Introduction
Data has thus become one of the most important resources that financial institutions can use within the current world which is highly dominated by the use of technology. The availability of mass amounts of information its storage and analysis enable banks investment companies and other financial structures and organisations to fulfil the requirements of their clients minimize risks and obey legal norms.
But this has made the financial sector one of the most vulnerable to data theft due to the reliance on data. Financial data theft is the act or process of gaining unauthorised or unlawful access obtaining or divulging financial information or data that can cause major losses reputational losses and legal risks.
The financial sector is rich in account information and therefore sensitive to data theft and other related activities through the data they transact which includes personally identifiable information (PII) payment card information (PCI) and other corporate data. Hacking is not a onetime event because criminals are always inventing ways to penetrate the flaws within the financial industry which may lead to a significant loss.
This paper aims to identify the different forms of data theft in finance their effects on the industry and ways of mitigating its occurrence. There are two types of data theft data interception and data corrosion.
Personal Information Theft
Identity theft as a subset of PII involves violation of other data including names addresses Social Security numbers and financial account details. This data is then used for identity theft fraud or selling on the dark web. That is why personal information is considered to be a valuable asset in the financial sector as it allows accessing the accounts without the owners consent applying for a loan and performing a number of fraudulent actions.
Corporate Data Breach
This is where business information that is important and confidential to a company like trade secrets financial statements or even formulae developed by a business entity is stolen. Failure would result in the compromise of such parameters as competitive advantage share price and overall market standing. The former could be used to compromise financial firms with an eye on certain mergers acquisitions or other corporate events in the future.
If data is stolen it spreads like wildfire and poses a major risk to several communities in particular the financial sector.
Effect of Data Theft
The effect of data theft on the financial sector is a double edged sword. Thieves fraudsters and those speaking however to deal with breaches could lead financial institutions to lose considerably of their cash. The legal effects and ramifications stemming from data breaches also raise heavy fines penalties and oversight of financial institutions especially from regulatory authorities.
Finally operational disruptions generated by data theft may negatively affect an institution’s capability to undertake its normal business thus adding to the loss of money and reputation. Capital One Credit Union is one organisation that fell prey to a data breach in May 2019 in which hackers gained access to millions of Capital One customers data.
Capital One Institution
Capital one an institution that operates as one of the leading banks in the United states was in July 2019 to have leaked information about approximately 100 million people in the United States and 6 million people in Canada. It unveiled a number of these identifiers as well as other additional information such as names addresses credit scores transaction information Social Security numbers and Bank account numbers.
The breach was performed by an ex worker of AWS and comprised a firewall misconfiguration in the company’s cloud system infrastructure. In doing so the attacker was able to obtain the bank’s data stored on the cloud which underscores the problem of cloud computing in the financial industry.
The Capital One breach incidents led to great loss and reputational losses for the bank involved. It also stirred concern towards the cloudbased systems used in the financial sector. It made appropriate calls for proper security measures such as correct configuration and periodic assessment of the cloud systems.
Desjardins Group
Desjardins also known as the Canadian Credit Union suffered a data breach in 2019 as presented below. In June 2019 the Canadian cooperative financial group Desjardins Group reported that its clients data is about 4. 2 million members and 173000 businesses. It was a case of an inside attack an employee with consent access dumped and passed organisational information to unauthorised persons.
The stolen data comprised names addresses birth dates Social Insurance Numbers email addresses and details concerning the customers banking profiles. It was established that Desjardins entities were victims of the breach after the latter realised that some transactions seemed suspicious and initiated an investigation into it the probe resulted in identifying the employee who was behind the data theft.
Major data breaches in the financial sector reveal several common patterns and lessons that can be applied to enhance data security The case studies of major data breaches in the financial sector reveal several common patterns and lessons that can be applied to enhance data security
Vulnerabilities in Systems and Software
Some of these were observed due to failed patches lack of proper patching or misconfigurations in the systems. Such risks can only be addressed through frequent patches updates or system security audits.
Insider Threats
It has been since its emergence that insider threats whether by remiss or volition are a major concern to financial institutions. Security controls as well as monitoring of employee productivity can be used to overcome this threat as well as create a security conscious culture among the employees.
