How Are Regulatory Measures Impacting Cybersecurity in the Banking Sector?
The rise in cyberattacks targeting the banking sector has led to the implementation of several mandatory cybersecurity regulations. Regulatory compliance, though sometimes seen as an extra burden on security teams, is actually one of the most effective ways to ensure that banking services remain accountable for their security. These regulations are established by either governments or authoritative security bodies and their application impacts the entire financial services industry, including commercial and investment banks.
European GDPR assisting in data security
The European General Data Protection Regulation is a security framework designed to protect its citizens from personal data compromise. The EU mandates GDPR compliance for banks collecting or processing personal data from their residents, regardless of the physical location of the business. According to a PwC survey, 92% of U.S. companies categorize GDPR compliance as a top priority.
The implementation of the GDPR contributes to operational excellence and provides opportunities for further industrialization and digitalization in the banking industry. Moreover, well-structured databases make it easier for banks to adapt their front office toward an updated, customer-centered relationship management including an appropriate and efficient client onboarding procedure. This enables banks to gain a holistic view of clients and to operate more efficiently in sales along with risk management. For instance, the Global Bank Corp established an improved security operations center in 2024. It detected threats and employed multi-factor authentication with end-to-end encryption through AI, to secure client transactions. This significantly reduced 80% of the phishing attempts.
The growth of the cybersecurity in banking market has been driven by the need for robust security systems, increasing internet penetration, and the rise of banks’ omnichannel presence. On October 28, 2024, Gulf Bank organized its Annual Cyber Awareness conference for its employees. Cybersecurity experts from several well-known global companies, including Ernst & Young, SecurEyes, and CrowdStrike participated in the seminar. Several important topics such as cyber threat, the use of AI in detecting and combating cyber-attacks were discussed at length.
The GLBA Act imposes obligations to explain customer data sharing
The Gramm-Leach-Bliley Act is a U.S. federal law that requires financial institutions to explain how they share and protect their customers’ private information. The primary data protection implications of the GLBA are outlined in its safeguards rule. The FTC, the federal banking agencies, and other authorities have implemented the GLBA. In 2023, ERMProtect collaborated with various financial institutions to develop a smart compliance strategy. This initiative aimed to adhere to GLBA and other regulations by using common security controls across multiple frameworks. Banks simplified their obligations and improved their cybersecurity posture by creating a compliance matrix.
Reducing Fraud through the Bank Secrecy Act
The Bank Secrecy Act, also known as the Currency and Foreign Transactions Reporting Act, is a U.S. law enacted in 1970 to combat money laundering, tax evasion, and other financial crimes. The BSA requires financial institutions to file Currency Transaction Reports if cash transactions exceed $10,000. The CTRs provide valuable information for identifying potential money laundering and other illicit financial activities. Many banks have invested heavily in cybersecurity, with over a million for BSA compliance efforts. Moreover, in 2022, Citibank partnered with a cybersecurity firm to enhance its anti-money laundering systems, ensuring compliance with BSA requirements and adapting to emerging cyber threats.
Endnote
The banking sector’s response to increasing cyber threats has led to the implementation of essential regulations like GDPR, GLBA, and the Bank Secrecy Act. These frameworks not only improve data protection and compliance but also encourage innovation in customer management and cybersecurity strategies. Moreover, initiatives like collaborations, seminars, and awareness workshops by industry leaders highlight the importance of education and collaboration in strengthening defenses against cyberattacks.
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