compliance requirement community banks

In today’s global marketplace, Banking and Financial Institutes are greatly exposed to a range of security threats.  The ever-evolving dynamics of the industry, its scope, and the complexity of the activity makes it an increasingly complex regulatory environment. Further, due to several cases of high profile compliance breakdowns, and increased emphasis on data protection, the federal and state regulatory agencies, investors, and the general public are focusing on institutions’ security controls, customer practices, and regulatory compliance like never before.

Moreover, Compliance failure leading to severe litigation, financial penalties, regulatory constraints, and reputational damage greatly impacts the Community Banks on its operational, management, and business front. So, based on the needs and the regulatory requirements, a comprehensive Compliance Management plan is required to help Community Banks in its efforts of achieving Compliance. The plan ensures the Community Banks stay up-to-date with all the regulatory requirements.

In today’s article, we will be focusing on various Compliance requirements for Community Banking and ways by which the process can be streamlined. But, let us first understand what a Community Bank is and what are the Compliance requirements for Community Banks.

What is a Community Bank?

A Community Bank is a locally operated financial institution that primarily focuses on helping small and mid-sized businesses financially. Community banks provide traditional banking services to address the needs of the local community. They form an integral part of the US Banking and Financial Systems. 

Role of a Community Bank in the US

The US Banking System comprises of large and small banks that are closely knitted to the local communities. Among all the Banking Institutes, Community Banks in the US account for a large share of banks but they account for a smaller share in the total banking activity. However, they still remain essential in some types of communities, especially in rural communities and some parts of the country.

Community Banks are important in rural communities for they account for nearly 58% of all banking offices in such communities and comprise nearly 49% of deposits. Besides offering substantial banking services in the rural community and small cities they are essential in providing relationship-based banking services. This service is availed by small businesses, individuals, and small-time depositors with low income and wealth.  Community banks also play a major role in lending money to their small-time businesses.

Cyber Security Challenges faced by Community Banks

1. Cyber Security Challenges

The Banking Industry is under a huge dilemma when it comes to the Privacy and Security of business-critical information and infrastructure.  Today, it simply boils down to three major aspects that expose the Banking Industry to incidents of a breach. This includes evolving sophisticated threats, the complexity of IT environments, and the lack of resources to deal with cyber threats. These factors are severely contributing to the erosion of the community bank’s ability to protect consumer information, confidential data, and the availability of their computing infrastructure to serve its customers. Community banks are required to invest in the latest security solutions and deploy advanced technology to prevent cyber risks.

2. Evolving technology

Community Banks are constantly under the pressure to cope with the evolving technology in the Banking Industry. This not only involves adapting to the technology, but also ensuring the implementation of necessary security measures to strengthen the security of the Infrastructure. Further, new technology platforms like Cloud Computing present a myriad of problems in terms of system implementation, operations, and pricing models.

3. Increased Regulatory Challenges 

Community Banks face a huge burden of Regulatory and Compliance mandates. Growing Regulatory requirements tend to inhibit the lending ability in the community or exorbitantly increase the cost of lending. Moreover, the harsh financial penalties are severe consequences for Non-Compliance adds to the pressure. It is indeed difficult for local Community Banks to keep up with Compliance requirements and abide by the evolving security landscape.

Compliance Requirements for Community Banking

Large amounts of data processed and stored by banks are most sensitive. For these reasons, banks are expected to secure their systems, operation, and have in place security controls to protect sensitive data and ensure compliance with industry standards. As one of the most highly regulated industries, community banks are today under stringent scrutiny over the adherence to Regulatory Compliance, Security Standards, and Risk Management.

Facing the scrutiny of multiple governing bodies for various Compliance and Regulatory Standards, Banks are expected to be compliant with many laws and regulations governing the security and privacy of all this data. Given below are some common compliance and regulatory requirements imposed on the banking industry that impacts the business of Community banking as well-

GDPR Compliance- GDPR is an EU law that requires banks to determine and ensure how the personal data stored in loan management systems is processed, consumed, and shared with other systems. This is to ensure the privacy and security of consumer data.

CCPA– Similar to GDPR, CCPA is a law in California that requires banks to examine their systems and operations to determine how the personal data stored in their systems is processed and shared with other systems. The law requires banks to ensure the privacy and security of consumer data.

PCI DSS – PCI has outlined stringent norms for banks to comply with and ensure compliance with PCI DSS Standards. The requirements drawn and outlined are to ensure that cardholder data is well protected and never compromised.  Issuing banks (credit and debit cards) are expected to perform security testing and Penetration testing to detect vulnerabilities in systems and fix them immediately to prevent data theft and breach.

PCI PIN – The PCI Council has set security requirements and standards that are more concerned with the physical and logical security of the point-of-sale devices or terminals. The standard is concerned with securing POS hardware and software, against security threats.

PA DSS- PCI Security Standards Council developed and actively promotes Payment Application Data Security Standards (PA-DDS) that apply to organizations that commercialize payment applications used by third-party merchants. It is a set of requirements expected to be followed to ensure that payment processing applications used by payment service providers and banks, are secure and cardholder data are not compromised.

ISO27001 Standard- Information Security Management System’s ISO 27001 Standard is an international framework that helps in the implementation of different laws, regulations, and requirements in context to data protection. It is a well-thought and designed Data Protection Standards and law that make the implementation of various regulations and standards requirements much easier. The framework includes all policies and processes relevant to how data can be controlled and used.

