Cybercriminals have focused on the Financial Services industry as a prime target for attack. They are leveraging ransomware as a weapon of choice due to it being low-effort and yielding significant results. This is why according to Sophos, there was a 51% increase in ransomware attacks against financial institutions in 2021.
Financial services organizations are particularly vulnerable due to the vast amount of sensitive data they manage, making them lucrative targets for cybercriminals. Research indicates that financial services organizations experience 300 times more cyber incidents than other industries, emphasizing the importance of stringent cybersecurity measures. High-profile attacks, such as the 2019 Travelex attack, demonstrate the potentially disastrous consequences of ransomware in this sector.
This blog explores how ransomware can impact the compliance posture of financial organizations and defend against this growing threat.
Ransomware Attacks on Financial Services Organizations
Understanding the method of attack is a crucial first step in defending against it. In the case of ransomware, it is a special variety of malware meant to extort money from victims. It encrypts files and data, preventing users from accessing it until a ransom is paid to attackers. As attackers got greedy, they created evolved variants of ransomware that go beyond encryption to steal data or open backdoors for attackers to do the same. This opens the door to more complex extortion attacks and leads to compliance issues.
Financial service organizations are prime targets for these attacks based on the valuable and sensitive data that they handle. When targeted by ransomware, they face the cost of the ransomware and additional financial losses and reputational damage.
This is further complicated by the regulatory guidelines governments and industry bodies set to protect sensitive information and operational integrity. Compliance refers to these organizations adhering to these rules and policies. These rules may involve adding security controls and processes to mitigate risks of data loss and reduce the likelihood and impact of potential attacks.
Compliance Requirements for Financial Services Organizations
Financial services organizations must comply with numerous federal, international, industry-specific, and state/local regulations. Examples of these regulations include:
- Sarbanes-Oxley Act (SOX).
- Gramm-Leach-Bliley Act (GLBA).
- General Data Protection Regulation (GDPR).
- California Consumer Privacy Act (CCPA).
Non-compliance extends beyond significant fines and can include damage to reputation, loss of business, and costly legal battles.
What Compliance Regulations Do Financial Services Have to Worry About?
Financial services organizations must comply with various regulations depending on their operations’ location, size, and nature. These regulations aim to protect consumer data, prevent financial crimes, and maintain the financial system’s integrity. Non-compliance can result in severe consequences, including hefty fines, loss of business, and reputational damage.
US federal regulations are the first major category of regulations to manage for organizations doing business with or in the US. These regulations include SOX and GLBA, which govern the accuracy and confidentiality of financial records. SOX requires public companies to establish and maintain internal controls over financial reporting, while GLBA requires financial institutions to protect the privacy and security of customer information. Failing to comply with these regulations can result in significant fines and reputational damage. Unlike many other regulations, company executives may also be held personally responsible for non-compliance.
Privacy regulations and legal decisions such as GDPR, CCPA, and Schrems-II also set requirements for financial institutions handling personal data. GDPR mandates that all organizations that handle the personal data of EU citizens must comply with strict regulations to protect their privacy rights. At the same time, the Schrems-II decision outlines the necessary steps that must be taken to transfer personal data outside the EU. Like GDPR, CCPA outlines California residents’ privacy rights and applies to organizations collecting or handling their data. Non-compliance with these regulations can result in hefty fines and damage to a company’s reputation, making it crucial for financial services organizations to prioritize compliance.
Industry regulations such as Payment Card Industry Data Security Standard (PCI-DSS) are also necessary for financial institutions to address. PCI-DSS governs the entire lifecycle and data storage related to payment cards, requiring merchants and providers to take steps to ensure this data is protected. For all but the smallest merchants and suppliers, compliance with PCI-DSS has to be verified by independent auditors to guarantee that the appropriate controls are in place and utilized effectively.
