The Global Cyber Threat to Financial Systems – IMF F&D – International Monetary Fund


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Cyber threats to the financial system are growing,
and the global community must cooperate to protect it

In February 2016, hackers targeted the central bank of Bangladesh and
exploited vulnerabilities in SWIFT, the global financial system’s main
electronic payment messaging system, trying to steal $1 billion. While most
transactions were blocked, $101 million still disappeared. The heist was a
wake-up call for the finance world that systemic cyber risks in the
financial system had been severely underestimated.

Today, the assessment that a major cyberattack poses a threat to financial
stability is axiomatic— not a question of if, but when.
Yet the world’s governments and companies continue to struggle to contain
the threat because it remains unclear who is responsible for protecting the
system. Increasingly concerned, key voices are sounding the alarm. In
February 2020, Christine Lagarde, president of the European Central Bank
and former head of the International Monetary Fund, warned that a
cyberattack could trigger a serious financial crisis. In April 2020, the
Financial Stability Board (FSB) warned that “a major cyber incident, if not
properly contained, could seriously disrupt financial systems, including
critical financial infrastructure, leading to broader financial stability
implications.” The potential economic costs of such events can be immense
and the damage to public trust and confidence significant.

Two ongoing trends exacerbate this risk. First, the global financial system
is going through an unprecedented digital transformation, which is being
accelerated by the COVID-19 pandemic. Banks compete with technology
companies; technology companies compete with banks. Meanwhile, the pandemic
has heightened demand for online financial services and made work-from-home
arrangements the norm. Central banks around the globe are considering
throwing their weight behind digital currencies and modernizing payment
systems. In this time of transformation, when an incident could easily
undermine trust and derail such innovations, cybersecurity is more
essential than ever.

Second, malicious actors are taking advantage of this digital
transformation and pose a growing threat to the global financial system,
financial stability, and confidence in the integrity of the system. The
pandemic has even supplied fresh targets for hackers. The financial sector
is experiencing the second-largest share of COVID-19–related cyberattacks,
behind only the health sector, according to the Bank for International

Who is behind the threat?

More dangerous attacks and ensuing shocks should be expected in the future.
Most worrisome are incidents that corrupt the integrity of financial data,
such as records, algorithms, and transactions; few technical solutions are
currently available for such attacks, which have the potential to undermine
trust and confidence more broadly. The malicious actors behind these
attacks include not only increasingly daring criminals—such as the Carbanak
group, which targeted financial institutions to steal more than $1 billion
during 2013–18—but also states and state-sponsored attackers (see table).
North Korea, for example, has stolen some $2 billion from at least 38
countries in the past five years.

This is a global problem. While cyberattacks in high-income countries tend
to make headlines, less attention is paid to the growing number of attacks
on softer targets in low- and lower-middle-income countries. Yet it is in
those countries where the push toward greater financial inclusion has been
most pronounced, leading many to leapfrog to digital financial services
such as mobile payment systems. Although they do advance financial
inclusion, digital financial services also offer a target-rich environment
for hackers. The October 2020 hack of Uganda’s largest mobile money
networks, MTN and Airtel, for example, resulted in a major four-day
disruption of service transactions.

The responsibility gap

Despite the global financial system’s increasing reliance on digital
infrastructure, it is unclear who is responsible for protecting the system
against cyberattacks. In part, this is because the environment is changing
so quickly. Without dedicated action, the global financial system will only
become more vulnerable as innovation, competition, and the pandemic further
fuel the digital revolution. Although many threat actors are focused on
making money, the number of purely disruptive and destructive attacks has
been increasing; furthermore, those who learn how to steal also learn about
the financial system’s networks and operations, which allows them to launch
more disruptive or destructive attacks in the future (or sell such
knowledge and capabilities to others). This rapid evolution of the risk
landscape is taxing the responsiveness of an otherwise mature and
well-regulated system.

Without dedicated action, the global financial
system will only become more vulnerable as
innovation, competition, and the pandemic
further fuel the digital revolution.

Better protecting the global financial system is primarily an
organizational challenge. Efforts to harden defenses and toughen regulation
are important but are not enough to outpace the growing risks. Unlike many
sectors, most of the financial services community does not lack resources
or the ability to implement technical solutions. The main issue is a
collective action problem: how best to organize the system’s protection
across governments, financial authorities, and industry and how to leverage
these resources effectively and efficiently.

The current fragmentation among stakeholders and initiatives partly stems
from the unique aspects and evolving nature of cyber risk. Different
communities operate in silos and tackle the issue through their respective
mandates. The financial supervisory community focuses on resilience,
diplomats on norms of state behavior, national security agencies on trying
to deter malicious activity, and industry executives on firm-specific
rather than sector-specific risks. As lines between financial services
firms and tech companies become ever more fuzzy, the lines of
responsibility for security are likewise increasingly blurred.

The disconnect between the finance, the national security, and the
diplomatic communities is particularly pronounced. Financial authorities
face unique risks from cyber threats, yet their relationships with national
security agencies, whose involvement is necessary to effectively tackle
those threats, remain tenuous. This responsibility gap and continued
uncertainty about roles and mandates to protect the global financial system
fuel risks. Part of this uncertainty is due to the current geopolitical
climate and high levels of mistrust, which hinder collaboration among the
international community. Cooperation on cybersecurity has been hampered,
fragmented, and often limited to the smallest circles of trust because it
touches on sensitive national security equities. International and
multi-stakeholder cooperation is not a “nice-to-have” but a “need-to-have.”