SOC1 Audits & Attestation – Systems and Organization Controls (SOC1) are requirements designed in relevance to a Service Organization or user entity’s internal controls and financial reporting. It is a set of requirements that will help banks meet the stringent banking regulations and secure critical areas including control environment, and ensure system availability, data backups, data communication, and application change controls.

SOC2 Audit & Attestation

Systems and Organization Controls (SOC2) are requirements designed in relevance to a Service Organization or user entity’s internal control that process customer data and for the security and privacy of those sensitive data. The set requirements help banking institutes comply with industry standards and regulations, ensuring Security, Availability, Confidentiality, Process Integrity, and Privacy of systems and data.

With so many different requirements makes information security and privacy compliance are extremely complicated. Every industry has its share of laws, standards, and regulations, but the financial and banking industry, are amongst the most highly regulated industries. Moreover, the fast developments in Fintech (financial technology), have added, to the complexity of Governance and Compliance.

Complying with a growing list of Regulatory and Operational Compliance requirements need professional expertise. Implementing all the Regulations and Compliance Standard takes a considerable amount of time and focus away from the financial well-being of clients. Moreover, since the Regulations are constantly in flux, the need to appoint Chief Compliance Officer / Chief Information Security Office is essential to help these institutions stay updated. This is when experienced Information Security Consulting service providers come into the role to assist community banks in their Compliance Programs.

Implementing Compliance Standards for Community Banks with VISTA InfoSec

Security and Regulations go hand in hand. Community banks need to be meticulous and proactive in implementing Security Controls, and Policies as per Industry Standards. As a part of VISTA InfoSec’s Compliance proposition to Community Banking clients, we focus on ensuring the security and confidentiality of customer data and information.  Through our Managed Compliance Turnkey Solutions we help Community Banks streamline their business operations, statutory reporting processes, and enable high-end security for data communication. Given below is our comprehensive Compliance Solutions for Community Banks that help them secure Infrastructure and meet Compliance requirements.

  • Compliance Management – Getting the right people for your team and then managing them is a major headache. Our experienced and qualified pool of personnel can seamlessly work with your team and augment the same to plug critical gaps
  • Infrastructure Assessment – With most of the banking happening online, ensuring your internet banking portals and API for channel banking are secure enough. We can in real-time and even periodically assess (VA, PT, Web Appsec, Mobile Appsec, Red Team Assessment) the processes and infrastructure to help you ensure closure of critical vulnerabilities.
  • Incident Management- Incidents of breach or fraud against community banks are a major concern. But our team offers a solution that effectively counters and copes with such situations ensuring business continuity.
  • Regulatory Compliance- Our customized and end-to-end compliance solutions ensure adherence to Regulatory Compliance including PCI DSS, PCI PIN, PA DSS/PCI SSF to name a few.
  • Privacy assessment – We assess the exposure of your organization to local and international privacy regulations and requirements such as CCPA / CPRA / HIPAA / GDPR, etc, and work with your team to mitigate the gaps identified.

Our Approach to Managed Compliance Services for Community Banking

Design and Implementation of Compliance Process- Our team provides legal expertise and advice on the design and implementation of compliance programs as per the industry standards. Our team helps you effectively operationalize the Compliance process through the integration of core business processes.

Regulatory Readiness- We conduct a comprehensive regulatory readiness compliance review to assist banking institutions in their preparation for regulatory examinations/inspections. This is done by helping them identify potential regulatory gaps and by providing them specific actionable recommendations to address these gaps.

  • Risk and Control Assessment– Our team of experts will evaluate the design and operating effectiveness of Compliance Risk and Control Processes to ensure your bank meets all the necessary requirements, and other applicable Regulatory Compliance requirements.
  • Internal Compliance Audit Support – We work as a team to assist community banks with the design and execution of various industry compliance programs and other compliance-related internal audits.
  • Regulatory Remediation– Our end-to-end Managed Compliance Services include assisting banks with remediating Compliance program and performance issues raised during the examining IT Infrastructure and environment. We also suggest a remedial plan of action for addressing issues and meeting the Compliance requirements.
  • Adherence to Compliance- We also perform final testing to determine the banking institution’s adherence to applicable Compliance Standards pertaining to the security and privacy of data, consumer protection laws, and regulatory guidance.

VISTA InfoSec is a reputed Information Security Consulting firm, offering regulatory compliance solutions. For our expert advice call us at(+1-415-513-5261) and drop us an email ussales[at]vistainfosec.com

Narendra Sahoo
Narendra Sahoo

Narendra Sahoo (PCI QSA, PCI QPA, CISSP, CISA, and CRISC) is the Founder and Director of VISTA InfoSec, a global Information Security Consulting firm, based in the US, Singapore & India. Mr. Sahoo holds more than 25 years of experience in the IT Industry, with expertise in Information Risk Consulting, Assessment, & Compliance services. VISTA InfoSec specializes in Information Security audit, consulting and certification services which include GDPR, HIPAA, CCPA, NESA, MAS-TRM, PCI DSS Compliance & Audit, PCI PIN, SOC2 Compliance & Audit, PDPA, PDPB to name a few. The company has for years (since 2004) worked with organizations across the globe to address the Regulatory and Information Security challenges in their industry. VISTA InfoSec has been instrumental in helping top multinational companies achieve compliance and secure their IT infrastructure.