Fortifying Financial Fortunes – Cyber Risk in the Banking Industry

In March 1831, James Honeyman and William J. Murray used forged keys to enter the City Bank of New York, emptying the vault of more than $245,000 in bank money. Boy, how times have changed!

In the digital age, criminals don’t need to risk their safety by physically entering a bank. Why would they when so many cyberattacks yield a payday from the comfort of their couch halfway around the world? In line with the online casino industry, financial institutions are highly attractive because there is the potential for substantial financial gain and access to sensitive customer information that can be sold on the dark web.  

More and more threat actors have realized how lucrative it is to attack banking, financial services, and insurance (BFSI) organizations. In 2021, US banks and financial businesses reported around $1.2 billion in ransomware payments – nearly three times the amount paid in 2020. In 2022, it became the second most attacked sector, experiencing a 17% increase in attacks which amounted to one out of every 49 financial organizations being affected by ransomware. Last year, the worldwide average cost of a data breach in the BFSI industry was nearly $6 million; in the US, the average cost skyrocketed to about $9 million.

With hackers becoming more sophisticated, regulatory compliance becoming stricter, and the severe consequences from a breach – legal fees, reputational damage, and more – the need for financial organizations to invest in robust cybersecurity defenses has never been more critical.

Complying With Regulations: How a SOC Helps

To ensure the security and integrity of their operations, banks and financial companies must adhere to various government regulations designed to protect customer data and maintain the stability of financial markets. Let’s look at three of the most prominent regulations and how a SOC supports compliance with each.

ISO/IEC 27001: The ISO/IEC 27001 standard sets the benchmark for information security management systems (ISMS), which many financial institutions must have. Banks implementing this standard prove their commitment to safeguarding sensitive information, ensuring data availability, integrity, and confidentiality. In addition to enhancing compliance and reducing risks, earning an ISO 27001 certification increases customer confidence and improves operational efficiency.

A SOC plays a crucial role in meeting ISO/IEC 27001 requirements by providing continuous monitoring, threat detection, and incident response capabilities. A SOC 2 Type 2 report assures an organization’s controls meet other financial requirements, such as the AICPA Trust Services Principles.

SOX (Sarbanes-Oxley Act): Introduced in response to financial scandals, SOX aims to enhance corporate governance and financial transparency. It imposes strict requirements on financial reporting and internal controls. With insider sabotage being a significant concern in the BFSI sector, SOX compliance becomes paramount.

A SOC is pivotal in helping banks establish a robust system of controls and detect unauthorized access attempts through its continuous monitoring, threat detection, incident response, and compliance reporting capabilities.  

PCI DSS (Payment Card Industry Data Security Standard): PCI DSS is designed to protect customers’ sensitive information, such as credit card numbers and expiration dates. Compliance requires establishing vigorous security controls, including strong passwords and access, securing networks and systems, encrypting data, security testing, and more.  

By implementing a SOC, banks can continuously monitor their payment card systems, identify and address security gaps and vulnerabilities, and respond swiftly to potential threats. SOCs also provide compliance guidance and issue reports demonstrating compliance to regulators and stakeholders.

Insider Sabotage: A Major Concern for the Financial Sector

While external threats grab most headlines, insider threats are one of the most significant challenges in the BFSI world, with some 60% of attacks attributed to privileged users, malicious employees, or third-party partners. The motivations behind insider attacks can vary, ranging from personal grudges to people looking for supplemental income. Notable institutions, including JP Morgan Chase, Morgan Stanley, Wells Fargo, and Bangladesh Bank, have all been victims of insider attacks.

This underscores the importance of SOX regulations that require organizations to maintain effective internal controls and systems that prevent unauthorized access and fraudulent activities and the outsized role a SOC plays in hardening defenses and mitigating the risk of insider sabotage.

Protecting Customer Information With Cybersecurity Solutions

The banking industry thrives on trust, and ensuring the safety and confidentiality of customer information is paramount to establishing that trust. The findings from an Experian survey highlight the consumer expectations and the consequences banks face after a data breach:

  • 66% of people would stop doing business with a company or switch to a competitor if the bank’s response to a breach is too slow or ineffective.
  • 45% would encourage family and friends to stop doing business with the company as well

BFSI organizations must take a comprehensive and layered approach to protect data by incorporating multiple solutions. Basic cybersecurity solutions such as firewalls, multi-factor authentication (MFA), and encryption are essential, but banks need to go beyond that and leverage additional solutions, many of which can be streamlined and incorporated through a SOC.

Network Security: A SOC monitors network traffic, identifies and blocks malicious activities, and detects unauthorized access attempts. By proactively safeguarding the network infrastructure, banks can mitigate the risk of data breaches and maintain customer trust.

Endpoint Protection: Endpoints, such as laptops, desktops, and mobile devices, are often targeted by threat actors seeking access to credentials and financial information. A SOC deploys advanced endpoint protection measures, including robust antivirus software, intrusion detection systems, and real-time vulnerability assessments, to ensure the security of these endpoints.

Threat Intelligence: A SOC leverages threat intelligence platforms to stay updated on emerging cyber threats and tactics used by malicious actors. By analyzing this intelligence, banks can proactively strengthen their defenses and respond effectively to potential incidents.

Incident Response Preparedness: Should a security incident occur, a SOC with a strong incident response plan can swiftly detect, contain, and mitigate the impact. That speed ensures minimal disruption to banking operations and enhances customer trust.

Safeguarding Banks and Building Trust in a Highly Targeted Industry

The banking industry has always been a prime target for criminals and now cybercriminals due to its financial assets and access to valuable customer information. The ever-evolving threat landscape necessitates the implementation of robust cybersecurity measures.

To build and maintain customer trust, banks must prioritize security and invest in advanced technologies such as a SOC, which delivers 24/7 monitoring and incident response plans. Beyond that, a SOC provides extensive security and financial advantages, including detecting insider sabotage, proactively defending against external threats, and helping to maintain compliance and efficiency. While cybersecurity is never a one-and-done situation, a SOC can go a long way toward hardening security and peace of mind.

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