector far more than most other industries, so fraud prevention, data protection and security training all need a deliberate plan. This article covers the mandatory requirements and the best practices that make for a resilient security program.
Mandatory financial cybersecurity requirements
In July 2023, the US Securities and Exchange Commission (SEC) adopted a cybersecurity disclosure rule under the Securities Exchange Act of 1934. It requires SEC registrants to disclose material cyber incidents promptly, with compliance required from 18 December 2023. Companies must weigh quantitative and qualitative factors to decide whether an incident is material. Disclosing incidents was not new, but the rule standardizes how it is done. Under the new Item 1.05 of Form 8-K, registrants must describe the incident’s nature, scope and timing, and its material or likely material impact, within four business days of deciding the incident is material.
Federal and international regulations
- Gramm-Leach-Bliley Act (GLBA) and Sarbanes-Oxley Act (SOX): strict requirements to protect financial records and personal data from unauthorized access.
- General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA): data protection standards that require rigorous controls to protect consumer information.
- Payment Card Industry Data Security Standard (PCI DSS) and Know Your Customer (KYC): mandatory for institutions that handle card data and verify customer identity, to keep transactions secure and prevent fraud.
Security frameworks
Financial institutions should adopt a formal security framework to meet these regulations. NIST, ISO, CIS and COBIT all provide structured guidance. The NIST Cybersecurity Framework, FINRA’s cybersecurity checklist and the SEC’s compliance releases give advice tailored to financial firms.
Regulations with penalties attached
- EU GDPR and UK GDPR: fines for failing to protect EU and UK residents’ data.
- SOX and GLBA: US laws that require comprehensive controls, with penalties for non-compliance that include fines and possible imprisonment.
- PCI DSS and the Bank Secrecy Act (BSA): require financial bodies to safeguard customer transactions and money movements, with substantial penalties after a breach.
State and sector regulations
- NYDFS Cybersecurity Regulation (23 NYCRR Part 500): applies to financial firms regulated in New York, with requirements on data governance and consumer privacy.
- FDIC and FFIEC guidance: covers US financial institutions, with emphasis on incident response and risk assessment.
Outside the US, the EU’s Digital Operational Resilience Act (DORA) has applied since January 2025 and requires larger financial entities to run threat-led penetration tests. In India, banks follow the Reserve Bank of India’s cybersecurity framework, and CERT-In requires many cyber incidents to be reported within six hours.
Most of these rules expect you to test your controls regularly. Our page on penetration testing for compliance explains what PCI DSS, ISO 27001 and similar standards ask for.
Meeting these requirements protects sensitive data and keeps the trust of customers and regulators.
Building a financial cybersecurity program
Financial institutions need a program that combines strategy, technology and process, tailored to the sector’s needs.
The framework
- Risk assessment and management. Assess your IT infrastructure thoroughly to find and prioritize vulnerabilities, and repeat the assessment as threats change.
- Policies. Write security policies that set out how you prevent, detect and respond to incidents, and review them regularly.
- Security controls. Use strong measures such as multi-factor authentication, encryption and secure coding practices to prevent unauthorized access and data breaches.
Incident response and compliance
- Incident response planning. Write a detailed incident response plan with clear roles, a communication plan and recovery procedures.
- Regulatory compliance. Make sure your security practices meet the regulations that apply, such as GDPR, CCPA and the SEC rules, and keep the documentation auditors will ask for.
- Training and awareness. Train every employee regularly on current threats and why the security procedures matter.
Technology and partners
- Advanced security technology. Use AI and machine learning for real-time threat detection and response. Keep firewalls and anti-malware software up to date.
- External experts. Work with security specialists for regular audits, penetration tests and guidance, alongside legal, forensic and crisis communication experts.
- Third-party risk management. Run a third-party risk management (TPRM) program to monitor the security of your vendors and service providers.
A program built this way protects your critical assets and customer data, and strengthens your reputation as a secure, reliable institution.
An internal incident disclosure process
Financial institutions need a clear internal process for reporting and handling cyber incidents. It is what lets you manage an incident quickly, protect sensitive data and meet regulatory deadlines such as the SEC’s four business days.
Incident response plans
- Assume a breach. Plan on the basis that a breach will happen, so you can respond quickly when it does.
- Define the method. Write incident response (IR) playbooks with step-by-step procedures for each type of threat.
