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Why Generic MSPs Fail Financial Services Compliance
In this article: The Problem With Generic MSPs Five Ways Generic MSPs Fail Financial Services Clients The Real Cost of the Wrong Provider What...
In this article:
Community banks face a cybersecurity problem that larger institutions solve with headcount. JPMorgan spends $15 billion a year on technology. Your bank has maybe two IT staff managing everything from teller workstations to core banking integrations to the next FFIEC cybersecurity assessment.
That gap is where managed IT services for community banks become a competitive advantage, not just a cost center. Community bank cybersecurity requires a provider who understands both the threat landscape and the regulatory response. The right provider gives a 200-person bank the same security infrastructure and compliance posture that a regional bank with a 30-person IT department maintains. The wrong provider gives you antivirus and a help desk.
This guide covers what community banks should look for in a managed IT provider, which regulatory requirements your provider must understand, and how to tell the difference between a generic managed service provider (MSP) and one that actually knows banking.
Note: While this article focuses on community banks, credit unions face nearly identical requirements under the NCUA, and mortgage companies have parallel obligations under the FTC Safeguards Rule. The evaluation criteria below apply to any financial institution choosing a managed IT provider.
Why Community Banks Need Specialized Managed IT Services
Banking IT isn't office IT. Your environment has regulatory, data, and operational requirements that most managed service providers have never dealt with:
- Examiner scrutiny. OCC and state banking examiners don't ask if you have antivirus. They ask how you assess and mitigate cybersecurity risk across your entire operation, from core banking to email to mobile banking apps. They expect written policies, evidence of testing, and documented incident response plans.
- FFIEC compliance framework. The FFIEC Cybersecurity Assessment Tool (CAT) measures your inherent risk profile against your cybersecurity maturity. A managed IT provider that doesn't understand this framework can't help you prepare for the assessment, and they definitely can't help you close the gaps it identifies.
- Customer data density. Deposit accounts, loan records, wire transfer details, Social Security numbers, tax IDs. A single breach at a community bank can expose the financial lives of an entire town. The reputational damage alone can drive depositors to a competitor.
- Core banking integration. FIS, Fiserv, Jack Henry, Corelation. Your core system connects to everything: online banking, mobile apps, wire systems, general ledger (GL), loan origination, document imaging. Securing those integrations without breaking them requires someone who understands how banking infrastructure actually works.
- Anti-money laundering compliance (BSA/AML). Your transaction monitoring, suspicious activity reporting, and customer due diligence processes all run on IT infrastructure. When that infrastructure has problems, your compliance has problems.
A provider that doesn't understand banking operations will either lock your environment down so tightly that tellers can't process transactions, or leave it open enough that your next OCC exam becomes a problem.
FFIEC, GLBA, and OCC: The Regulatory Stack Your IT Provider Must Know
Community banks operate under overlapping federal and state regulatory frameworks. Your managed IT provider needs to understand all of them, not just the one they Googled before the sales call.
FFIEC Cybersecurity Assessment
The FFIEC CAT is the benchmark your examiners use. It maps your inherent risk profile (based on your products, services, and technology) against five cybersecurity maturity domains: cyber risk management, threat intelligence, cybersecurity controls, external dependency management, and cyber incident management.
Your IT provider should know which domain your bank is weakest in and have a specific plan to move you from "baseline" to "evolving" or "intermediate" maturity. If they've never seen the CAT, they aren't qualified to manage a bank's IT.
GLBA Safeguards Rule
The Gramm-Leach-Bliley Act requires financial institutions to protect customer information through administrative, technical, and physical safeguards. The FTC's updated Safeguards Rule (effective June 2023) added specific requirements that directly affect your IT environment:
- Designated qualified individual responsible for information security
- Written risk assessment with documented criteria
- Encryption of customer information in transit and at rest
- Multi-factor authentication for any individual accessing customer information
- Continuous monitoring or annual penetration testing
- Incident response plan with specific notification procedures
Your IT provider should be able to show you exactly how your Microsoft 365 environment, your endpoints, and your network satisfy each of these requirements. If they can't produce that evidence, you can't produce it for your examiner.
OCC Heightened Standards
For OCC-supervised banks, the heightened standards go beyond GLBA. OCC examiners evaluate your third-party risk management program, which means your managed IT provider is itself subject to examination scrutiny. They'll ask about your provider's SOC 2 attestation, their business continuity plans, their own security controls, and whether you've performed due diligence on them as a vendor.
If your IT provider doesn't have a SOC 2 Type II report, you have a gap in your vendor risk management program that your examiner will find.
What Your Managed IT Provider Must Deliver
Not every MSP is built for banking. Here's what separates managed IT services for community banks from generic business IT support.
