Introduction
It should be noted that in the modern environment that can be characterised as a digital economy the financial sector is under attack with threats that are related to cybersecurity. Security risks are another factor that has elicited concerns among the clients specifically the most immediate and obvious concern is the risk of data theft.
This is because financial institutions handle very sensitive information and data which makes them an attractive and obvious target for hackers. The impact that can follow a data breach episode is enormous and affects the financial institution customers shareholders and the economy in general. In this article we shall discuss data breaches in the finance sector their causes and effects and the measures to be taken in order to minimise risks.
Emphasising the Role of Data
Data is the lifeline to the operation of the finance sector and giant organisations rely on this sector immensely. Whether it is an identification number bank credentials or corporate balance sheets data provides the framework from which corporations in the financial industry are built. This makes financial organizations one of the favourite targets of hackers who are looking for the most important information.
The Other Kinds of Data Dealt with by Spears of the Financial Institutions
Personal Identifiable Information (PII)
Financial transactions and records
Trade secrets and proprietary Financial models
Also the information about the clients behaviour and credit scores
Understanding Data Breaches
Data breach means inadmissible access by an unauthorised person to data stored in a computer system or network. In the financial sector this may include stealing personal or financial information from the clients in the process of embezzlement or out of vandalism sentiments against the agency.
Why Data Breaches Take Place?
Hacking and Malware
There are varied methods by which criminals penetrate network systems.
Insider Threats
Sometimes the breaches are a result of deliberate action by employees or contractors while other times they are accidental.
Social Engineering
Fraudsters involve the victim in a way that they give out personal information.
Third Party Vendors
Thus financial institutions depend on third party services that can be the source of vulnerabilities in the security system.
General Techniques Employed in Data Breaches
Phishing attacks
Ransomware
Distributed denial of service (DDoS) attacks
SQL injections
Man In The Middle attacks
Most Popular Breaches
Recently significant data breach incidents have been registered in the finance sector proving that even big and secure organisations are not immune to undergoing data breach incidents.
Equifax Breach
In the 2017 month of September Equifax which is a credit reporting agency fell victim to a hack attack that paved the way for exposing the information of 147 million people. Attackers penetrated a weakness in the companys WS and retrieved the Employees SSN date of birth and address. What this hack shows us is that one cannot be too careful when it comes to unpatched software as well as weak security measures.
Capital One Breach
Capital One credit card company for example suffered a data breach in 2019 that involved about 100 million people in the U. S. An attacker was able to loot the personal details of individuals including names addresses and credit scores by using a misconfigured web application firewall. This led to three important lessons including the significance of cloud security as well as constant checks towards the configurations of the network.
JP Morgan Chase Breach
This is a real example in 2014 JPMorgan Chase one of the largest banks in the United States suffered a data breach that affected 76 million households and 7 million small businesses. This was due to the breach of the servers that the hackers used to get the contact information of the customers. Despite the fact that the hackers failed to steal any of the banks monetary information the ordeal pointed out that the bank had been at risk of cyberattacks.
Effects of Data Breaches
The consequences of data loss in the financial industry are wider and more complex.
Financial Losses
Direct financial costs
This may result in expensive forensic investigations lawyers fees and compensation for the customers who have been affected.
Fines and Penalties
The legal framework sometimes mandates that financial institutions pay the regulatory authorities large penalties for data protection negligence.
Loss of business Concerned customers may defer their business from a financial institution following a breach hence a decline in the business.
Reputational Damage
A breach of data can actually be very detrimental to the image of most financial institutions. Credibility can be viewed as a form of confidence between the client and the financial institution and once compromised it can lead to longterm damage to the brand.
Out of legal Repercussions
Financial organisations are under the laws and regulations of various data protection measures such as GDPR CCPA and and GLBA. This can result in customer legal action against the company and fines and penalties from regulatory bodies.
Customer Impact
Again in case of a breach customers are usually the ones who feel the impacts of the breach. Loan loss stolen credit card money invasion of the individuals privacy and stress are usually the consequences of the misuse of financial data.
Privacy Laws and its Application
Much attention is paid to the fact that financial institutions are operating in a very regulated environment. Different laws and regulations exist to guarantee that they safeguard customers data and uphold strict security measures.
Gramm Leach Bliley Act (GLBA)
The GLBA thus mandates financial organisations and institutions to provide individuals with information concerning the sharing of their information as well as ensure and protect consumers sensitive data. It also covers provisions concerning information disclosure and such obligations as institutions have to preserve.
