New York State Department of Financial Services Superintendent Adrienne A. Harris announced that PayPal, Inc. (NASDAQ: PYPL) will pay a $2 million penalty to New York State for violations of DFS’s Cybersecurity Regulation.
An investigation determined PayPal failed to use qualified personnel to manage key cybersecurity functions and “failed to provide adequate training to address cybersecurity risks.”
These failures led to sensitive customer information, including “social security numbers (SSNs), being left unredacted and easily accessible to cybercriminals.”
Superintendent Harris said:
“New York’s nation-leading cybersecurity regulation sets a critical standard for safeguarding consumer data and strengthening the resilience of financial institutions. Qualified cybersecurity personnel are the first line of defense against potential data breaches, and providing proper training and effectively implementing cybersecurity policies and procedures are vital steps to protecting sensitive data and mitigating risks.”
PayPal, one of the world’s largest financial technology companies, “offers online financial services to customers around the globe.”
Customer data was exposed after PayPal implemented “changes to existing data flows to make IRS Form 1099-Ks available to more of its customers.”
However, the teams tasked with implementing these changes were “not trained on PayPal’s systems and application development processes.”
As a result, they failed to follow “proper procedures before the changes went live.”
This allowed cybercriminals to leverage “compromised credentials to access Form 1099-Ks, which included sensitive customer data, including SSNs.”
The Department’s investigation also revealed that PayPal failed to implement and maintain “written policies that address access controls, identity management, and customer data, and failed to use effective controls to protect against unauthorized access to Nonpublic Information or Information Systems.”
Notably, the company did not require customers to “use multifactor authentication or use controls such as CAPTCHA or rate limiting to help prevent unauthorized access.”
PayPal has since remediated these issues and “improved its cybersecurity practices.”
The Department’s Cybersecurity Regulation has been in effect since March 2017, with the “second amendment becoming effective in November 2023.”
