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Cyber Threats to Global Financial System Escalate, Urgent Action Needed

A disturbing trend is emerging in the global financial system: the number of purely disruptive and destructive attacks has been increasing at an alarming rate. These attacks not only compromise sensitive information but also provide malicious actors with valuable knowledge about the financial system’s networks and operations, allowing them to launch even more devastating attacks in the future - or sell this expertise to others.

The rapid evolution of cyber threats is taxing the responsiveness of a once-mature and well-regulated system. The digital revolution, fueled by innovation, competition, and the pandemic, has further accelerated the problem. Without dedicated action, the global financial system will continue to be vulnerable to these attacks.

A Comprehensive Strategy

To combat this growing menace, the Carnegie Institute of International Peace has developed a comprehensive strategy that involves building capacity, strengthening international norms, and facilitating collective response. Key recommendations include:

• Establishing entities to assist in assessing threats and coordinating responses
• Intelligence gathering focused on threats to the financial system, with sharing of intelligence among allies and like-minded countries
• Secure, encrypted data vaulting for members to back up customer account data overnight
• Regular exercises to simulate cyberattacks, identifying weaknesses and developing action plans
• Strengthening norms to protect the integrity of the financial system, including clear statements from governments on how they will apply international law to cyberspace

Building Capacity

Elevated unemployment due to the pandemic provides an opportunity to train and hire talented individuals to strengthen the cybersecurity workforce. Financial services firms should invest in initiatives to build the talent pipeline, including high school, apprenticeship, and university programs.

Additionally, building cybersecurity capacity requires focusing on providing assistance where it is needed. International organizations such as the IMF and other international agencies received many requests for cybersecurity assistance from member states following the 2016 Bangladesh incident. G20 governments and central banks could create an international mechanism to build cybersecurity capacity for the financial sector, with an international agency designated to coordinate the effort.

Maintaining Progress in Financial Inclusion

Financial inclusion is also at risk as countries extend financial services and move to digital financial services. To maintain progress, connections between financial inclusion and cybersecurity must be strengthened, particularly in Africa where many countries are experiencing a significant transformation of their financial sectors.

Time for Action

The international community - including governments, central banks, supervisors, industry, and other relevant stakeholders - must come together to address this urgent challenge. A well-thought-out strategy like the one outlined above provides a blueprint for turning words into action.

Author

Tim Maurer is the director of the Cyber Policy Initiative and a senior fellow in the Carnegie Institute of International Peace’s Technology and International Affairs Program.