General Data Protection Regulation or GDPR
That is why the GDPR is an influential regulation even though it was designed for the European market. When engaging in business activities with customers in the European Union financial institutions are bound by the norms regarding approval storage and use of personal data.
CCPA or California Consumer Privacy Act
The CCPA was designed to afford the residents of the state of California greater control over their data. Organisations that provide financial services to customers in California are bound by this act to explain the collection and use of consumers data.
PCI DSS
Any company that deals with the processing of payment card transactions has to follow PCI DSS guidelines which act as a set of security measures to be taken towards cardholder data.
Role of Technology in Data Breaches
The use of technology is also very important in eliminating risks such as data breaches. Financial institutions have to use bestofbreed solutions to stay secure ahead of cyber threats to data.
Encryption
The process of protecting information from unauthorised access is one of the best practices that can be observed in the modern world. Even in the event that hackers gain access to the system the information is encrypted and hence it does not make sense to the perpetrator if they do not possess the decryption key.
MultiFactor Authentication (MFA)
MFA also enhances the security of granting access to systems or data since users are forced to enter two or more verifications when accessing the systems or the data. This substantially minimises the chances of attackers obtaining and exploiting user passwords and other login credentials.
Artificial Intelligence (AI)
AI and Machine learning can be used to mark out the behaviours that deviate from the normal behavioural pattern and detect the threats in real time. These technologies will be of much benefit to financial institutions in that they are able to respond to security threats as they are weaved in a constantly proactive manner.
Cloud Security
This is especially so as more companies in the financial industry start transitioning to the cloud environment. Cloud configuration properly data encryption and constant security audits of cloudbased services will go a long way in preventing the risks associated with cloud services.
Minimise Data Breaches
Bring and Enforce Good Security Policies
Lenders should have standard operating procedures to cover measures that should be taken to prevent loss of data as followed by workers. This can be in the form of passwords security measures for devices as well as procedures to follow while dealing with sensitive information.
Rational Security Audit & Security Penetration Test
Continuous security audits and penetration testing let financial institutions know the weak points that hackers are most likely to exploit.
Training and Awareness to the Employee
This is because employees are the most vulnerable asset in an organization especially in matters concerning security. This means that through giving periodic training on the right ways to deal with cases of cyberattacks financial institutions reduce the chances of human factors leading to a breach.
Incident Response Plans
In our context it is clear that having a well defined incident response plan is one of the most crucial factors in avoiding high levels of impact from the breach. This plan should lay down the measures that will be taken whenever there is a security breach for instance how customers and other stakeholders will be informed.
Third Party Risk Management
While third party vendors are convenient to clients they are often a security threat. As such any financial institution must conduct a thorough check on their partners with a view to ascertaining the level of security they adhere to.
Data Security Risk and Fraud
It must however be understood that as the financial sector progresses so will the risks that come with it. There are new threats associated with such new technologies as quantum computing or decentralized finance (DeFi).
Quantum Computation and Cryptography
Artificial intelligence technologies together with quantum computing can pose a significant threat to the security of most of the algorithms employed in the protection of financial information. Quantum computing is a new reality that financial institutions have to face by researching quantumresistant encryption methods.
DeFi and Security Threats
Centralised exchange platforms have however been replaced in recent years by Decentralised Finance (DeFi) platforms through which transacting counterparties engage in direct on 969 chain financial transactions. However these platforms are often more exposed to attacks because of their present in the form of distributed systems.
New Advanced Persistent Threats (APTs)
Advanced Persistent Threats (APTs) represent protracted highly professionalised cyberattacks typically associated with the activities of professional criminal groups or states. Such assaults are often intended to gain illicit access to financial systems and occupy them for as long as necessary and until a more extensive job can be carried out. At its base the issue with APTs is that theyre not built to be an immediate threat instead they amass information gradually and then make use of that data at a later date.
Mechanics of APTs
Criminals launching APTs usually employ social engineering or phishing in order to crack into privileged users account credentials. Once an attacker is in the system he tries to advance in the system and move around without being detected. The purpose is not monetary but to gain a competitive edge over competitors for instance acquire clients data research and development information or credit card records. APTs can also include malware that has been selected to go unnoticed by traditional AV tools since such attackers need their malware around in the long run.
Flaws in the Financial Sector
As financial institutions manage valuable customer and business information these APTs attack critical systems such as databases containing transaction data loans or even messengers. An organisation’s data can also be exploited by attackers targeting trade secrets financial strategies or high value accounts to conduct fraudulent transactions.
