We have recently made a significant change to our Incident Response Policy regarding Disclosure Incidents.

At infotex we are always revising and updating our boilerplates. We have recently made a significant change to our Incident Response Policy regarding Disclosure Incidents. It is of course very important to comply with all applicable laws and regulations, but understanding which of these you are required to comply with, and when compliance is necessary, will prevent undue burden on your institution. We want our policy to queue up that financial institutions do not have to comply with state law if their policy requires them to comply with federal law (such as FDIC’s Financial Institution Letter 27-2005, the OCC Supervisor Letter 2005-13, SR 05-23 / CA 05-10 for Federal Reserve banks, and NCUA Rules and Regulation 748 Appendix B for NCUA institutions).  This will get you out of a lot of busy work required by the state if you don’t need the help of law enforcement.

If you DO need law enforcement’s help, they will ask you to hit on certain parts of state law.  (Usually notifying the State Attorney General’s office.)  And there may be other reasons you should comply with state law that arise out of the unpredictable incident itself.

Thus, our boilerplate USED to say:

• Disclosure Incidents:  These are incidents which, because of some statute or regulation, require [name of financial institution] to notify customers, law enforcement, examiners, or the board of directors.  The [Incident Response Team (IRT) / IRT / Technology Steering Committee / Disaster Recovery Team] must comply with all applicable laws and regulations, including state laws such as [Indiana Code 24-4.9 / applicable law in your state] and federal regulations such as the [FDIC’s Financial Institution Letter 27-2005, the OCC Supervisor Letter 2005-13, SR 05-23 / CA 05-10 for Federal Reserve banks, and NCUA Rules and Regulation 748 Appendix B for NCUA institutions —> the FFIEC’s Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice] and/or any other applicable guidance or regulations as they are developed.

However, we feel this can be interpreted to mean that you are REQUIRED to comply with state law.  Not so.

In the newest version of our boilerplate, we have changed our wording to reflect that while federal regulations regarding disclosure incidents should always be followed, state regulations should only be addressed when absolutely necessary.  The new language is as follows:

• Disclosure Incidents:  These are incidents which, because of some statute or regulation, require [name of financial institution] to notify customers, law enforcement, examiners, or the board of directors.  The [Incident Response Team (IRT) / IRT / Technology Steering Committee / Disaster Recovery Team] must comply with all applicable laws and regulations, including (only when absolutely necessary) the state laws such as [Indiana Code 24-4.9 / applicable law in your state] and always including federal regulations such as the [FDIC’s Financial Institution Letter 27-2005, the OCC Supervisor Letter 2005-13, SR 05-23 / CA 05-10 for Federal Reserve banks, and NCUA Rules and Regulation 748 Appendix B for NCUA institutions —> the FFIEC’s Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice] and/or any other applicable guidance or regulations as they are developed.

Please note that we have passed our interpretation of this issue on to our own attorneys, who have agreed that we are interpreting it correctly, with one all-caps stipulation:  THE BANK STILL HAS TO COMPLY WITH FEDERAL GUIDANCE.  (To which we said, hey, they’re banks, of course they will comply with the federal guidance!!)

Adam Reynolds is a Staff Auditor at infotex.