Cyber attacks are becoming more sophisticated and more costly as criminals find new ways to penetrate security systems. Bank boards are increasingly worried about the risks, as mobile banking and other technologies are making banks more vulnerable.
Though globally connected banks face a larger variety of threats than community banks, the latter have fewer resources to handle the threat. Mobile banking, social media and cloud computing have all launched an entirely new set of potential weaknesses to the system and new points of entry for hackers.
While five years ago, a cyber criminal was typically part of a small group or a loner, now specialized teams act in concert throughout the world, taking an almost “assembly line” approach.
In the event of fraud, most victims expect the bank to take care of the loss. While courts have generally said that an indemnification contract with a customer alone doesn’t absolve the bank of liability, one way to protect the bank when all else fails is to buy cyber insurance. Some banks dislike this type of insurance because coverage can be limited. Policies may cover the cost of mailing notices to customers, paying for credit monitoring services, legal expenses and handling an investigation, but not for theft of money.
Dealing with a vendor that has had a colossal breach can be devastating, possibly resulting in years of expensive litigation and causing reputational harm. Though the risks are hard to quantify, the rewards of a well executed cyber crime prevention plan can save a banks a plethora of time, resources and money.
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