NYDFS (New York State Department of Financial Services)

The New York State Department of Financial Services (NYDFS), often shortened to DFS, is the state agency that regulates and supervises banks, insurance companies, money transmitters, virtual currency businesses and other financial services firms operating in New York. It issues New York money transmitter licenses and the BitLicense, charters state banks and trust companies, and enforces state financial law, including some of the most demanding anti-money laundering, sanctions and cybersecurity requirements in the United States.

Because New York is home to the largest US financial center and to the dollar-clearing operations of many global banks, NYDFS has an influence well beyond the state, and global firms often weigh its requirements alongside those of other financial-centre regulators such as the Dubai Financial Services Authority (DFSA). For the agency's full profile, see the New York State Department of Financial Services regulator profile.

NYDFS was created in 2011 under the New York Financial Services Law, which merged the former New York State Banking Department and the New York State Insurance Department into a single regulator, an integrated model comparable to Switzerland's FINMA, which supervises banks, insurers and securities firms together. It began operating in October 2011, headed by a Superintendent of Financial Services appointed by the Governor. The banking department it replaced had supervised state-chartered institutions since the nineteenth century.

• Banking. Chartering and supervising state-chartered banks, trust companies, and New York branches and agencies of foreign banks.
• Insurance. Licensing and supervising insurers, brokers and agents doing business in New York.
• Money transmission. Licensing money transmitters under Article 13-B of the New York Banking Law, a regime that has its own capital, bonding and reporting requirements and that New York has not replaced with the multistate Money Transmission Modernization Act.
• Virtual currency. Licensing virtual currency business activity under the BitLicense regulation and chartering limited purpose trust companies that custody digital assets or issue stablecoins.
• Consumer protection. Supervising consumer lenders, check cashers, mortgage businesses and student loan servicers, and handling consumer complaints.

NYDFS rules are codified in Title 23 of the New York Codes, Rules and Regulations (NYCRR). Notable parts include:

• Part 200 (BitLicense), adopted in 2015, which requires a license for virtual currency business activity involving New York or its residents, with requirements on capital, custody, AML, cybersecurity and consumer disclosure.
• Part 500 (Cybersecurity), effective in 2017 and substantially amended in 2023, which requires covered firms to maintain a cybersecurity program, appoint a chief information security officer and report significant incidents.
• Part 504 (Transaction monitoring and filtering), effective in 2017, which requires regulated institutions to maintain transaction monitoring and sanctions screening programs and to file an annual compliance certification signed by a senior officer or the board.

In 2022 NYDFS issued guidance for US dollar-backed stablecoins issued by its regulated entities, covering reserve composition, redemption and attestation.

NYDFS has brought large enforcement actions against banks and other firms for failures in AML programs, sanctions compliance and cybersecurity. Several of its best-known cases involved foreign banks processing payments for parties subject to US sanctions administered by OFAC, including actions against Standard Chartered in 2012 and BNP Paribas in 2014, the latter as part of a multi-agency settlement totaling about 8.9 billion dollars. It has also penalized virtual currency firms and payment companies for weaknesses in their AML programs. Its actions often run in parallel with those of federal agencies such as FinCEN and the Federal Reserve, and frequently require the appointment of an independent monitor.

For companies building a nationwide payments or crypto business, New York is often the last and most demanding state license to obtain. Applicants for a New York money transmitter license file through NMLS using the standard NMLS MU filings, but NYDFS also reviews extensive additional material on ownership, control persons, capital, compliance and cybersecurity, and approval can take considerably longer than in other states. Its review of a change of control at a licensee is similarly detailed. NYDFS participates in multistate coordination through the Conference of State Bank Supervisors, while keeping its own licensing standards.

• New York State Department of Financial Services