With all the doom and gloom attention focused on the election and economy, one senior official is sounding a different alarm. Cybersecurity and the growing threat of cyberhacking faced by banks. Kansas City Fed president Esther George told an audience of bankers in Chicago that cybersecurity is a growing concern for banks, especially as the world moves more to global electronic payments systems.
George said, “Regarding the issue of security, there should be no doubt that dynamic, persistent and escalating threats are challenging public confidence in the U.S. payment system. The growing scale, sophistication, and global nature of cyber threats, along with the proliferation in points of vulnerability, has made security a key priority for financial institutions, payments providers, central banks and regulators around the world.”
One of the main concerns is the lack of any standard or universally accepted way of establishing and verifying the identity of people using electronic payment systems. Banks also have no way of sharing fraud and cyber-threat information with each other. George says that, “Driving widespread adoption of security improvements, however, remains a considerable challenge.”
A Secured Payments Task force has been tasked with making recommendations by July of 2017. Even if the group meets its goal, rulemaking and implementing the changes will still take considerably more time.
In the interim, a number of federal banking regulators have issued formal guidance. Those agencies include the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve and the Office of the Comptroller of the Currency (OCC). Despite the lack of industry information sharing and cybersecurity best practices, banks are still required to use reasonable efforts to protect customer information from hacking and identity theft and to promptly report hacking attacks on their information systems.
Our discussions with bank compliance officers suggest that cyber hacking attempts and incidents are much higher than reported to account and regulators.
FIRREA and Bank Cybersecurity Whistleblowers
For over two decades, Congress has authorized awards for whistleblowers with inside information about fraud and misconduct that threatens or impacts banks. Today, one of the biggest risks facing banks is cyber security. Already there have been several well publicized successful hacks of major banks. One attack on the Bank of Bangladesh cost that bank $81 million dollars (the illegal transfer was processed through the New York Federal Reserve).
The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and its companion Financial Institutions Anti-Fraud Enforcement Act (FIAFEA) allow the Justice Department to pay awards of up to $1.6 million to bank fraud whistleblowers.
Are these awards “real”? In the last five years our bank whistleblower clients have collected over $100 million in awards. The awards are certainly real.
Picking the right lawyer is one of the most important things you can do. Sometimes the Justice Department requests the whistleblower’s own counsel to handle the prosecution of these cases. Unfortunately, most lawyers have neither the knowledge or experience to prosecute banks, especially if the records or documents are in another country.
If you have information about fraud or misconduct involving or impacting a bank, give us a call. You can also visit our FIRREA / FIAFEA page. We also have many FIRREA and cybersecurity articles in our text searchable Due Diligence blog.
Mahany Law – America’s Bank Fraud Whistleblower Lawyers