Financial institutions are heavily targeted by cybercriminals, but to avoid detection, criminals are always changing the types of crimes they use. Financial institutions need to be constantly alert about the changing cybersecurity landscape, and they need to be proactive about protecting themselves, their data, and their customers.
Take a look at five of the most significant risks to banks and other financial institutions right now.
1. Insider threats
Insider threats are one of the most significant threats faced by financial institutions. Employees often have in-depth knowledge about their employer’s anti-fraud efforts, positioning them to commit fraud relatively easily. Only around 10% of suspected internal embezzlement cases at financial institutions are investigated and just 8% lead to convictions, a fact that often makes insiders even more confident about committing crimes.
To protect their bottom lines, financial institutions need to be aware of internal threats such as embezzlement from customers, identity theft, data theft, corporate card fraud, position abuse, and other types of theft. Internal theft also includes acts such as applying refunds or credits to the employee’s personal account or their friends and family’s accounts.
Financial institutions should create a system of checks and balances that prevent any single person from having unbridled control of the bank’s data or financial resources, and employees should be required to take time off so other people can step into their roles. Financial institutions also need to be proactive about creating a corporate culture that minimizes the risk of fraud.
2. Internal mistakes
Malicious actors aren’t the only internal security threat. Employees can also compromise bank security by making mistakes, practicing poor cybersecurity hygiene, or falling prey to social engineering attacks. To strengthen security, financial institutions must train their employees in cybersecurity essentials.
Employees should understand the importance of using strong passwords and how to spot phishing attacks where criminals try to convince them to share passwords, download malware, or take other risky actions.
Financial institutions also need to boost their cybersecurity by working with partners who understand how to minimize these risks. For instance, they should work with an IT specialist who knows how to configure their servers and firewall correctly.
3. Third-party service providers
Whether a financial institution is hiring a managed IT service provider or a cleaning crew, it needs to ensure its vet the third-party service provider thoroughly. While this has always been a security concern for banks, the landscape is becoming more complicated as financial institutions forge an unprecedented number of relationships with third-party service providers as they expand their digital offerings.
Unfortunately, financial institutions are often in the dark about the subcontractors their third-party service providers are using, and this chain of providers creates an environment where financial institutions are assuming the risks created by their third-party service providers as well as their fourth, fifth, etc level providers.
To reduce their risk, financial institutions need to develop a system that allows them to assess the security of not only their third-party service providers but also the entities that work with those service providers. Ideally, they should develop contracts with assignment clauses that require vendors to provide notice and obtain consent before outsourcing certain tasks, allowing financial institutions to minimize fourth-party risks.
Because ransomware is such an effective and profitable way for criminals to obtain money, it has been rising in popularity, and analysts expect the situation to get worse.
Also called extortion-ware, this type of fraud involves a criminal preventing a victim from being able to access their data until they pay a ransom, but once they pay the ransom, most victims still aren’t in the clear. Over half of ransomware victims who pay the ransom recover less than two-thirds of their data, while another 29% recover less than half of their data.
To protect your financial institution from ransomware threats, you need strong data backup and retention policies that allow you to safeguard business continuity in the event of an attack, and of course, you also need network security that prevents cybercriminals from being able to access your data in the first place.
5. Malware on ATM Systems
Many financial institutions are not vigilant about updating their ATM operating software. Outdated systems are not secure because they lack patches, and additionally, failing to update the system can void the warranty and increase the risk of an attack.
Rather than updating their ATMs, many financial institutions just replace them at the end of their life cycle, increasing their vulnerability while they are using old machines. Additionally, the remote location of many ATMs allows hackers to gain physical access to the motherboard so they can clone payment cards, steal PINs, or use malware to obtain other sensitive data.
To protect themselves, financial institutions should update ATM software regularly. They should also ensure they never use default passwords, and they should have tools in place that detect physical tampering or quickly notice other signs of ATM fraud.
Staying on top of the constantly evolving cybersecurity risks while also expanding into the digital sphere to meet the needs of their clients is challenging for banks of all sizes. To strike the right balance, you need a cybersecurity partner who can provide you with tools and solutions to improve your cybersecurity while you focus on customer satisfaction and profitability.
At SQN Banking Systems, we handle cybersecurity so our clients can focus on banking. To learn more about how we can help protect your financial institution from the cybersecurity threats of today and the future, contact us today.