Cloud Security
With the rising usage of cloud based systems in financial institutions it is paramount to consider the security of cloud systems. Data stored on the cloud must be well configured encrypted and most importantly audited often so as to ensure they are secure.
Legal and Regulatory Frameworks
A summary of the rules governing data protection in the globe. The financial sector all over the world has various rules and regulations pertaining to data protection with the aim of providing safety and private ownership to individuals. These regulations are enforced in different geographical areas to some extent or another. They are aimed at safeguarding the individuals data discouraging the leakage of data and ensuring that the organisation takes responsibility for the safety of their data.
GDPR (Europe)
The General Data Protection Regulation known as GDPR is one of the most advanced data protection laws at present. A regulation that applies across the EU and EEA GDPR regulates the collection processing and storage of personal data to the highest standards.
There are requirements concerning data processing in the financial sectors that require organisations to obtain clear and concise consent before data processing process collection for lawful and legitimate purposes data being processed in a legalised way and organisations should apply adequate measures to protect data.
As per GDPR any financial institution involved in data processing is obliged to inform the respective regulators about any breach within 72 hours of its identification. The repercussions of nonadherence to or breach of GDPR provisions are combined fines of up to 4% of the organization’s global turnover of the preceding financial year or €20 million whichever is higher.
CCPA (California USA)
CCPA This is a state law on consumers rights to personal data privacy and security and it applies to organisations within California including the financial sector. CCPA grants the affected individuals the right to obtain information on the collection of their personal information the right to have their personal information deleted and the right to opt out of the sale of their personal information.
Business entities under the CCPA must put in place the structural regimen to meet these rights to offer transparent privacy fulfil consumers requested rights and prevent personal data from being accessed and used unauthorised. Non compliance with CCPA means fines and legal actions against the company from both the state and the consumers.
In the United States there is an independent body known as the Financial Industry Regulatory Authority (FINRA) which regulates brokerage firms and exchange markets so that exaggerated and perverted formations in financial business are curbed. Some of the regulatory measures that have been put in place by FINRA include the rules in relation to the protection of customer information and data matters relating to the privacy of customers data.
General standards that require the protection of customer information and cybersecurity risk assessment among other things. Here FINRAs regulations serve the purpose of taking care of the welfare of investors and the efficiency of the financial markets. Failure to adhere to the regulations set by the FINRA will attract penalties that include fines and disciplinary actions in addition to greater regulatory attention.
Function of Supervisory Authorities
Supervisory authorities have a very important function of protecting financial data by approving and establishing such norms and also continuously inspecting organisations for compliance. Such bodies include
Ministries and departments Sectors Industries and associations. International organisations are responsible for drafting and implementing policies relating to the protection of data. Aside from the rules and directives financial institutions are urged to utilise benchmark standards and engage in intelligence exchange programs in order to be aware of the latest threats risks and sector trends. This is very important because such financial institutions need to work closely with the regulators to ensure they offer a secure financial system.
Consequences in Terms of Penalty
The legal repercussions of data theft in the financial industry are absurd with penalties that include fines legal costs and regulatory actions. Specific consequences that financial institutions may suffer in case they are exposed to have neglected their responsibilities in protecting data include attracting litigation suits from users attracting regulatory actions plus eroding their reputation.
At other times acts of data theft may also lead to legal consequences especially where the actors involved are people working for the company or third party contractors or where the breaches were by external parties. The laws relating to hacking define the legal repercussions of data theft and they underscore the significance of diverse measures for safeguarding data across the financial industry.
Requirements to Comply with Financial Institutions
Many financial institutions face the very challenging task of dealing with numerous compliance demands to secure their data and avert the legal consequences. Some of these requirements are data protection measures risk assessments breach reporting and informing customers about data collection and processing.
Adherence to data protection legal requirements is not only mandatory but it is also a strategic success factor in the market and with clients. The financial institutes that are more focused on data security and regulatory compliance are in a better place to manage the risks of data theft and control their image in the marketplace.
MultiFactor Authentication (MFA)
The use of MFA requires a user to produce more than one proof that will enable them to get access to a particular data or system. MFA can involve the use of what the user knows for instance a password what the user has such as a token and what the user is such as a fingerprint. MFA should be adopted in all financial institutions in a manner that covers all critical systems and accounts to minimise free access to them.
