Mobile payment services and online banking have lightened our wallets, at least physically. Phones, smart watches, and user login identification that remembers passwords and credit card information make financial processes streamlined. Contactless pay options, decentralized digital currency, and cryptocurrency are revolutionizing the economy.
The financial industry’s digitalization throughout the pandemic was swift. So were the cyberattackers who preyed on the uncharted and susceptible developments in finance.
Chainaysis’ blog preview of their 2022 Crypto Crime Report found that “cybercriminals laundered $8.6 billion worth of cryptocurrency in 2021.” They based it on “the amount of cryptocurrency sent from illicit addresses to addresses hosted by services.” The vast amount of money cyberattackers can access is unnerving. It is motivation to increase cybersecurity regulations. To address the problem of cyberattacks in the financial sector, we need to see how it’s affecting this industry and the state of cybersecurity now.
How Does Finance and Technology Connect?
Is there anything that the pandemic hasn’t impacted? For the financial industry, there is a trend toward a cashless society. “Central banks around the globe are considering throwing their weight behind digital currencies and modernizing payment systems.” Those who work from home, prefer contactless and need accessible services can enjoy this progress.
With this evolution comes risks. The digital transformation we’re experiencing can compromise “the global financial system, financial stability, and confidence in the integrity of the system.” It points to a global cyber threat banks and technology need to be aware of.
The Financial Times interviewed Jessica Rusu, the chief data, information, and intelligence officer for the Financial Conduct Authority. Rusu recognizes the unique risks of technology-enabled financial services. Recent world affairs change the way governments and businesses handle these risks. “‘Macro events including climate change…war in Ukraine, and the rapidly escalating cost of living'” are costly and pivotal to the economy.
Banks and financial institutions hope to adapt to the times. With modern technology, comes threats from cybercriminals taking advantage of new systems and infrastructures.
Cybercriminals dealing in cryptocurrency money laundering services take billions of dollars. The goal is to transfer stolen money “to a service where [it] can be kept safe from the authorities and eventually converted to cash.” Chainalysis reports on this and how “two of the worst-offending money laundering services – Suex and Chatex [took] funds from ransomware operators [and] scammers.” The Office of Foreign Assets Control (OFAC) penalized the two groups.
Society relies on technology to deliver better, faster, and more efficient solutions. Can the explosion of this connectedness achieve basic and fortified cybersecurity to protect financial accounts?
What Are the Regulations for Cybersecurity in Finance?
The central bank of the U.S., the Federal Reserve System, includes the Board of Governors of the Federal Reserve System (Board) and 12 regional Federal Reserve Banks (Reserve Banks). The Federal Reserve supports the U.S. economy and the public interest. The Board “is the governing body of the Federal Reserve System.”
The Reserve Banks adheres to “a comprehensive, risk-based information security program..informed by NIST standards and guidance and industry best practices.” The Board supervises the Reserve Banks’ “cyber risk management posture.”
The Board strives to detect and prevent imminent threats. They join forces with federal agencies, the private sector, and other resources to track cybersecurity tools. They identify high-risk cyberattacks that require immediate attention. The role of the federal government to regulate cybersecurity can help administer laws to protect the financial industry. There are multiple laws that cover various sectors. Ones that address finance “provide regulators the authority to supervise these institutions for compliance with such standards.” The financial industry also depends on “broad authorities to shape cybersecurity policies.”
As with any industry, the financial sector can become a victim of cyberattacks despite U.S. regulations and involvement.
What’s at Stake in the Financial Industry?
From a breakdown of attacks on the top 10 industries, finance ranked number two at 22.4%. It had fallen just .8% below the manufacturing industry according to the X-Force Threat Intelligence Index 2022. As the second most targeted industry, finance is both profitable and insecure enough for hackers to continuously invade.
On top of this, there are operational and reputational risks due to poor cybersecurity. Any type of breach, ransomware attack, disruption, or natural disaster is an operational risk. A business must halt operations to attend to the cyberattack or threat. The latter is what happens when a business experiences an operational risk. It can ruin a business’ reputation. This is particularly true for financial institutions. Loss of money could lead to poverty, plunging credit scores, negative balances, unpaid bills, and unrecoverable savings.
