Ensuring Transaction Security in Financial Institutions through Cyber security

Online banking has revolutionized how we manage our finances.

From checking account balances to paying bills and even applying for loans, it’s all at our fingertips, anytime and anywhere.

However, this convenience comes with a dark side: the ever-looming threat of hacking in the banking sector.

Financial institutions, the guardians of our financial well-being, are constantly under siege from cybercriminals seeking to exploit vulnerabilities in their systems.

In this article, we delve deeply into the cybersecurity of financial institution services, exploring how these institutions work tirelessly to safeguard your transactions and shield your hard-earned money from the grasp of online threats.

An Evolving Threat Landscape For Financial Institutions

Financial institutions are prime targets for cyberattacks due to the vast sums of money they hold. Cybercriminals see banks as lucrative targets, offering opportunities for profit through extortion, theft, and fraud. Additionally, nation-states and hacktivists also focus on the financial sector to exert political and ideological influence.

Recognizing this growing threat, regulators are taking action by implementing new cybersecurity measures to protect the banks under their supervision. The Strategic Technologies Program conducts research on the evolving cyber threats facing the financial system and the legal and regulatory efforts aimed at bolstering its security.

The threat landscape for financial institutions is undergoing a significant transformation once again. The rise of digital financial services and mobile banking has significantly expanded the potential points of attack that criminals can exploit.

Concurrently, the proliferation of user-friendly malware and hacker-for-hire services on the black market has democratized access to tools that were once exclusive to nation-states, making them available to a broader range of malicious actors.

Defensive measures are continually advancing, but attackers remain resilient and adaptable. While financial institutions have gained more tools to safeguard their networks through enhanced training, a growing cybersecurity workforce, increased investment, and new technologies, attackers continuously discover new vulnerabilities.

Furthermore, law enforcement faces challenges in apprehending these attackers, resulting in limited capacity to bring them to justice. This report examines the factors shaping the threat landscape for financial institutions, including changes in the attack surface, attacker motivations, and emerging defensive strategies, and their implications for the industry.

Current State of Cybersecurity in Banks

Between June 2018 and March 2022, Indian banks reported a total of 248 successful data breaches carried out by hackers and criminals. The Indian government officially informed Parliament about these incidents on August 2, 2022.

In 2022, the Indian government documented a staggering 1,160,000 cyberattacks, marking a threefold increase compared to the numbers observed in 2019. India has been a prime target for significant cyberattacks, including a notable phishing attempt in 2016 that almost resulted in a fraudulent transaction worth $171 million against the Union Bank of India.

Another incident involving a cyberattack on online banking services targeted the Union Bank of India, resulting in substantial financial losses. In this case, one of the bank officials inadvertently fell victim to a phishing email and clicked on a suspicious link, granting the malware access to the bank’s systems. The attackers infiltrated the system by using counterfeit RBI IDs.

To mitigate the risk posed by such cyber threats, banks have been directed to enhance their IT risk governance framework. This directive includes a requirement for the Chief Information Security Officer to assume a proactive role. Additionally, both the Board and the Board’s IT committee are expected to take proactive steps in ensuring compliance with the necessary cybersecurity standards.

Who is behind the threat?

We should anticipate more dangerous attacks and their resulting impacts in the future. Of particular concern are incidents that compromise the integrity of financial data, including records, algorithms, and transactions.

Unfortunately, there are currently limited technical solutions available to effectively counter such attacks. These types of cyberattacks have the potential to erode trust and confidence on a broader scale. The individuals and groups responsible for these attacks include not only increasingly audacious criminals, exemplified by the Carbanak group, which targeted financial institutions and successfully stole over $1 billion from 2013 to 2018, but also nation-states and state-sponsored attackers. North Korea, for instance, has managed to pilfer approximately $2 billion from at least 38 countries in the past five years.

This is a global issue that affects countries worldwide. While cyberattacks in high-income nations often grab headlines, there is a growing number of attacks on softer targets in low- and lower-middle-income countries that receive less attention.

Ironically, it is in these countries where the drive for greater financial inclusion has been most pronounced, prompting many to adopt digital financial services such as mobile payment systems.

Although these digital financial services contribute to advancing financial inclusion, they also create an environment rich in potential targets for hackers. For instance, a substantial disruption of service transactions ensued for four days following the October 2020 hack of Uganda’s premier mobile money networks, MTN and Airtel.

