On 13 September 2016, the Central Bank of Ireland (the CBI) published new guidance on IT risk management and cybersecurity for financial service firms. Publication of the Guidance follows the CBI’s previous actions in relation to cyber risks in the funds, insurance and banking sectors (see previous blog here). The CBI acknowledges that IT plays an integral part in the supply of financial services and calls on Boards and Senior Management of regulated firms to recognise the ever increasing incidences of cyber-attacks and business interruptions. It requests such firms to acknowledge their responsibilities in this regard and prioritise IT security. This responsibility involves establishing and maintaining a resilient IT strategy, while ensuring that it aligns with the firm’s general business strategy. It states that a robust oversight and engagement on IT matters at the Board and Senior Management level promotes an IT and security risk aware culture within the firm.
On 7 December 2015, the EU Council reached an informal agreement with the EU Parliament on the draft Network and Information Security (NIS) Directive.The draft Directive sets out cybersecurity obligations for operators of essential services in the healthcare, banking, energy and transport sectors, and also digital service providers (including e-commerce platforms, search engines, social networks, internet payment gateways, and cloud services). These operators will be required to take measures to manage cyber risks and report major security incidents.
Recent high profile security incidents illustrate that no institution or business is immune from cyber attack. A cyber attack on the White House in 2014 resulted in a partial shutdown of its email system. In a reported attempt to extort money from the ECB, email addresses and other user contact information were stolen in 2014. Confidential movie scripts and emails about staff and movie stars were released as part of the 2014 Sony hack. Already this year, the Carphone Warehouse security breach in early August and the more recent Ashley Madison hack have received extensive media coverage.
“The next big financial shock will arise from a succession of cyber-attacks on financial services firms.”
This is the case according to the Chairman of the International Organisation of Securities Commission as cited by the Central Bank of Ireland’s Deputy Governor, Cyril Roux, during a recent address to the Society of Actuaries.
Last month the Department of Communications, Energy and Natural Resources published the Government’s National Cyber Security Strategy 2015-2017 (the Strategy).
In 2013 the World Economic Forum classified cyber related threats as one of the highest of all global risks from the perspective of impact and likelihood. This assessment was echoed at a national level in the Government’s 2014 National Risk Assessment. The development and proliferation of Information and Communications technology (ICT) has transformed the way in which society operates. There are few sectors of both society and the economy which do not rely on some form of ICT for their continued operation. This increased dependence has led to increased risk with threats such as hacking, cyber-crime, hacktivism, cyber espionage, software failures and even human error posing a direct threat not only to the daily lives of Irish citizens but also to the economy and the State.
Researchers at McAfee have discovered a new “ransomware-as-a-service” tool on the darknet. This tool, named "Tox", allows criminals to automatically create ransomware. Once the victim’s device is infected, the ransomware begins to encrypt their hard drive, allowing the criminal to demand a ransom in exchange for the encryption key.
Symantec released their annual Internet Security Threat Report (the Symantec Report) last week (available at http://www.symantec.com/security_response/publications/threatreport.jsp) and it makes for alarming reading. The risk of cyberattack is one that has been brought to the forefront of popular consciousness by the devastating cyberattacks on Sony Pictures Entertainment in 2014 and the Symantec Report shows that 2014 saw a worryingly exponential increase in the number, severity and sophistication of such attacks.
On 3 February 2015, the Securities and Exchange Commission (the "SEC") and the Financial Industry Regulatory Authority ("FINRA") both issued cybersecurity reports to the US securities industry. The SEC is the US Federal Government’s securities regulatory agency, while FINRA is a private company that acts as a self-regulatory organisation for US securities firms. The publications highlight the increased US regulatory focus in this area.
The Risk Alert summarises the SEC’s findings following its examination of 57 broker-dealers’ and 49 investment advisers’ controls regarding cybersecurity preparedness. Notable statistics from the firms examined include:
– 88% of broker-dealers and 74% of investment advisers have experienced cyberattacks either directly or through one of their vendors. The majority of the cyberattacks involved the use of malware and fraudulent emails but no single loss exceeded $75,000;
– 93% of broker-dealers and 83% of investment advisers have written information security policies in place, of those, 89% of broker-dealers and 57% of investment advisers periodically audit policy compliance;
– 58% of broker-dealers and 21% of investment advisers maintain cybersecurity insurance, however, only one broker-dealer and one investment adviser reported that they had filed claims; and
– Only 15% of broker-dealers and 9% of investment advisers offer security guarantees to protect their clients against cyber related loss.