Financial firms uniquely exposed to cyber crime
“The financial sector is uniquely exposed to cyber risk. Financial firms—given the large amounts of sensitive data and transactions they handle—are often targeted by criminals seeking to steal money or disrupt economic activity. Attacks on financial firms account for nearly one-fifth of the total, of which banks are the most exposed”, three specialists at International Monetary Fund (IMF) warn in a blog post.
They write that as attacks often emanate from outside a financial firm’s home country and proceeds can be routed across borders, international cooperation is imperative to address cyber risk successfully.
“Incidents in the financial sector could threaten financial and economic stability if they erode confidence in the financial system, disrupt critical services, or cause spillovers to other institutions.”
As an example, the three authors write that a severe incident at a financial institution could undermine trust and, in extreme cases, lead to market selloffs or runs on banks. Although no significant “cyber runs” have occurred thus far, our analysis suggests modest and somewhat persistent deposit outflows have occurred at smaller US banks after a cyberattack.
The authors are Fabio M. Natalucci, Deputy Director of Monetary and Capital Markets, Mahvash S. Qureshi, Assistant Director of Monetary and Felix Suntheim, Senior Financial Sector Expert.
“Another consideration is that financial firms increasingly rely on third-party IT service providers, and may do so even more with the emerging role of artificial intelligence. Such external providers can improve operational resilience, but also expose the financial industry to systemwide shocks.”
The authors mention a 2023 ransomware attack on a cloud IT service provider caused simultaneous outages at 60 US credit unions.
Only about half of countries that IMF has surveyed had a national, financial sector-focused cybersecurity strategy or dedicated cybersecurity regulations.
IMF’s recommendations:
- Periodically assessing the cybersecurity landscape and identifying potential systemic risks from interconnectedness and concentrations, including from third-party service providers.
- Encouraging cyber “maturity” among financial sector firms, including board-level access to cybersecurity expertise, as supported by the chapter’s analysis which suggests that better cyber-related governance may reduce cyber risk.
- Improving cyber hygiene of firms—that is, their online security and system health (such as antimalware and multifactor authentication)—and training and awareness.
- Prioritizing data reporting and collection of cyber incidents, and sharing information among financial sector participants to enhance their collective preparedness.
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