Financial Crime World

Global Financial System on High Alert as Cyber Threats Intensify

The global financial system is facing an unprecedented threat from cyber attacks, according to a new report by the Carnegie Endowment for International Peace. The report warns that the rapid evolution of cyber threats has outpaced the responsiveness of the financial regulatory system, leaving the system vulnerable to disruption or destruction.

A Collective Action Problem

The main obstacle to effective protection is a collective action problem - how to organize the system’s defense across governments, financial authorities, and industry to leverage resources effectively and efficiently. The report highlights that different communities operate in silos, tackling the issue through their respective mandates, while lines between financial services firms and tech companies have become increasingly blurred.

Key Principles for Protection

The report recommends an international strategy to better protect the global financial system against cyber threats, based on four key principles:

  • Greater Clarity: Greater clarity about roles and responsibilities is required.
  • International Collaboration: International collaboration is necessary and urgent.
  • Cyber Resilience: Cyber resilience must be strengthened through law enforcement actions and multilateral responses.
  • Capacity Building: Capacity building is essential for a strong cybersecurity workforce and expanded financial sector cybersecurity capacity.

Recommendations

To reinforce international norms, governments should make clear how they will apply international law to cyberspace and strengthen norms to protect the integrity of the financial system. The report also emphasizes the need to build capacity by:

  • Training and Hiring: Training and hiring talented people in cybersecurity
  • Assistance: Providing assistance where it is needed
  • Safeguarding Gains: Safeguarding gains in financial inclusion

The Importance of International Cooperation

As the world grapples with the implications of the pandemic, experts warn that elevated unemployment provides an opportunity for training and hiring talented individuals to strengthen the cybersecurity workforce. Tim Maurer, Director of the Cyber Policy Initiative at Carnegie Institute of International Peace, urges the international community to come together to address this urgent challenge.

References

  • Garcia-Macia, Daniel, and Rishi Goyal. 2020. “Technological and Economic Decoupling in the Cyber Era.” IMF Working Paper 20/257.
  • International Monetary Fund (IMF). 2019. “The Rise of Corporate Market Power and Its Macroeconomic Effects.” World Economic Outlook, Chapter 2.
  • Medhora, Rohinton P. 2021. “We Need a New Era of International Data Diplomacy.” Financial Times, January 17.

Note

Opinions expressed in articles and other materials are those of the authors; they do not necessarily represent the views of the IMF and its Executive Board, or IMF policy.