Hedge fund technology leaders are facing a crisis of faith, with national cybersecurity experts proclaiming that “Every investment is at risk“. IT data breaches are reaching astronomical proportions and impacting thousands of organizations each year in the US alone. Even the Securities and Exchange Commission weighed in, noting that investors are facing ongoing cybersecurity risk and creating a special branch of enforcement called the Cyber Unit. Protecting against these threats requires specialized knowledge and an ongoing effort to understand emerging cybersecurity threats and how to combat them, particularly in the financial services and wealth management sector. With so much high-value information at stake, hedge fund managers may find themselves in a situation of continually reviewing new resources in an attempt to cover any vulnerabilities in their operations infrastructure.
Common Cyberattacks Experienced by Hedge Funds
The sheer volume of financial data for high net worth individuals would be enough to make a hedge fund extremely attractive to hackers, creating an unacceptable risk for the entity. Each business entity has its own unique opportunities and challenges, and hedge funds are quite susceptible to three key types of attacks: BEC (Business Email Compromise), ransomware and social engineering.
- Business Email Compromise attacks, also known as phishing or whaling, often take the form of innocent-seeming email threads with cybercriminals attempting to misdirect funds in the form of fraudulent wire transfers. Identifying these emails as an attack requires ongoing diligence on the part of staff members as well as advanced monitoring and notification solutions.
- Cybercriminals are becoming quite crafty in their attacks, with financial services firms seeing an increase in social engineered attacks that focus on invalid wiring instructions. Any request for a wire transfer or other large transfer of funds or stock should be well-documented and follow strict procedures, with ongoing education to reduce the risk of errors.
- Protect your firm from unexpected ramifications by adding stringent standards around how dates are written on checks and other legal documentation. Instead of utilizing a 2-digit year in written date fields, be sure you utilize the full 4-digit date. Dates should be written in this format: MM/DD/YYYY instead of MM/DD/YY to avoid confusion.
- Financial services and healthcare are particularly vulnerable to ransomware or crypto-mining attacks because this type of threat reduces the ability to access business data or critically important information systems. The impact on the organization is often secondary to the negative impact on customers or partners — specifically in the case of fast-moving financial transactions. IT professionals are often pressured to quickly resolve ransomware attacks, which often means paying the ransom to hackers to regain access to important IT platforms.
- Social engineering attacks are often considered a “long game” because hackers take the time to get to know their targets — learning enough about a key individual to be able to either break into their accounts by guessing passwords or otherwise infiltrating their systems. Early forms of social attacks involved encouraging individuals to click a link to update their information or to verify details about their work and home life or charitable contributions. This type of nuanced attack can be the most difficult for busy executives to spot, as they are used to simply handling details quickly and moving on as opposed to deeply researching emails to determine if they’re a potential threat.
Finding the right solutions to protect against each of these emerging threats requires a systematic review of current cybersecurity principles as well as creative strategies to reduce the ongoing risk of a data breach or other type of attack.
Protecting your financial services entity starts by working with a partner that has a thorough understanding of the current and future threat landscape. At Coretelligent, our cybersecurity professionals are experts in financial technology and can help you understand how emerging threats could place your hedge fund at risk. From developing situational awareness to improving your security posture, Coretelligent provides comprehensive compliance and cybersecurity solutions for financial services institutions of all sizes. Contact us at 855-841-5888 or via email to firstname.lastname@example.org to schedule your complimentary, no-obligation consultation.