Friday, January 5, 2018

Sheltered Harbor Program Uses "Buddy System" to Protect Financial Institutions from Cyber-Criminals

Increased prevalence of new technologies in pretty much every industry over the past few decades has led to improved quality and efficiency of service across the board. While technological improvements have, as a whole, provided more benefits than drawbacks in the modern day, one major concern has made its way to the forefront in recent years. With the technological advances has come cyber attacks, which put personal data and financial information at risk. Yalman Onaran's article in the L.A. Times discusses a method that financial institutions have been developing to protect trillions of dollars in funds from hackers.

From checking and savings accounts to retirement and pension funds, there are trillions of dollars being stored through various banks and brokers. Those assets tend to be insured, such as in the case of a bank robbery, the clients of the bank will get their money back. The difference between a physical robbery and theft via cyber attack is that hackers will often delete data from the targeted system, which can lead to great turmoil for a banking institution without sufficient backup data.

Many of the larger companies keep their data backed up on private secure servers, but that doesn't help much if the cyber attack shuts down their entire system. In a situation where the entire system is targeted and taken down, it can take days or even weeks for the company to get everything running properly again. The main issue with that, especially among banks, is that their customers need to access their accounts on a daily basis. The average person can't just wait uncertainly for days on end without access to the money in their checking account.

Financial institutions began to worry that such a hack at any banking entity, no matter how small, could cause significant ripples throughout the entire financial system. For example, if people hear that a bank was hacked (even if the bank is not theirs), and if they see that the customers of that bank can't access their money, they would be less likely to trust their own bank and could possibly go to withdraw their money, to prevent their funds from getting tied up if their bank was hacked. If enough people followed suit, it would become a wave that could crash the entire infrastructure, as banks don't actually have enough money in-house to cover most of their customers, since they lend out the majority of it to other customers.

A project called Sheltered Harbor is aiming to avoid such potential issues by teaming up financial institutions. By pairing them up, if one bank was hacked and had their system shut down for any length of time, the other bank would have a backup of their data and could assist their customers. The same would work in reverse. So, unless a sophisticated cybercriminal could predict and target the exact banking institutions that had been paired, Sheltered Harbor's system should be able to prevent an all-out meltdown of the financial system. That means that trillions of dollars in savings and retirement accounts will remain protected.

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