Penalties of Non-Compliance
Compliance with one mandate does not mean all others are being met simultaneously. Financial organizations have to balance the requirements of each one. Otherwise, they may find themselves having to face stiff penalties for non-compliance. Below are some common penalties that are broken out by regulation or standard.
|Compliance Framework||Penalty For Non-Compliance|
|● Delisting from stock exchanges|
|● Arrests of executives if non-compliance is due to negligence|
|GLBA||● Fines to the organization|
|● Fines to officers and directors|
|● Prison time and revocation of licenses|
|GDPR||● Fines up to 20 Million Euros or 4% of global annual turnover, whichever is greater|
|CCPA||● Fines of $2500 per incident|
|● Ability to be sued by consumers for any actual damages resulting from non-compliance|
|PCI||● Monthly fines of $5000 to $100k until compliance restored|
|● Restriction on the ability to accept payment cards|
How Ransomware Attacks Can Destroy Compliance
Ransomware attacks can have severe consequences for financial services organizations, including non-compliance with various regulatory requirements. These attacks can result in unauthorized access, loss, or destruction of sensitive data, compromising compliance. In addition, ransomware attacks may disrupt critical incident response planning and breach notification processes, further compromising compliance.
One of the challenges of ransomware attacks is that they are difficult to quickly identify, allowing the attack to escalate before a response is made. This response delay enables regulation violations to occur as data may be exfiltrated in the episode before the malware is stopped.
The Financial Impact of Ransomware Attacks
Ransomware attacks are treated much like any other breach for financial service organizations. At the point data is affected, unless the organization can prove otherwise, it has to be assumed it was accessed and exfiltrated by malware or related backdoors that may be opened in the attack. This opens the door to the whole gambit of expenses related to non-compliance, including regulatory fines, recovery, and remediation.
Fully recovering from a ransomware attack may require investments in new hardware, software, and personnel time for restoration. The post-attack recovery phase may also need new security measures to be implemented to prevent future attacks, and these measures may be mandated to remain in compliance.
Beyond the direct costs, ransomware also has a reputational impact on financial organizations. These impacts are also significant as some customers will abandon a brand over concerns with its security practices.
How Ransomware Affects Privacy
Ransomware attacks threaten more than just the financial organization itself. They also impact the privacy of their clients, customers, and staff. These attacks expose personal and financial data, including staff data, which can result in identity theft and other forms of fraud. Victims who have lost their data in ransomware attacks may not see identity theft and fraud attacks immediately but instead may only be targeted years after the initial attack.
Ransomware attacks reveal trade data, operational information, or other organizational secrets. The consequences of a privacy breach resulting from a ransomware attack can be severe, including losing a competitive advantage. Leaked trade data and patterns give competitors an edge. At the same time, information about a company’s operations could help competitors better understand their inner workings, enabling them to better position themselves in the market.
Case Study: A Ransomware Attack on a Financial Services Organization
The 2021 Travelex ransomware attack crippled the company’s operations, affecting customers worldwide. The incident exposed just how unprepared the organization was for such an attack. Ultimately this impacted their compliance with data protection and privacy regulations. Specifically, Travelex was found to be in breach of GDPR for its failure to protect customer data adequately. This led to regulatory fines and opened the organization up to legal action from affected customers.
Beyond the direct financial consequences of the compliance failure, Travelex also suffered from reputational damage, leading to business loss. The damage from this was irreparable and drove Travelex into bankruptcy, which eventually led to it get acquired by another company.
Financial Organizations Trust Sotero
Proactive measures to prevent ransomware attacks and maintain compliance are crucial for financial services organizations. Implementing strong cybersecurity measures and partnering with companies like Sotero can help organizations overcome these challenges and safeguard their sensitive data, ensuring both regulatory compliance and financial stability.
Sotero helps financial organizations overcome the challenges of ransomware in the cloud, eliminating the threat of it spreading to internal resources that utilize it.
Traditional ransomware solutions use a legacy signature-based approach to detection. Sotero, on the other hand, uses advanced anomaly detection to identify ransomware based on behavioral triggers. Using machine learning to create a baseline of access and utilization across your cloud infrastructure, Sotero’s platform monitors, flags, and immediately suspicious activity, eliminating ransomware threats before they can take hold and spread.
With Sotero, financial organizations avoid the threat of non-compliance by detecting malware at the earliest stages of an attack, cutting off its access before data is at risk. Sensitive data remains safe from exfiltration, helping your organization avoid the financial, legal, and reputational penalties that come from non-compliance.
Learn more about how Sotero can help defend your business from ransomware and avoid compliance failure.