The 21st century bank robber does not wear a mask and barge into a local branch with a firearm. Today's criminal sits in a remote location generating sophisticated software that mitigates the security of large financial institutions and allows hackers to infiltrate systems and remove funds at their convenience.
Cyberattacks continue to be on the rise according to software company Symantec, which estimates that crimes against US firms increased by more than 40 percent in 2012. Financial institutions are on high alert, stepping up their security and participating in exercises that increase the skills of their employees and systems which recognize attacks.
In a recent State of the Union address, President Barack Obama warned about criminal hacking against the banking industry and later met with JPMorgan CEO and Chairman Jamie Dimon to formalize a process for mitigating bank security. In fact, financial institutions are beginning to formulate risk factors, similar to credit and market risk, which inform regulators of reserves that are put aside in case of a cyber-attack.
An example of an attack occurred recently. Cybercriminals were able to hack into a major financial instruction and eliminate the restrictions on the amount of funds a bank customer was allowed to remove from ATM machines. The perpetrators where then able to use replicated ATM cards to removed significant capital from banks at their leisure.
Cyber ExercisesIn an effort to help the industry to mitigate the risks associated with cyber-attacks, last week approximately 50 banks participated in an elaborate drill that tested how they would perform if hackers produced an attack against them.
The drill itself, known as Quantum Dawn 2, fired small bits of information to bank employees during the course of the day that potentially could indicate that a cyberattack could be imminent. The exercise used a simulated stock exchange for irregular trading practices which would be shared with regulators and other financial intuitions.
Federal regulators including the Office of the Controller of the Currency, which regulates banks along with the Treasury and Secret Service, participated in the exercise. Regulators want to standardize the procedures used by banks which will enhance the systematic process of fighting cyberattacks.
Cyberattacks will likely continue to be the heist of choice as few banks keep significant funds in retail locations. Attacks will continue to become more sophisticated and financial institutions will need to stay ahead of the curve to avoid a drop in customer sentiment from their valued customers.
About The Author: Marcus Holland is with Financial Trading, a leading education resource on the world of financial derivatives.