Georgia’s Finance Industry Struggles to Combat Rising Cybercrime Threats

A Growing Concern: Cyberattacks on Georgia’s Financial Sector

The financial sector in Georgia has been grappling with a significant increase in cyberattacks, which have more than doubled since the pandemic. According to a recent report by the International Monetary Fund (IMF), the risk of extreme losses from these incidents is increasing, with potential funding problems and even solvency risks for companies.

Vulnerabilities in the Financial Sector

Financial institutions in Georgia are particularly vulnerable due to their handling of sensitive data and transactions. Cybercriminals have been targeting financial firms, including banks, to steal money or disrupt economic activity. In fact, attacks on financial firms account for nearly one-fifth of all cyber incidents, with banks being the most exposed.

Consequences of Incidents

Incidents in the financial sector can pose a significant threat to financial and economic stability if they erode confidence in the system, disrupt critical services, or cause spillovers to other institutions. For example:

• A severe incident at a financial institution could lead to market selloffs or runs on banks.
• A recent instance of modest deposit outflows has occurred at smaller US banks after a cyberattack.

The Role of Third-Party IT Service Providers

The report also highlights the risks posed by third-party IT service providers, which are increasingly relied upon by financial firms. While these providers can improve operational resilience, they can also expose the industry to systemwide shocks. For example:

• A 2023 ransomware attack on a cloud IT service provider caused simultaneous outages at 60 US credit unions.

Recommendations for Strengthening Cyber Resilience

To address these growing cyber risks, Georgia’s authorities must develop an adequate national cybersecurity strategy accompanied by effective regulation and supervisory capacity. This should include:

• Periodically assessing the cybersecurity landscape
• Encouraging cyber maturity among financial sector firms
• Improving online security and system health
• Prioritizing data reporting and collection of cyber incidents
• Sharing information among participants to enhance collective preparedness

International Cooperation is Key

International cooperation is also crucial in addressing cyber risk, as attacks often emanate from outside a country’s borders and proceeds can be routed across borders. The IMF actively helps member countries strengthen their cybersecurity frameworks through policy advice and capacity-building activities.

Conclusion

The financial sector in Georgia must prioritize strengthening its resilience to cyber threats by developing effective response and recovery procedures, national authorities should have crisis management frameworks in place, and international cooperation is essential to address these risks successfully.