A “cybersecurity incident [could] destabilize the financial system.” For larger financial corporations, a cyberattack “at one of the major banks or payment networks could adversely affect operations at many other financial institutions.”
The Introduction to Financial Services also includes “three channels through which a cybersecurity event could threaten the stability of the U.S. financial system”:
- An incident could disrupt a key financial service or a financial market utility for which there are few substitutes (e.g., the central bank, exchanges, and payment clearing and settlement institutions).
- An incident could cause a loss of confidence among a broad set of customers or market participants.
- An incident could compromise the integrity of critical data, rendering information critical to financial firms either inaccurate or unusable.
These exposures have rippling effects on the economy as a whole. Cyberattackers are going after larger accounts with billions of dollars in either decentralized currency or real bank accounts from trusting Americans. The ramifications are profound.
What Are the Types of Finance Attacks?
The X-Force Threat Intelligence Index 2022 breaks down the financial attacks further:
- 70% were on banks
- 16% were on insurance organizations
- 14% were on other financial organizations
Kaspersky’s 2021 financial report provides an “overview of the latest trends and key events across the threat landscape.” In it, they found common methodologies cyberattackers employ. The data is also indicative for 2022, as well as what financial institutions need to be cracking down on:
- 40% of financial phishing was e-shop
- One-third of all financial phishing targeted payment systems
- 26.6% targeted accounting
- 17.6% of phishing schemes were E-commerce-related
- 37.8% of attacks were on PayPal users, making them the most frequently targeted payment system users
- 9.4% of attacks were on Visa
- 37.8% of corporate threats came from banking malware
- 62.2% were from consumer banking malware attacks
- 48.78% of retail platform phishing schemes targeted Apple customers
- 21.48% targeted Amazon
- 37.8% of financial malware attacked corporate
- 62.2% attacked consumers
The Board studied current or emerging cybersecurity threats to the financial sector:
- Ransomware as a Service (RaaS)
- Supply chain risk
- Sophisticated DDoS threats
- Increased sophistication in cyber threats
In the financial industry, users trust their banks, online transfers, and retail businesses. Advanced cybercriminals can deceive unassuming users with multiple techniques. Without cybersecurity training or protection that evolves with the malicious and clever attacks, hackers can outwit consumers and corporations alike.
Kaspersky concluded that e-shops topped banks for phishing attacks. They also warn cryptocurrency users as Bitcoin is a reservoir for cyberattackers. Fortunately, mobile and PC malware did not affect as many users as the previous year. While this is good, there are still risks of infection to safeguard against.
What Can Be Done to Increase Cyber Protection?
IMF experts speaking on the global cyber threat say cybersecurity has “a collective action problem.” This is vastly different from other industries that “lack resources or the ability to implement technical solutions.” The financial sector requires organizations to protect “across governments, financial authorities, and industry and how to leverage these resources effectively and efficiently.”
The expansive network and scope of responsibility make financial cybersecurity difficult. The private and public sector, banks, mobile payment services, e-shops, and cryptocurrencies may be subject to independent cybersecurity protocols.
66% of financial services use backups to restore data. Following a ransomware attack, this industry was able to restore 62.8% of data. The Sophos ransomware report [PDF] shows how backup isn't emphasized enough in the financial industry.
For “attacks targeting data and algorithms…authorities should also prioritize increasing the financial sector’s resilience.” IMF believes that “secure, encrypted data vaulting…allows members to securely back up customer account data.”
Security is central to software design at Macrium. Our applications give you complete control over where your data is stored and will operate fully offline for the most secure, air-tight networks.
Effective backups are a last, but vital, aspect of cybersecurity for the financial sector. Restoring customer data and confidence can mitigate operational and reputational risks. Online accounts can hold sensitive information. If stolen or tampered with, exploitation could cost someone’s financial stability. Macrium Software can give you and your customers assurance that your infrastructure is secure. Check out our website to learn about installing effective backups to prevent data loss at Macrium.com.