Banks and other financial institutions have a duty to protect their customers’ data. Without proper cybersecurity measures in place, financial institutions are at a high risk for data breaches that can expose private information and negatively impact their reputation, as well as their legal and financial standing.
Cybersecurity refers to the practice of protecting networks, systems and programs from digital attacks. Such attacks can take the form of viruses, malware, unauthorized access, theft of data, denial of service, tampering of data and various other malicious actions. Here are some of the top reasons why banks, credit unions and financial institutions of all sizes need a strong cybersecurity strategy.
Many Cybercriminals Target Banks and Other Financial Institutions
According to a recent report by the Boston Consulting Group, financial services firms are 300 times more likely than companies in other industries to be targeted by a cyberattack.
Cybercriminals use a variety of tactics when targeting financial institutions, such as trojans to download data or steal banking information. ATM malware may also be used to steal customer credit and debit card information.
Many modern hackers steal funds not only by compromising customer accounts, but also by targeting vulnerabilities in the bank’s systems and infrastructure.
The Personal Data Stored in Banking Databases Is Sensitive
Although most businesses have access to client information, financial institutions require customers to provide highly sensitive data personal data, including their name, address, birth date, email address, phone number and social security number. All of this information is linked to customers’ loans, account information and credit card numbers. This information is highly valuable to cyber criminals who can sell it on the black market.
Data Breaches Ruin Reputation and Standing
Financial institutions stand to lose more than just money should they fall victim to a cybersecurity incident that results in a data breach. They can also suffer substantial reputational damage. When a customer loses money as the result of a data breach, it’s likely they will lose trust in that bank and may turn to another institution for services. If the breach becomes public knowledge, the news of it will prevent potential new customers from opening accounts.
It can be challenging for banks and other financial institutions to fully recover after losing public trust. In some cases, the institution may be forced to close its doors.
Non-Compliance with the FDIC Can Result in Significant Penalties
Financial institutions are obligated to meet certain compliance requirements that help reduce the likelihood of a cyberattack. When institutions fail to take the necessary steps to comply with these requirements, they could face serious penalties from regulating bodies like the FDIC.
Between August and October of 2020, the Office of the Comptroller of the Currency (OCC) imposed approximately $625 million in fines on financial institutions that failed to comply with cybersecurity regulations.
Banks May Face Lawsuits if Information is Compromised
When a bank experiences a data breach that compromises customer information, those customers have the right to file a lawsuit against the financial institution. Data breach lawsuits are deemed valid if a customer suffers damage from a data breach through civil or criminal injuries, such as the loss of income from online activities or the use of stolen financial information to perform identity theft.
Although a cybercriminal may be responsible for the stolen funds or compromised data, a court may find the bank that holds the data or funds liable if the victim can prove that the bank did not take the necessary security measures to prevent an attack.
Speak with the Cybersecurity Consultants at Hartman Executive Advisors
There are many ways that banks and other financial institutions can defend against cyber threats. Undergoing regular security audits, using anti-malware applications, enabling firewalls, executing multi-factor authentication (MFA), implementing automatic login and creating awareness of cybersecurity risks can help prevent these attacks.
Bank leaders can benefit from speaking with a risk management consultant about mitigation strategies that met regulation and align with business objectives. To learn more or to request a consultation with an experienced risk management consultant, contact the experts at Hartman Executive Advisors.
