Best Practices for Protecting Nonpublic Information (NPI) Under NYDFS Regulations

Protecting customer data has become one of the most critical responsibilities for financial institutions. The NYDFS Nonpublic Information requirements emphasize safeguarding sensitive customer and business information through strong cybersecurity controls, governance policies, and continuous monitoring. As cyber threats continue to evolve, organizations must adopt a proactive approach to protecting Nonpublic Information (NPI) while maintaining compliance with the New York Department of Financial Services (NYDFS) Cybersecurity Regulation (23 NYCRR Part 500).

Organizations that understand what qualifies as Nonpublic Information and implement effective security measures are better positioned to reduce regulatory risk, prevent data breaches, and strengthen customer trust. For a detailed overview of the regulation, organizations can refer to the Solix Knowledge Base article on NYDFS, which explains its purpose, scope, and cybersecurity requirements.

What Is Nonpublic Information (NPI)?

Under NYDFS regulations, Nonpublic Information (NPI) refers to electronic information that is not publicly available and could expose individuals or organizations to financial, reputational, or operational harm if disclosed without authorization.

Examples include:

• Customer financial records

• Bank account details

• Credit reports

• Social Security numbers

• Driver's license numbers

• Health-related financial information

• Authentication credentials

• Confidential business records

• Proprietary financial data

Because NPI is highly sensitive, organizations must implement appropriate administrative, technical, and physical safeguards to protect it.

Why Protecting NPI Matters

A breach involving Nonpublic Information can have serious consequences, including:

• Regulatory penalties

• Financial losses

• Identity theft

• Business disruption

• Customer dissatisfaction

• Reputational damage

• Legal action

Strong NPI protection helps organizations maintain compliance while building long-term trust with customers and regulators.

NYDFS Requirements for Protecting NPI

The NYDFS Cybersecurity Regulation requires organizations to implement a risk-based cybersecurity program that protects sensitive information throughout its lifecycle.

Key requirements include:

• Risk assessments

• Data governance

• Encryption

• Access controls

• Multi-factor authentication (MFA)

• Security monitoring

• Incident response planning

• Employee cybersecurity awareness

• Third-party risk management

These controls work together to reduce the likelihood of unauthorized access to NPI.

Best Practices for Protecting NYDFS Nonpublic Information

1. Discover and Classify Sensitive Data

Organizations cannot secure information they cannot identify.

Data discovery tools help locate NPI across:

• Databases

• File shares

• Cloud storage

• Email systems

• Enterprise applications

• Backup repositories

Once discovered, information should be classified according to sensitivity and regulatory requirements.

Accurate classification allows organizations to apply appropriate security controls.

2. Implement Strong Access Controls

Not every employee requires access to sensitive information.

Organizations should adopt:

• Role-based access control (RBAC)

• Principle of least privilege

• Privileged access management

• User authentication

• Periodic access reviews

Restricting access significantly reduces insider threats and accidental data exposure.

3. Encrypt Sensitive Information

Encryption is one of the most effective methods for protecting NPI.

Organizations should encrypt data:

At Rest

• Databases

• Document repositories

• Backup systems

In Transit

• Email communications

• APIs

• Cloud applications

• Internal networks

Even if attackers gain access, encrypted data remains unreadable without the proper keys.

4. Monitor User Activity

Continuous monitoring enables organizations to detect suspicious behavior before significant damage occurs.

Monitoring should include:

• Login activity

• File access

• Privileged account usage

• Data downloads

• Administrative changes

• Network activity

Security logs also support compliance audits and forensic investigations.

5. Strengthen Identity Management

Identity security plays a central role in protecting NPI.

Best practices include:

• Multi-factor authentication

• Single Sign-On (SSO)

• Strong password policies

• Password managers

• Account lockout policies

• Privileged account monitoring

Identity management helps reduce unauthorized access.

6. Secure Third-Party Vendors

Many financial institutions share information with external vendors.

Organizations should evaluate vendor security by reviewing:

• Security certifications

• Data protection controls

• Compliance programs

• Incident response capabilities

• Contractual security obligations

Ongoing vendor monitoring reduces supply chain risks.

7. Maintain Secure Data Backups

Backups help organizations recover from ransomware and accidental data loss.

Backup strategies should include:

• Regular backup schedules

• Immutable backups

• Offline storage

• Recovery testing

• Encryption

Business continuity depends on reliable backup processes.

8. Train Employees

Employees are often the first line of defense against cyber threats.

Training programs should cover:

• Phishing awareness

• Password hygiene

• Social engineering

• Safe remote work

• Data handling procedures

• Incident reporting

Regular awareness training helps reduce human error.

9. Develop an Incident Response Plan

Organizations should prepare for security incidents before they occur.

Incident response plans should define:

• Detection procedures

• Escalation paths

• Investigation steps

• Communication processes

• Recovery activities

• Regulatory reporting

Routine tabletop exercises improve response readiness.

10. Establish Strong Data Governance

Data governance helps organizations manage information consistently throughout its lifecycle.

Governance policies should address:

• Data ownership

• Classification

• Retention

• Disposal

• Access permissions

• Compliance monitoring

Strong governance improves both security and operational efficiency.

The Role of Data Lifecycle Management

Sensitive information should not remain in production systems indefinitely.

Data lifecycle management helps organizations:

• Archive inactive information

• Retain regulated records

• Secure historical data

• Dispose of expired records

• Reduce storage costs

• Improve compliance

Managing data throughout its lifecycle minimizes unnecessary exposure.

Common Challenges in Protecting NPI

Organizations often struggle with:

• Legacy applications

• Data silos

• Shadow IT

• Unstructured data

• Cloud complexity

• Third-party risks

• Manual compliance reporting

Modern enterprise data management solutions help overcome these challenges by improving visibility and automating governance.

How Solix Helps Protect Nonpublic Information

Solix Enterprise Data Management solutions support NYDFS compliance by helping organizations:

• Discover sensitive information

• Classify regulated data

• Implement enterprise data governance

• Archive inactive information securely

• Automate retention policies

• Strengthen access controls

• Improve audit readiness

• Support compliance reporting

These capabilities reduce risk while simplifying ongoing compliance efforts.

Best Practices Checklist

To strengthen NPI protection, organizations should:

• Conduct regular risk assessments.

• Discover and classify sensitive information.

• Encrypt data at rest and in transit.

• Enforce least-privilege access.

• Enable multi-factor authentication.

• Continuously monitor systems.

• Train employees on cybersecurity.

• Manage third-party vendor risks.

• Archive inactive data securely.

• Review governance policies regularly.

Following these practices helps organizations protect sensitive information and maintain compliance with NYDFS regulations.

Conclusion

Protecting NYDFS Nonpublic Information requires more than implementing isolated cybersecurity controls. Financial institutions must adopt a comprehensive strategy that combines enterprise data governance, identity management, encryption, monitoring, and lifecycle management to safeguard sensitive information throughout its existence.

By implementing these best practices and leveraging enterprise data management solutions, organizations can improve regulatory compliance, reduce cybersecurity risks, and build greater confidence among customers and regulators.