Microsoft 365 Governance for Banking
Most community banks run on Microsoft 365. Your provider should configure and manage:
- Conditional Access policies that restrict access based on device compliance, location, and risk level. Not just "require MFA." Policies that block legacy authentication, require compliant devices for accessing customer data, and restrict access from unmanaged personal devices.
- Data Loss Prevention (DLP) rules that prevent customer account numbers, Social Security numbers, and loan documents from being emailed to personal accounts or uploaded to consumer cloud storage.
- Information barriers between departments where regulators require separation (trust department from commercial lending, for example).
- Retention policies aligned with your records retention schedule. Banking regulators expect specific retention periods for different document types. Your IT provider should configure these, not leave it to each employee's judgment.
Endpoint Security That Satisfies Examiners
Antivirus is table stakes. For a community bank, endpoint security means:
- Endpoint Detection and Response (EDR) with 24/7 monitoring. Not "we'll check the alerts on Monday."
- Device compliance enforcement. If a laptop falls out of compliance (missed patches, disabled encryption), it loses access to banking systems automatically.
- Application control. Teller workstations should only run approved applications. No employee should be installing personal software on machines that access core banking.
- Full disk encryption verified and reportable. When your examiner asks for proof that all laptops are encrypted, your provider should produce that report in minutes, not days.
SOC 2 Type II Attestation
This isn't a marketing badge. It's a requirement for your vendor risk management program. A SOC 2 Type II report means an independent auditor has verified that your IT provider's security controls work as described over a sustained period (typically 6 to 12 months). SOC 2 Type I only confirms controls exist at a point in time. Type II confirms they actually work.
Ask for the full report, not a summary. Read the exceptions section. If there are material exceptions, ask what they've done to remediate.
Incident Response Planning
When a community bank experiences a security incident, the response has regulatory dimensions that don't exist in other industries. Your provider should maintain a documented incident response plan that covers:
- Containment procedures specific to banking systems (isolating core banking vs shutting down everything)
- Notification timelines for your primary regulator (OCC, FDIC, or state banking department)
- Suspicious Activity Report (SAR) filing coordination if the incident involves potential fraud
- Customer notification procedures under state breach notification laws
- Evidence preservation for potential law enforcement involvement
If your IT provider's incident response plan is a generic template that says "notify affected parties," it wasn't written for a bank.
Vendor Risk Management Support
Community banks rely heavily on third-party technology providers. Your managed IT provider should help you assess and document the security posture of your critical vendors, not just manage your internal infrastructure. This means helping you collect and evaluate SOC 2 reports from your core processor, your online banking provider, your wire transfer vendor, and your document imaging system.
Red Flags When Evaluating a Managed IT Provider for Your Bank
These aren't minor concerns. Any one of these should make you question whether a provider is ready for banking:
- No SOC 2 Type II report. If they can't pass their own security audit, they can't manage yours.
- They don't know what FFIEC stands for. Ask them to describe how they'd help you prepare for your next FFIEC cybersecurity assessment. If they can't answer specifically, they've never done it.
- Their pricing is based on "per user" with no banking-specific services. A provider charging $150/user/month for the same package they sell to law firms and accounting firms isn't giving you banking-grade security.
- No experience with core banking integrations. Ask which core systems they've worked with. If the answer is "we can figure it out," that means they haven't done it.
- They can't explain their monitoring capabilities. "We monitor 24/7" means nothing if they can't tell you what they monitor, what triggers an alert, and what their response time targets are.
- No documented incident response plan for banking clients. A generic incident response plan won't address regulatory notification requirements, Suspicious Activity Report coordination, or evidence preservation for bank examiners.
- They recommend consumer-grade tools. If they suggest Dropbox for file sharing or use free antivirus, they don't understand the data protection requirements for financial institutions.
How ABT Works With Community Banks
ABT has managed IT environments for thousands of financial institutions — including banks, credit unions, and mortgage companies — since 1999, and currently supports over 750 active clients. Here's what that looks like in practice for community banks:
- Guardian platform. ABT's Guardian security platform continuously monitors your Microsoft 365 tenant against over 100 security benchmarks. It doesn't just report your Secure Score. It identifies specific configuration gaps, maps them to FFIEC maturity domains, and tracks remediation progress so you have documentation ready for your examiner.
- Microsoft Tier 1 CSP. ABT holds Tier 1 Direct Partner authority with Microsoft, which means direct access to Microsoft engineering support. When a core banking integration breaks at the Microsoft 365 level, ABT escalates directly to Microsoft product teams rather than going through standard support queues.
- FFIEC assessment support. ABT helps community banks prepare for FFIEC cybersecurity assessments by mapping your current security posture against the CAT domains, identifying gaps, building remediation plans, and assembling the evidence packages your examiner expects.
- Banking-specific compliance documentation. ABT maintains compliance evidence libraries for banking clients that include Conditional Access policy documentation, DLP rule configurations, encryption verification reports, and endpoint compliance summaries. When your examiner asks, you have it.