Incident response steps
- Detection. Use systems that detect anomalies and breaches quickly and accurately.
- Containment. Contain the breach to prevent further damage or data loss.
- Eradication. Remove the threat from your systems completely.
- Recovery. Restore systems and data while strengthening defenses against a repeat.
- Analysis. Review the incident afterwards to understand its impact and improve your security practices.
See our guide to creating a cyber incident response plan for more detail.
Trends and challenges in financial cybersecurity
New technology, new risks
- Rapid adoption. Financial institutions are quickly adopting cloud computing, artificial intelligence and digital identity systems. Each brings benefits and new vulnerabilities.
- Frameworks falling behind. Many existing security frameworks struggle to keep up with the risks of these technologies, so security strategies need updating.
More sophisticated attacks
- Phishing and ransomware. Phishing attacks rose 22% in the first half of 2021, and ransomware attacks increased ninefold between February and April 2020. These attacks increasingly target specific weaknesses in financial systems.
- Supply chain attacks. Supply chain attacks rose 80% in 2021. Attackers target connected systems, where one breach can affect many organizations.
Strategic responses
- Zero trust architecture. Verify identity throughout the network, not just at the entry points, to secure every internal and external connection. Our guide to zero trust security explains how.
- Stronger data protection. Scheduled backups, offsite storage and solid disaster recovery plans protect against data loss from ransomware and other attacks.
Who the attackers are
- Global and varied attackers. Organized crime groups and state or state-sponsored actors are using the sector’s digital transformation to commit financial crime at scale.
- More complex environments. Digital transformation has added connectivity and new technology, but also made security harder, and traditional measures are no longer enough.
The role of culture in cybersecurity compliance
How the organization shapes compliance
- Organizational and security culture. Research shows that organizational culture strongly affects whether people follow information security policies. A security-focused subculture inside the wider organization improves compliance.
- Leadership. Leaders set the tone. When executives treat security as part of business ethics and practice, awareness spreads through the organization.
Building a security-first culture
- Education. Give employees, customers and partners ongoing training on security risks and how to reduce them.
- Policy and practice. Align policies with security needs to shape behaviour, and communicate clearly what non-compliance costs and what following the rules achieves.
Norms and values
- Shared responsibility. Make security everyone’s business, so employees take ownership of their actions and understand their part in protecting the organization.
- Risk and innovation. Balance a culture of innovation with risk management. Recognize the security risks of new practices and reduce them.
With these cultural elements in place, compliance becomes a value the organization holds, not just a regulatory requirement.
Conclusion
Protecting financial data depends on strong security and strict regulatory compliance working together. Financial institutions have to keep adopting modern security technology and practice to keep up with growing threats. The regulations covered here, from SEC disclosure to GDPR, along with best practices such as zero trust and better incident response, set out a clear route to resilience.
Culture matters just as much. When security is a value every person holds, compliance stops being a box to tick. That shift, together with a forward-looking approach to new threats and technology, prepares financial institutions for the risks ahead and protects the trust the sector depends on.
Get expert help with financial cybersecurity
Krylo Security tests the web applications, APIs, mobile apps and networks that financial institutions run on, and maps the findings to the standards your auditors use. Talk to us about a penetration test.
FAQs
What does financial cybersecurity involve?
Financial cybersecurity is the set of security measures financial services organizations use to protect sensitive financial information, including encryption, secure networking and strong authentication, so financial data stays available only to authorized people.
What are three major cybersecurity regulations?
Three major US laws are the Health Insurance Portability and Accountability Act (HIPAA) of 1996, the Gramm-Leach-Bliley Act of 1999, and the Homeland Security Act of 2002, which includes the Federal Information Security Management Act (FISMA).
What are some recommended cybersecurity best practices?
Recommended practices include using AI for security, promoting security awareness, shopping safely online, using more than passwords to secure accounts, securing open-source software, designing systems to be secure by default, building a culture of cyber safety, and protecting against identity theft.
Which laws and regulations should a financial firm’s cybersecurity program comply with?
Depending on where you operate, the main ones are PCI DSS, the Sarbanes-Oxley Act (SOX), NIST guidelines, ISO/IEC 27001, GDPR, the Gramm-Leach-Bliley Act (GLBA) and the EU’s Payment Services Directive (PSD2). Each aims to protect customer data and make breaches harder. You can also read more about identity theft as a cybercrime.