An international strategy

To achieve more effective protection of the global financial system against
cyber threats, the Carnegie Endowment for International Peace released a
report in November 2020 titled “International Strategy to Better Protect
the Global Financial System against Cyber Threats.” Developed in
collaboration with the World Economic Forum, the report recommends specific
actions to reduce fragmentation by fostering more collaboration, both
internationally and among government agencies, financial firms, and tech

The strategy is based on four principles: first, greater clarity about roles and responsibilities is required. Only
a handful of countries have built effective domestic relationships among
their financial authorities, law enforcement, diplomats, other relevant
government actors, and industry. Existing fragmentation hampers
international cooperation and weakens the international system’s collective
resilience, recovery, and response capabilities.

Second, international collaboration is necessary and urgent. Given
the scale of the threat and the system’s globally interdependent nature,
individual governments, financial firms, and tech companies cannot
effectively protect against cyber threats if they work alone.


reducing fragmentation will free up capacity to tackle the problem.

Many initiatives are underway to better protect financial institutions, but
they remain siloed. Some of these efforts duplicate each other, increasing
transaction costs. Several of these initiatives are mature enough to be
shared, better coordinated, and further internationalized.


protecting the international financial system can be a model for other

The financial system is one of the few areas in which countries have a
clear shared interest in cooperation, even when geopolitical tensions are
high. Focusing on the financial sector provides a starting point and could
pave the way to better protection of other sectors in the future.

Among actions for strengthening cyber resilience, the report recommends
that the FSB develop a basic framework for supervising cyber risk
management at financial institutions. Governments and industry should
strengthen security by sharing information on threats and by creating
financial computer emergency response teams (CERTs), modeled on Israel’s

Financial authorities should also prioritize increasing the financial
sector’s resilience against attacks targeting data and algorithms. This
should include secure, encrypted data vaulting that allows members to
securely back up customer account data overnight. Regular exercises to
simulate cyberattacks should be employed to identify weaknesses and develop
action plans.

To reinforce international norms, the report recommends that governments
make clear how they will apply international law to cyberspace and
strengthen norms to protect the integrity of the financial system. The
governments of Australia, The Netherlands, and the United Kingdom have
already taken a first step with statements indicating that cyberattacks
from abroad may be regarded as illegal use of force or intervention in the
domestic affairs of another state.

Cyber resilience and strengthened international norms can facilitate
collective response through law enforcement actions or multilateral
reaction with industry. Responses can include sanctions, arrests, and asset

Governments can support these efforts by establishing entities to assist in
assessing threats and coordinating responses. Intelligence gathering should
include a focus on threats to the financial system, and governments should
share such intelligence with allies and like-minded countries.

Building capacity

The comprehensive strategy outlined in the Carnegie report depends in turn
on building the cybersecurity workforce, expanding the financial sector’s
cybersecurity capacity, and safeguarding gains in financial inclusion that
have resulted from the digital transformation.

Elevated unemployment due to the pandemic provides an important opportunity
for training and hiring talented people to strengthen the cybersecurity
workforce. Financial services firms should invest in initiatives to build
the talent pipeline, including high school, apprenticeship, and university

Building cybersecurity capacity means focusing on providing assistance
where it is needed. The IMF and other international organizations received
many requests for cybersecurity assistance from member states, particularly
following the 2016 Bangladesh incident. G20 governments and central banks
could create an international mechanism to build cybersecurity capacity for
the financial sector, with an international agency such as the IMF
designated to coordinate the effort. The Organisation for Economic
Co-operation and Development and international financial institutions
should make cybersecurity capacity building an element of development
assistance packages and should significantly increase assistance to
countries in need.

Finally, maintaining progress in financial inclusion requires strengthening
connections between financial inclusion and cybersecurity. This is
particularly urgent in Africa, with many countries on the continent
experiencing a significant transformation of their financial sectors as
they extend financial inclusion and move to digital financial services. A
network of experts should be created to focus specifically on cybersecurity
in Africa.

The time has come for the international community—including governments, central banks, supervisors, industry, and other relevant stakeholders—to come together to address this urgent and important challenge. A
well-thought-out strategy, such as the one above, provides a blueprint for
turning words into action.


is the director of the Cyber Policy Initiative and a senior fellow in the
Carnegie Institute of International Peace’s Technology and International
Affairs Program.


ARTHUR NELSON is a research analyst in
Carnegie’s Cyber Policy Initiative.


Garcia-Macia, Daniel, and Rishi Goyal. 2020. “Technological and Economic
Decoupling in the Cyber Era.” IMF Working Paper 20/257.

International Monetary Fund (IMF). 2019. “The Rise of Corporate Market
Power and Its Macroeconomic Effects.” World Economic Outlook, Chapter 2.
Washington, DC, April.

Medhora, Rohinton P. 2021. “We Need a New Era of International Data
Diplomacy.” Financial Times, January 17.

Opinions expressed in articles and other materials are those of the authors; they do not necessarily represent the views of the IMF and its Executive Board, or IMF policy.

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