Performing Security Audits
Application security assessments and vulnerability scanning should be performed on a daily basis as this will help prevent and mitigate threats to financial institutions systems and structures. Security audits entail examinations of politics procedures and measures that can be technical to determine their compliance with the standards as well as the laws. The other form of testing is penetration testing where one tries to find out the flaws within the systems that attackers could exploit.
Thus through audits and tests financial institutions have a chance to foresee potential problems in computer security and have no chance to use them for their own benefit by cyber criminals.
Artificial Intelligence in threat detection
AI and ML technologies are gradually being integrated into the financial industry specifically in threat detection and response systems. These technologies are capable of scanning through large volumes of data to check for consistency in signs that may point towards a cyber attack. Through AI and ML threats to the financial institution are realized and a faster response is needed to reduce the effects of the breach.
AI and ML can also be applied in security procedures such as intrusion detection differential user behaviour analysis and fraud detection. This automation can help alleviate some pressures on security teams as well as the efficiency of cybersecurity operations.
Data Minimization and Access Control
Data minimization means the usage and storage of the least possible amount of data required for performing business functions. Thus one can highlight the positive effect and reduce the amount of data that can be compromised in case of a data breach that may happen in financial institutions. Access control is also employed as another crucial factor that helps provide data security with restrictions to access to the information.
To minimise the risk posed by insider threats firms should establish RBAC that limits an individuals ability to access data depending on their role. It should also be applied to the practice of least privilege where the employee is provided the least amount of access required to perform their job.
Emerging Threats and Challenges
This being the case as the financial sector undergoes development other challenges and threats are expected to occur. Some of the key trends and developments that financial institutions should be aware of include
Advanced Persistent Threats (APTs)
APTs can be described as elaborate and strategic plans that call for a binding infiltration of a specific network with the aim of staying covert. The financial institutions also remain vulnerable to APTs and need to allocate resources for the development of powerful threat identification and prevention mechanisms.
Supply Chain Attacks
The supply chain of financial organisations is now considered the primary area of interest by cyber criminals as they can easily infiltrate third party vendors and service providers. Financial institutions are also required to make sure that their supply chain partners follow strong security measures and they need to evaluate their security position on a regular basis.
Emerging Technology
Among the technologies above blockchain and cryptography are considered the two that have the highest potential to improve data security in the financial domain. Blockchain a distributed ledger technology provides a secure and transparent means of keeping track and or validating transactions making it very hard for attackers to manipulate the recorded financial data.
Currently blockchain is being tested in banks and other financial organisations for purposes such as protecting payment functions and identifying security threats. One of the most important methods of ensuring the privacy of financial data is cryptography that is the use of codes. Thus organisational growth in cyber threats comes with the emergence of new cryptographic techniques like homomorphic encryption and post quantum cryptography.
Vitality of Enduring Cybersecurity Improvement Process
Cybersecurity is a dynamic subject where new threats and risks appear from time to time. It is appreciated that financial institutions must exercise constant enhancement in cybersecurity to have the advantage in dealing with attackers and in guarding the data. This includes but is not limited to the availability of resources for research and development IT infrastructure implementation innovativeness and indepth knowledge of current trends and models in cyber security.
Although it is always important to follow existing practices and ensure individuals have good security habits it is also necessary for financial institutions to promote innovation in their organisations and allow employees to come up with new ideas and methods on how to achieve data security. Through innovation financial institutions can find better ways of guarding against cyber threats thus retaining customer and stakeholder confidence.
Conclusion
The common threat in the financial sector is data theft and this is a major threat as it affects not only the financial companies but also consumers and the economy in general. Some of the data breach impacts comprise monetary losses brand erosion regulatory fines and business interruptions. While the threat landscape is constantly changing these seven proactive measures are crucial for the financial institutions that manage large amounts of data to be put to the right use.
In this way by adopting a holistic view of cybersecurity being up to date with the possible threats and adhering to the laws of data protection financial institutions can guard their customers data against theft. The future of data security in finance is ambitious as it has to constantly search innovate and cooperate to overcome emerging threats of the new age of globalisation and digitization of the financial environment.
