Salomon Kisters

Jan 16, 2024

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Cybersecurity is one of the primary concerns for the finance sector. Amid rapid digitalization, geopolitical differences, and dependence on service providers, digital risks are evolving by the day and aim to exploit a bank’s vulnerabilities to threaten its financial stability.

According to KPMG’s State of Banking Survey in 2022, 43 out of 100 senior executives acknowledged that their banks might not have a competent IT infrastructure to secure customer data, privacy, and other digital assets if they were under a cyberattack.

The same report states that 81% of bankers expect an increase in digital attacks. Still, 34% admit that their bank isn’t investing enough money to thwart cyber threats. But it's important to remember not all is lost. There’s still some time for modern banking to adopt effective strategies for enhanced security.

How Can Modern Banking Boost Its Security?

Cybersecurity is a growing concern for industries across the globe. IBM’s Cost of a Data Breach Report 2023 states that the average international cost of a data breach in 2023 was $4.45 million. This staggering number indicates a 15% increase in the cost of data breaches over three years.

Despite the increasing risk, an IMF survey of 51 countries indicates that nearly 56% of emerging and developing economies don’t have a national cybersecurity framework for the financial sector.

It’s important to note that security issues don’t just arise from cyberattacks. Unknowingly harboring financial criminals and helping them launder money is a significant issue plaguing banks.

However, that doesn’t mean individual banks can’t develop and adopt effective strategies to fight financial cyber crimes. If they don’t, their monetary assets and data repository will be under constant attack. This would halt business operations, lead to financial loss, give way to legal troubles, and shake consumer confidence.

So, if banks want to survive in the current digital landscape and side-sweep the minefield (or at least be prepared for it) containing threats like malware, money laundering, data theft, phishing, hacking, and cyberattacks, they must incorporate well-defined security strategies as part of their business plan**.

4 Strategies banks can adopt to boost cybersecurity

Before we get to the strategies, it’s essential to remember that cybersecurity isn’t an isolated activity. The bank must establish a digital trust to maintain privacy and boost its IT infrastructure.

Moreover, these measures shouldn’t be viewed as a hindrance to business operations since these strategies would help modern banks make sound decisions and operate confidently while keeping their monetary and data assets secure and out of reach of bad actors.

That being said, here are the top [four]{.mark} strategies modern banks should incorporate with their business plan to secure their assets and keep intruders out.

Follow KYC, CDD, and AML best practices

The financial sector faces a huge issue when it comes to identifying criminals they might be harboring despite following KYC (know your customer) best practices. It’s true that KYC is essential to identify your customer’s IDs, registered addresses, and pictures to ensure they are who they claim to be.

But this is just a basic step, and industrious criminals often find it easy to manipulate the system and bypass it entirely. So, you never know if you’re leading the way for a fox to enter your hen house. This is where FinCEN’s (Financial Crimes Enforcement Network) CDD (customer due diligence) rule comes into the picture.

Sure, the additional layer of authentication will make your customer onboarding more arduous and time-consuming. However, check sanctions screening, online databases, government records, and watchlists to actually understand your customers and the level of risk they’ll expose your bank to.

Similarly, follow government-directed AML (anti-money laundering) policies to stay vigilant and not accidentally aid and abet financial criminals. This will boost your financial stability and protect your goodwill in the market.

However, these are not the only advantages of following the set AML regulations. For instance, the AMLA (Anti-Money Laundering Act) of 2020 aims to remove anonymity surrounding certain business owners, helping banks weed out financial criminals who hide behind shell corporations to keep their nefarious activities funded.

Since it’ll remove the mystery surrounding certain business owners, banks would be more in control and know the true identity of their consumers.

To ensure this comes to pass and financial criminals have a hard time hiding their illicit activities under the guise of shell corporations, FinCEN introduced the Corporate Transparency Act (CTA), and has made it mandatory for several businesses to fill the Beneficial Ownership Information form.

Being aware of these regulations and diligently following them will allow banks to stay on the right side of the law and keep an eye on suspicious persons or corporations. That being said, money laundering isn’t easy to keep track of or monitor manually.

Use AML transaction monitoring software

Transaction monitoring in AML is vital to flush out money launderers and related suspicious activities. Since setting up elaborate processes and following them 24/7 isn’t possible for the human workforce, dedicated transaction monitoring software is absolutely necessary for these financial institutions.

Such solutions consistently monitor high cash deposits, track a large volume of transactions, and let you set customized risk rules in real-time. While these processes aren’t ground-breaking, detecting the connection between suspicious activities and beneficial owners will help modern banks secure their institutions from fraudsters.

Examine current security measures and devise countermeasures

One of the most essential strategies modern banks can undertake is to analyze their current security measures and update them to fight fraudsters at every turn. So, the first step is to recognize the latest security issues and find the vulnerabilities in your IT infrastructure accordingly.

To illustrate, if your research yields that data breach is the primary concern for banks, take steps to secure your data centers and cloud reservoirs. Apply the principles of IAM (identity access management) to ensure your employees can only access the required data.

This will make it difficult for them to sift through the data archives at their leisure and minimize vulnerabilities fraudsters can exploit. Similarly, converge your physical and digital security measures to ascertain your security and IT teams are in sync. This will help you find and eliminate all the weak links in your security posture.

For instance, if the security team finds that employee badges are easy to mimic and allow fraudsters to pose as trusted personnel, the IT team can digitize them, make multi-factor authentication necessary, and install cameras at strategic places.

Better yet, you can employ turnstiles and access control systems to regulate the flow of traffic and manage admission to sensitive areasdigital and physical.

Another excellent idea is to demystify cybersecurity and outsource it if you don’t have enough resources in-house**. Experts will create a moat around your bank through real-time security measures like DDoS prevention, intrusion detection, encryption, authentication, and vulnerability analysis.

Alternatively, you can turn to a third party to gauge the effectiveness of your security measures. Dedicated red teams will prove instrumental in scanning your IT infrastructure for weak links. They’ll also put your IT team’s readiness and response through simulated attacks.

Train your employees

A company is as secure as its security culture. All your security measures will be for naught if your employees remain unaware and practice poor security measures internally. Make security and digital privacy a priority, not an afterthought, and embed it in your bank’s DNA.

Your employees setting weak passwords, divulging confidential information, and clicking on suspicious email links might all seem like minor inconveniences in the grand scheme of things. But the consequences can quickly add up if a fraudster catches wind of this.

So, educate your employees on best practicesonline and offlineto reduce the blowback from innocent mistakes. Tell them to keep their anti-malware and anti-virus solutions updated for the best results.

Moreover, train your employees in the latest endpoint security solutions, like zero trust, digital identifiers (DIDs), and public key infrastructure. Additionally, hire a compliance officer (or specialist) to teach them about the importance of AML regulations and how they can detect, analyze, and report suspicious activities in the nick of time.

Though you’ll have to bear additional costs for cybersecurity education and training, the money you spend will be a fraction of what you’ll have to part with due to poor security culture.

Facilitate customer awareness

Be proactive in educating your consumers. Tell them how they can keep their account safe and out of reach of fraudsters. Benign steps, like setting strong passwords and not using public Wi-Fi to carry out bank transactions, can secure their online banking transactions and will have a positive impact down the line.

Don’t forget to emphasize the importance of following the best security measures. Build a genuine relationship with them so they’ll be comfortable reporting breaches or fraudulent bank transactions to the bank’s cybersecurity team.

Security is paramount for success in modern banking

There’s no substitute for security in banking since the safety of monetary assets and data repositories depend on their security posture. Become aware of the latest AML regulations, embed security in your DNA, and encourage your employees and customers to follow best practices.

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