An International Strategy

Summary: The Carnegie Endowment and World Economic Forum’s 2020 report outlines a strategy to bolster global financial cybersecurity, highlighting the need for clear roles, international collaboration, unified cybersecurity efforts, and using the financial sector as a cybersecurity blueprint for other sectors. Key recommendations involve establishing a cyber risk management framework, ensuring financial sector resilience, and promoting collective responses to cyberattacks through coordinated efforts and intelligence sharing among nations.

In November 2020, the Carnegie Endowment for International Peace, in collaboration with the World Economic Forum, published a report titled “International Strategy to Enhance Global Financial System Cybersecurity.” This report outlines specific recommendations aimed at bolstering the protection of the worldwide financial system against cyber threats.

The strategy is anchored in four key principles. First, it emphasizes the need for greater clarity regarding roles and responsibilities. Currently, only a limited number of countries have established effective domestic partnerships among their financial authorities, law enforcement agencies, diplomats, relevant government entities, and industry stakeholders. The existing lack of cohesion impedes international cooperation and weakens the collective resilience, recovery, and response capabilities of the global system.

Secondly, the report stresses the urgency of international collaboration. Given the extensive scale of the cyber threat and the interconnected nature of the global financial system, it is imperative that individual governments, financial institutions, and technology companies join forces. Isolated efforts are insufficient to effectively safeguard against cyber threats.

The third principle highlights the importance of reducing fragmentation in cybersecurity initiatives. While many efforts are underway to enhance the security of financial institutions, they often operate in isolation. This fragmentation can lead to duplicated efforts and increased costs. Several of these initiatives have reached a level of maturity where they can be shared, coordinated more effectively, and expanded on an international scale.

Lastly, the report underscores that safeguarding the international financial system can serve as a model for other sectors. The financial industry is one of the few areas where countries share a clear interest in cooperation, even during times of heightened geopolitical tensions. By concentrating on the financial sector, this strategy can provide a starting point and pave the way for improved protection in other sectors in the future.

Among the actions recommended to enhance cyber resilience, the report suggests that the Financial Stability Board (FSB) should develop a foundational framework for supervising cyber risk management within financial institutions.

Financial authorities should give a high priority to enhancing the resilience of the financial sector against cyberattacks that target data and algorithms. This effort should encompass secure and encrypted data storage solutions, allowing members to securely back up customer account data overnight.

Regularly conducting simulated cyberattack exercises is essential to pinpoint weaknesses and formulate effective action plans. To reinforce international norms, the report recommends that governments clarify how they intend to apply international law in cyberspace and strengthen norms to safeguard the integrity of the financial system.

Notably, Australia, The Netherlands, and the United Kingdom have taken initial steps by stating that cyberattacks from foreign sources may be considered illegal acts of force or interventions in another state’s domestic affairs.

The promotion of cyber resilience and the fortification of international norms can facilitate collective responses through either law enforcement actions or multilateral coordination with the industry. Such responses may involve measures like sanctions, arrests, and asset seizures.

Governments can support these endeavors by establishing entities dedicated to assessing threats and coordinating responses. Intelligence gathering should concentrate on threats targeting the financial system, and governments should share this intelligence with their allies and like-minded nations.

Delayed Implementation of Two-Factor Authentication (2FA)

The financial industry faces challenges in keeping pace with technological advancements. Legacy systems, although merely an inconvenience to customers, can be a substantial threat to financial institutions, and hackers often exploit these systems with the help of new technologies. For example, many financial institutions have yet to implement two-factor authentication (2FA), which is a commonly used security measure.

In 2FA, a temporary code is sent to the customer’s mobile phone, which is required to log into their account. In this scenario, a hacker would need access to both the account credentials and the associated mobile phone. However, several banks do not employ 2FA for account logins, often citing customer convenience as the primary reason for this omission.

To meet customer demand for convenience, companies must leverage the latest advancements in computer science technology. App and software developers are under pressure to enhance the customer experience, and security considerations can sometimes lag during the development process.

Establishing a DevSecOps environment, where security responsibilities are shared across all stages of development and operations, requires security professionals with up-to-date programming and security skills.

Financial industry leaders must acknowledge that hackers will persistently search for vulnerabilities, whether in computer systems and networks or in processes and procedures. Building a robust tech firewall is just the initial layer of defense in this ongoing battle against cyber threats.

Final Thoughts

Financial institutions play a crucial role in our economy, offering a variety of financial services to individuals, businesses, and governments. Whether it’s your neighborhood bank or a sophisticated investment firm, they all contribute to managing risks, ensuring financial security, and fostering economic growth.

However, the ever-present threat of hacking in the banking sector reminds us that safeguarding our transactions in online banking is of utmost importance. These institutions work tirelessly to fortify their defenses, ensuring that your money remains safe and secure in the digital age.  

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