- Free security assessment. ABT offers a free Microsoft 365 security assessment that grades your tenant configuration against financial services security benchmarks. You get a report showing where your environment stands and what needs to change before your next exam.
Frequently Asked Questions
What does managed IT services for community banks include?
Managed IT services for community banks include Microsoft 365 administration and security, endpoint protection with EDR monitoring, network security management, FFIEC cybersecurity assessment preparation, GLBA compliance support, core banking integration management, help desk support, and incident response planning. A qualified provider also handles vendor risk management support and produces the compliance documentation that banking examiners require.
How much do managed IT services cost for a community bank?
Managed IT services for community banks typically cost more than generic business IT support because banking-specific security requirements, compliance documentation, and regulatory exam preparation require specialized expertise. Pricing varies based on user count, core banking integration complexity, and the scope of compliance support included.
What is the FFIEC Cybersecurity Assessment Tool and how does IT management affect it?
The FFIEC Cybersecurity Assessment Tool measures a financial institution's inherent cybersecurity risk against its cybersecurity maturity across five domains. Your IT management directly affects maturity scores because most assessed controls are IT controls, including access management, network security, endpoint protection, and incident response. A provider experienced with the FFIEC CAT identifies gaps and builds remediation plans before your examination.
Should a community bank use a local IT company or a specialized managed IT provider?
Community banks should choose a managed IT provider with specific banking experience over a local generalist. Local providers rarely have FFIEC compliance, core banking integration, or banking incident response experience. A specialized provider holds SOC 2 Type II certification, produces compliance documentation examiners expect, and understands core system integrations that generalists haven't touched.
What compliance certifications should a managed IT provider have to work with banks?
A managed IT provider for community banks should hold SOC 2 Type II attestation at minimum, verifying their security controls work over a sustained period. Additional qualifications include FFIEC cybersecurity assessment experience, GLBA Safeguards Rule knowledge, OCC examination familiarity, and Microsoft partnership credentials like Tier 1 Cloud Solution Provider status.
What Microsoft 365 Conditional Access and DLP configurations should a community bank have?
Community banks should configure Conditional Access policies that enforce multi-factor authentication for all users, block legacy authentication protocols, require device compliance for core banking access, and restrict sign-ins from unmanaged devices. Data Loss Prevention (DLP) rules should detect and block sharing of customer Social Security numbers, account numbers, and loan data outside the organization. Additional configurations include DMARC email authentication to prevent domain spoofing, sensitivity labels for document classification, and audit logging sufficient to produce evidence packages for OCC and FFIEC examiners.
Technical Reference
The following tables provide definitions for regulatory frameworks and technical terms used in this article.
Regulatory Frameworks
| Term | Full Name | What It Means |
|---|---|---|
| FFIEC | Federal Financial Institutions Examination Council | Interagency body that publishes the IT Examination Handbook and Cybersecurity Assessment Tool (CAT) used by bank examiners. |
| GLBA | Gramm-Leach-Bliley Act | Federal law requiring financial institutions to protect customer information through administrative, technical, and physical safeguards. |
| OCC | Office of the Comptroller of the Currency | Federal regulator for national banks. Conducts IT examinations using FFIEC framework. |
| NCUA | National Credit Union Administration | Federal regulator for credit unions. Uses the same FFIEC examination framework as OCC. |
| FTC Safeguards Rule | Federal Trade Commission Safeguards Rule | Requires mortgage companies and non-bank financial institutions to maintain comprehensive information security programs. |
Glossary
| Term | Definition |
|---|---|
| BSA/AML | Bank Secrecy Act / Anti-Money Laundering — regulations requiring financial institutions to detect and report suspicious transactions. |
| Conditional Access | Microsoft 365 login policies that control who can access what, from which devices, and under what conditions. |
| DLP | Data Loss Prevention — rules that detect and block sensitive data from leaving the organization. |
| DMARC | Email authentication protocol that prevents attackers from sending emails that appear to come from your domain. |
| EDR | Endpoint Detection and Response — security software that monitors devices for threats and enables rapid response to incidents. |
| MSP | Managed Service Provider — a company that remotely manages a customer's IT infrastructure and systems. |
| SAR | Suspicious Activity Report — a filing required when a financial institution detects potential fraud or money laundering. |
| SOC 2 Type II | Independent audit that verifies a vendor's security controls work as described over a sustained period (typically 6-12 months). |
Next Steps
If your community bank is evaluating managed IT providers or preparing for your next FFIEC cybersecurity assessment, start with a clear picture of where your environment stands today.
- Get your free security grade. ABT's Microsoft 365 Security Assessment evaluates your tenant configuration against financial services security benchmarks and shows you exactly where the gaps are.
- Talk to a financial institution IT specialist. Schedule a conversation with ABT's team to discuss your compliance requirements and IT challenges — whether you're a community bank, credit union, or mortgage company.
