Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
Comments are moderated and will not appear until the moderator has approved them.
Please submit appropriate comments. Inappropriate comments include content that is abusive, harassing, or threatening; obscene, vulgar, or profane; an attack of a personal nature; or overtly political.
In addition, no off-topic remarks or spam is permitted.
Federal Reserve Web Sites
Other Bank Regulatory Sites
October 28, 2019
Should We Throw in the Towel When It Comes to Data Breach Prevention?
We've all heard it said—we've probably, cynically, said it ourselves: "It's not a matter of if but when your company will be hit by a data breach." Reports about cyberattacks and network breaches fill my daily newsfeed with headlines on ransomware attacks, attacks on multifactor authentication, and 5G network vulnerabilities. For each new, better, stronger, faster solution the industry comes up with, criminals find a way to circumvent it in seemingly short order. Is there anyone whose personal information hasn't been stolen once, twice, five times? I've lost count of how many times I've received six months of free credit monitoring.
In today's world, is there any way for an organization to fully protect itself against the broad spectrum of ever-evolving threats and still have time, resources, and capital left over to conduct its everyday business? Or should we assume that breaches are a foregone conclusion, throw in the towel when it comes to prevention, and turn our focus instead to incident response?
According to Verizon's 2019 Data Breach Investigations Report , small businesses were frequent targets of breaches. (The report looked at incidents occurring from November 1, 2017, to October 31, 2018.) Other findings it reported: outside actors perpetrated 69 percent of breaches, 52 percent were the result of hacking, and it took months or longer to discover 56 percent of the incidents.
Last year, I wrote about committing to muscle memory your organization's plan for the right of boom. A Google search on "data breach response" returns pages of results with guides, resources, and services, but the midst of a cyber-event is probably not the best time to come up with a plan. Turns out, there's an app for that! At a recent fintech conference, I saw a demo of a dynamic breach response solution that turns response into a routine business process. The company likens its app to "an airbag for network breaches" and claims the tool helps organizations prepare for, detect, and respond to data breaches. Another company demonstrated a white-labeled application for financial institutions that aims to reduce post-breach fraud and identity theft of consumers through algorithmic risk assessments that produce recommendations for actions to take to mitigate these risks.
October is National Cybersecurity Awareness Month. It's a good time to review your own right of boom plan or take steps to implement one. One resource: the Department of Homeland Security's Cybersecurity Resources Road Map for small and midsize businesses.
While it is not hyperbole to assert that criminals will breach your organization's network, you should not throw in the towel or lower your defenses against such threats. Rather, you should avail yourself of technological innovations to support breach prevention and response preparedness so your organization can restore normal business operations as quickly as possible. What approach has your organization taken to adopting threat prevention and response preparedness?
September 30, 2019
"Insuring" Ransomware Will Continue to Flourish
Making predictions is a dangerous game. More than two years ago, I predicted that 2017 and 2018 would be the Years of Ransomware. And while I am not willing to admit that I completely missed out on that prediction, it does appear to be a bit short-sighted. If I could go back to May 2017, I would also include 2019 in my prediction. According to the insurance firm Beazley, ransomware attack notifications from clients increased by 105 percent in the first quarter of this year compared to the first quarter of 2018, and the average ransom demand increased to $225,000 from $116,000 during the same period. My colleague Dave Lott wrote two blogs in July highlighting the changing nature of ransomware attacks and suggesting ways to avoid them or minimize their impact.
In just the few weeks since Dave's posts were published, ransomware attacks have continued to flourish. On August 16, 22 Texas municipalities and agencies were hit by an apparent coordinated attack. On August 26, a cloud management provider for the dental industry was stricken with ransomware, impacting approximately 400 of its dental clients. And over Labor Day weekend, a small Pennsylvania school district was attacked.
In both of his posts, Dave noted that law enforcement officials urge ransomware victims not to pay ransom because doing so encourages criminals to continue. Moreover, there is no guarantee that they will send the decryption keys. Ultimately, the decision of whether or not to pay a ransom lies with the organization that has been attacked and its unique situation. The ransom payment dilemma was recently featured in the Wall Street Journal's September 18 Cybersecurity Journal Reports section. Two cybersecurity experts debated whether or not cities affected by ransomware should succumb to the criminals' demands for payment.
But now an interesting twist in ransom payments has emerged: who is making the ransom payment, the attacked organization or an insurance company?
In his last ransomware blog, Dave wrote that entities should evaluate their "cybersecurity insurance policy in terms of its ransomware coverage." This brings us to an interesting question: Are insurers making ransom payments on behalf of their clients under cybersecurity insurance policies? The answer is yes. So this begs a couple of other questions: Will insurers paying ransoms on behalf of ransomware victims guarantee that ransomware attacks will continue? And could they lead to larger ransoms? I believe the answer to both questions is a resounding yes. It's not my place to debate whether or not insurers should be in the business of paying ransoms, but continuing the practice could cause ransomware attacks to continue to flourish.
July 22, 2019
Ransomware Attacks Continue
Ransomware attacks have only continued since I addressed the problem in a recent post, and they've continued to target municipal and state agencies. Riviera Beach (May) and Lake City (June), both in Florida, were successfully attacked. Lake City paid a bitcoin ransom of approximately $470,000 while Riviera Beach paid about $600,000, also in bitcoin. These attacks took place soon after the one in Jackson County, Georgia, whose government paid $400,000 for decryption keys. While law enforcement officials recommend that victims not pay ransom for fear that doing so encourages the criminals to continue their attacks, the affected agencies often view paying the ransom as a cost-effective way to restore operations as soon as possible. Moreover, Lake City and Riviera Beach were both insured against such attacks, with a $10,000 and a $25,000 deductible, respectively. It appears that in all three of these instances, when they got their ransom, the criminals supplied the necessary data that allowed officials to regain control of the systems.