A classic case of APTs in the financial industry is the Bangladesh Bank Heist of 2016 which involved a hack of the bank’s SWIFT system and the fraudulent transfer of one billion US Dollars. Though only $81 million was stolen the attack underlined that the financial systems of the companies remain exposed to well planned consistently sustained saboteur operations.
Forms of Insider Threats
Malicious Insiders
These are the people who use their access for malicious purposes including stealing information from the organisation using it for personal benefits or causing harm to the organisation or competitors. For instance an employee may pocket a customers financial details and sell the details to the relevant black market.
Negligent Insiders
These are the workers who inadvertently put the company at risk by for instance losing confidential information or getting duped into giving out their credentials to a fraudster. This could be for instance transmitting a dangerous document to the wrong email address clicking on an unsafe hyperlink or neglecting a system by using the wrong passwords.
How to Mitigate Insider Threats?
Combating insider threats is more complex than most people would assume and needs a combination of policy and technology. Banks must set rules regarding data access and then make security checks at least once a year or every two years as to whether the access privilege is right for the worker. It can also monitor the activities of an organization and flag any activities that are considered strange for instance an employee going through files that in normal circumstances should not require their attention.
Monitoring & Analytics
Supervising employees activities especially in cases with increased permissions make the breach preventable or detectable in the shortest time possible. Systems that employ artificial intelligence to monitor employee activity can notice when a particular employee starts behaving sneakily for instance he downloads quite a lot of information on the company.
Access Control & Segregation of Duties
Mismatching of access controls to ensure that any given employee who may be a potential insider threat does not have access to all the information that they need and also ensuring that no single employee controls a whole process greatly minimises the risk of a successful insider threat.
Supply Chain Attacks
Another emerging threat to financial institutions is the supply chain attack. These attacks happen in situations where hackers go for the weaker third party service provider in an attempt to get into the financial institutions network. Most financial institutions depend on third parties for such outsourcing activities as storage payments or even software sourcing. However if the vendors security is breached then the attacker is welcome to have easy access to attack the financial institution.
Role of ThirdParty Vendors
Several third party service providers such as financial institutions offer cloud computing IT support and payment gateways which are common in banks. These vendors could have higher and uncontrolled or at least unmonitored levels of access to company information assets or networks. Due to this if hackers gain access to a vendors systems they will easily penetrate the banks systems as was seen in the infamous SolarWinds supply chain cyberattack in the year 2020 which affected different sectors including the finance sector.
Securing the Supply Chain
Risk mitigation of the supply chain can be achieved through compliance assessment of suppliers and stringent legal terms and conditions as well as by monitoring third party performances. This means that there is a need for financial institutions to maintain a high standard in relation to the vendors they work with and this includes compliance with the best practices as recommended in the current cybersecurity industry where aspects like encryption access control and real time monitoring are of paramount importance. Besides risk assessments and audits should be carried out continuously to ensure compliance with these standards.
Emerging Threats AI Powered Cyber Attacks
With the increase in the use of machine learning in financial institutions to improve security so does the same thing by hackers to stage more complex attacks. Its quite obvious that AIenabled cyberattacks can target weaknesses more effectively and efficiently launch their attack with increased accuracy and even copy the activities of genuine users.
Countering AI Driven Attacks
Therefore AI and Machine learning must form part of the financial institutions defences against AIdriven attacks. It is possible to use AI when predicting possible attack schemes along with critiquing actual network behaviour in real time and perceiving signs of an ongoing attack. There can also be the use of machine learning for behavioural analysis of the users irregular behaviour thus giving security personnel an early warning system for potential breaches.
Protecting DeFi and Blockchain
Such issues have raised the need for the principles of software engineering best practices to be applied to smart contracts in DeFi as it expands into the financial sector including third party code auditing and constant monitoring of smart contracts. Furthermore it is necessary to create models of blockchain governance to respond to security issues rapidly if they occur.
Conclusion
Cyber risks have become rampant across the world and more so in the financial sector. The increasing amounts of money and volume of credit transactions prove that financial institutions need to address the issues of security and privacy more actively to ensure the confidence of the clients. Today with strong security measures modern technologies and constant predictions of threats the financial sector is capable of preventing data leakage. However this will need constant monitoring spending and engagement from regulators technology partners and other stakeholders. The preservation of those resources cannot be viewed as a mere compliance issue but as a fundamental part of keeping finance honest and secure.