The CUSO Security Loop Hole
The NCUA Inspector General (IG) suggested this week that the agency have regulatory oversight of Credit Union Service Organizations (CUSOs) to reduce the overall risk to the system. CUSOs have long been seen as a separate firm from the credit unions, though they may have an ownership stake in them. To date, many of these organizations have been outside the regulatory and oversight controls that are applied to the very credit unions they serve. In terms of information security, that often means they aren’t held to the same level of security and risk management controls as required by NCUA 748 and other guidance.
CUSO Security Oversight Challenges
The NCUA IG suggests that NCUA guidance and regulatory oversight be directly applied to CUSOs, instead of through vendor or partner risk management programs of the CUSO customers. This would provide for more direct regulation of the security controls and risk management processes in use at the CUSOs themselves. However, this introduces several challenges for some CUSOs, who may be more focused on agility, market speeds and innovation – areas where regulatory guidance can be especially impactful and can create significant budgetary challenges. This gets even more complicated when regulatory guidance is vague, or can be inflexible – the very opposite of the needs of organizations focused on innovation and market speed adaptation. An excellent example of this is CUSOs working on financial technologies, crypto currencies, blockchain and other exciting new areas. Regulatory guidance lags or lacks in most of those areas and hasn’t caught up to these new, and in some cases, experimental technologies.
One Approach – Best Practices CUSO Security and Third Party Attestation
One approach that might work, is for CUSOs to work with independent third-party assessors who could then measure the CUSO against industry standard best practices that apply to their specific lines of business, research or innovation. These vendors could then help the CUSO build a relevant and respectable CUSO security and risk management program – which they could attest to the NCUA. If this attestation were required on a yearly basis, along with some basic guidance, like ongoing risk management reviews, ongoing vulnerability management, etc – this could go a long way to mitigating the risks that concern the NCUA IG, while still maintaining independence and control by the CUSOs – thus, empowering their mission. Programs like these have been very successful in other industries and don’t have to add the overhead and bureaucracy of full regulatory compliance or programs like PCI-DSS.
If you’d like to build such a program for your CUSO, please get in touch with us. We’d love to work on creating this process with a handful of CUSOs around the US, and are more than capable of applying our 30 years of experience in information security to each organization’s independent needs. Drop us a line or give us a call at (614) 351-1237 and let’s work together to close the CUSO Security loop hole in a way that reduces risk but doesn’t destroy the power and flexibility of the CUSO ecosystem.