So how can governments, schools, hospitals and doctors' offices, financial services, and consumers best protect their systems from these nefarious attacks? It's not easy—criminals are constantly developing new malware to get into systems. However, here are some critical guidelines from IT security professionals that can help us all avoid or minimize the impact of a ransomware attack.
- Perform data backups at least daily, and keep at least one backup copy offsite or on portable storage devices not connected to the network.
- Avoid using end-of-life operating systems and software that cannot be updated to address known vulnerabilities.
- Install software updates and security patches as soon as possible, and follow established change control guidelines.
- Evaluate segmenting your network into separate zones to minimize the spread of a ransomware infection.
- Train and test employees regularly about how criminals use phishing attacks to load malware onto computers that can then compromise system access credentials.
- Require employees to use strong passwords.
- The IT security community is divided about how frequently passwords should be changed, but do so at least every six months.
- Maintain comprehensive access controls so that only the employees that require access to individual system have such rights, especially regarding remote access.
- Use reliable security software and, as the second bulleted item recommends, keep it updated. Evaluate adding special trusted anti-ransomware tools, some of which are free.
- Evaluate your cybersecurity insurance policy in terms of its ransomware coverage.
In addition, every agency and organization should develop a ransomware response plan that can be implemented as soon as an attack has been detected. While the immediate focus should be on minimizing the impact of the attack, elements for business continuity, law enforcement notification, media communications must also be part of the plan.
We hope you won't be a victim, but simply keeping your fingers crossed isn't an effective plan.
By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
April 8, 2019
Insuring Against Cyber Loss
Over the last few months, my colleagues and I have had multiple speaking engagements and discussions with banking and payments professionals on the topic of business email compromise (BEC). Generally, these discussions lead to talk about a risk management strategy or approach for this large, and growing, type of scam. One way some companies and financial institutions are mitigating their risk of financial loss to BEC and other cyber-related events is through a cyber-risk insurance policy. In a recent conversation, someone told me their cyber-insurance carrier mandates that they get an outside firm to audit and assess their cybersecurity strategy and practices, or they risk losing coverage.
According to a recent Wall Street Journal article, some large insurers are even going a step further and collaborating with each other to offer their own assessments of cybersecurity products and services available to businesses. Their results, which they will make publically available, will identify products and services they deem effective in reducing cybersecurity incidents and potentially qualify insured companies with improved policy terms and conditions if they use those products or services.
Cybersecurity vendors who would like their products and services to be assessed must apply by early May. They are not required to pay any fees for the evaluation. In light of the rising number of cyber-related events and increasing financial losses, along with the growing number of legal cases between companies and their insurance providers, this move by the insurance companies makes sense as a way for them to potentially reduce their exposure to cyber incidents. But it will be very interesting to see just how many cybersecurity vendors apply for participation in the program and how effective the insurers are at assessing the vendors' products and services. Moreover, for businesses, just using cybersecurity solutions helps them meet only part of the challenge. How they implement and maintain these solutions is critical to an effective cybersecurity approach.
Also of note in the Wall Street article is a graph that depicts the percentage of a particular global insurance company's clients, by industry, that have purchased a stand-alone cyber-insurance policy. Financial institutions, at 27 percent, rank last. Perhaps they are more confident in their cybersecurity strategies than are other industries, or perhaps insurers have no attractive stand-alone policies for financial institutions.
The cyber threat today is serious. In fact, Federal Reserve Board chairman Jerome Powell in a recent CBS 60 Minutes interview, when asked about a possible cyberattack on the U.S. banking system, responded that "cyber risk is a major focus—perhaps the major focus in terms of big risks."
As the Risk Forum continues to also focus on and monitor cyber risks, we look forward to the public findings from the insurers' collaborative assessment of cybersecurity products and services and will be interested to see if, over time, more financial institutions obtain cyber-risk insurance policies. I suspect the cyber-insurance industry will evolve in the products they offer and will continue to grow as companies look to mitigate their risks in the event of a cyber event.
What are your thoughts on this collaborative effort by the insurers? How do you see the cyber-insurance industry evolving? And do you think more financial institutions (or perhaps your own) will acquire cyber-insurance policies?
By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
Take On Payments Search
- account takeovers
- ATM fraud
- bank supervision
- banking regulations
- banks and banking
- card networks
- check fraud
- consumer fraud
- consumer protection
- credit cards
- crossborder wires
- data security
- debit cards
- emerging payments
- financial services
- financial technology
- identity theft
- law enforcement
- mobile banking
- mobile money transfer
- mobile network operator MNO
- mobile payments
- money laundering
- money services business MSB
- online banking fraud
- online retail
- payments fraud
- payments innovation
- payments risk
- payments study
- payments systems
- Payment Services Directive
- phone fraud
- remotely created checks
- risk management
- Section 1073
- skills gap
- social networks
- thirdparty service provider
- trusted service manager
- Unfair and Deceptive Acts and Practices UDAP
- wire transfer fraud
- workforce development
- workplace fraud