The threat landscape for financial institutions is increasingly digital. Digital financial services present a fertile ground for cybercriminals. The threat landscape includes: Actors’ motivations outside the cyber realm; Internet technology is just a means to an end. As a result, cyber-attacks will likely become more sophisticated, and tools and approaches will be constantly updated to keep up with the changing threat scenario. In addition, the regulation of financial institutions will likely affect the nature of cyber risk. This article will reveal why Cybersecurity in the financial services industry.
Digital financial services offer a target-rich environment for hackers.
Cybercriminals are increasingly targeting financial services as they provide access to sensitive information such as home addresses, social security numbers, banking details, phone numbers, email addresses, and income information. The high value of such data makes financial services a lucrative target for attackers. This sector will account for $22 trillion by 2019 and is growing thanks to the rise of the Internet, a global shift towards instant payment schemes, and increased investment from governments and corporations exponentially.
A recent attack in the financial services sector is a wake-up call. Hackers are targeting the industry by exploiting vulnerabilities in SWIFT, the electronic payment messaging system used by the global financial system. They attempted to steal $1 billion by delaying or denying legitimate payments, but only $101 million was recovered. The attack sent shockwaves through the finance world, and it was a stark reminder that systemic cyber risks were underestimated.
Financial institutions are highly exposed to various attacks, including insider threats. Moreover, insiders may target businesses for monetary gain, personal gain, or reputational harm. Insider risks can range from the unintentional disclosure of critical information to intellectual property theft. Furthermore, cloud technologies and robotics are becoming essential tools for larger institutions. However, these new technologies also increase the potential for hackers to exploit vulnerabilities in financial services.
Government regulations impact cyber risk.
The current state of cybersecurity is far from satisfactory. The financial services industry continues to be subject to sophisticated cyberattacks and schemes. The widespread use of electronic money transfers, such as checks and money transfers, has made financial institutions attractive targets for criminals. While these cyberattacks can damage the reputation of an entire industry, regulators are increasingly taking action to increase pressure on the industry. While these new laws and regulations create new challenges for the financial services industry, compliance requirements remain the most critical reason consumers trust the financial sector.
While consumers aren’t directly at risk of cyberattacks on financial institutions, they can take steps to protect themselves. Under US federal law, banks must refund a customer within 60 days after an errant transaction. But while the government protects consumers through rules and regulations, banks and other financial services firms have very few assurances. Regulations are primarily intended to ensure the financial system’s stability, but critics claim these agencies aren’t doing enough to protect financial institutions against cyberattacks.
As a result, firms have been increasingly aware of cyber resilience. But they also recognize that cyber resilience is regulatory, not just an IT issue. The European Commission reported that firms that switched their workforce to remote working increased the risk of cyber-attacks by 71 percent in one week, despite restrictions on lockdowns and social distancing. Furthermore, cyber-attacks against financial services firms rose by 38 percent in one week, reflecting the rise of mobile technology.
Reporting requirements for cyber incidents
According to the final rule, financial institutions must provide notification to their primary Federal regulator within 36 hours of a cybersecurity incident. The regulation includes denial-of-service attacks and computer system failures. Financial executives must disclose these events as quickly as possible because of the potential impact of significant cybersecurity incidents on a financial institution’s business. In addition, the reporting requirements must take into account third-party risks. Financial institutions should review their incident response policies and update their incident response plans, which define what constitutes a cyber incident.
As a result, the Department of Banking encourages financial institutions to report cyber incidents to relevant government agencies. These agencies include the Department of Homeland Security and the Department of Justice. Companies can submit reports by phone, in person, and online. Once submitted, the federal government shares these reports with relevant stakeholders to reduce the impact of the incident and investigate criminal violations. Financial institutions should implement their reporting requirements to keep their customers, and the public informed to prevent future cyber incidents.
The Cyber Incident Reporting for Critical Infrastructure Act of 2022 is a landmark law that will affect the financial industry. This Act requires critical infrastructure sectors to develop written cybersecurity programs, implement robust cybersecurity standards, design, and internal cyber incident reporting, and foster a culture of cyber compliance. Companies need to be ready to meet the new requirements for this necessary regulation, as it will affect their bottom line. The Act also requires certain critical entities, like banks, to conduct an education campaign to educate employees and protect their customers.