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WASHINGTON -- Federal officials warned companies Monday that hackers have stolen more than 500 million financial records over the past 12 months, essentially breaking into banks without ever entering a building.
Were in a day when a person can commit about 15,000 bank robberies sitting in their basement, said Robert Anderson, executive assistant director of the FBIs Criminal Cyber Response and Services Branch.
The US financial sector is one of the most targeted in the world, FBI and Secret Service officials told business leaders at a cybersecurity event organized by the Financial Services Roundtable. The event came in the wake of mass hacking attacks against Target, Home Depot, JPMorgan Chase and other financial institutions.
Youre going to be hacked, Joseph Demarest, assistant director of the FBIs cyberdivision, told the business leaders. Have a plan.
Nearly 439 million records were stolen in the past six months, said Supervisory Special Agent Jason Truppi of the FBI. Nearly 519 million records were stolen in the past 12 months, he said.
About 35% of the thefts were from website breaches, 22% were from cyberespionage, 14% occurred at the point of sale when someone bought something at a retail store, and 9% came when someone swiped a credit or debit card, the FBI said.
About 110 million Americans -- equivalent to about 50% of US adults -- have had their personal data exposed in some form in the past year, said Tim Pawlenty, president of the Financial Services Roundtable and the former governor of Minnesota.
About 80% of hacking victims in the business community didnt even realize theyd been hacked until they were told by government investigators, vendors or customers, according to a recent study by Verizon cited by Pawlenty.
Businesses need to reach out to the FBI and Secret Service for tips on how to protect their data before something happens, agents said. If a business is hacked, company officials need to contact government agents rather than trying to keep the attack quiet and deal with it internally, the FBI said. No one is going to solve this problem on their own, said Supervisory Special Agent Thomas Grasso of the FBI. This is something we all need to work together on.
FBI and Secret Service officials say they have taken down international hackers with the help of US companies and international law enforcement allies overseas. Agents said many of the attacks against US companies are done by cybercriminals in other nations.
One Romanian hacker was lured to Boston by Secret Service Special Agent Matt ONeill, who used the Internet to pose as a woman and invite the cybercriminal on a trip to the USA to enjoy gambling and romance. He was quite surprised that I was the one meeting him when he arrived, said ONeill, who worked on the case for months.
The man was arrested and is serving seven years in a US prison. Romanian authorities extradited one of his co-conspirators to the USA, reflecting stronger partnerships between US law enforcement authorities and US allies to catch hackers.
Five years ago, we would have focused on whether the (hacker) was in the United States where we could get our hands on them, Grasso said. Today, were going to team up with our overseas law enforcement partners and go after them.
Congress could help by passing cybersecurity legislation to update surveillance laws and give federal agents greater authority to go after cybercriminals, Pawlenty said. The House has passed a bill that the Senate has not taken up. The Senate has taken a piecemeal approach, approving one bill that would make it easier for the Department of Homeland Security to hire cybersecurity experts.
Our government and our businesses are in a daily fight against hackers, Pawlenty said. Its getting increasingly concerning, and it needs to be met with action by Congress.
Financial Services Opportunity
SEED Financial Strategies
31 Lewis St., Suite 401, Binghamton, NY 13901
A Carmel-based firm that serves the financial sector is looking to fill 60 jobs this year and potentially more next year as the firm extends a growth streak.
Officials at Allied Solutions LLC said 50 of the new jobs this year will come in Carmel, and it plans to build out another floor of its namesake office building at 1320 City Center Drive to accommodate the hires. The company employs about 916, including 400 in Carmel, and its seen its work force double since 2010.
Allied is investing $850,000 on improvements for 21,000 square feet in Carmel. Officials said no economic development incentives are attached to the hiring.
Our growth has primarily been fueled by our brand recognition, President Pete Hilger said of Allied, which serves about 4,000 banks and credit unions across the country.
The benefits of financial services are certain in the course of economic development. Policy makers realize that a great deal may be acquired if financial services can reach people who are currently underserved.
The poor and the vulnerable are partly underserved because they feel that they do not have money and therefore do not need nor benefit from financial services. However, such a reason is groundless since in the long term, economic growth has enabled Indonesia to join lower middle-income countries, with 2013 income recorded at around US$3,500 per capita. Economic growth has also brought down the number of people living below the poverty line. In 2000, right after the Asian financial crisis, there were about 38.7 million people living below the poverty line. In March 2014, more than 10 million people moved up above the poverty line, leaving about 28.3 million people below the line.
However, 48 percent of Indonesian people do not have access to financial services. From the 52 percent of Indonesian people that have access to financial services, only 50 percent save in banks and 17 percent borrow from banks. The penetration of bank branches and ATMs is still very low in Indonesia. On average there are only 9.24 bank branches per 1,000 square kilometers, compared to 9.76 in Singapore, 11.77 in Thailand and 19.91 in Malaysia.
Financial services among the poor and vulnerable in Indonesia are still limited. Despite a significant amount of money released by the government of Indonesia for transfer payments, the main delivery method is still cash payments through post offices. The use of formal accounts is very limited, unlike in the Philippines where the mandatory payment method in transfer payments is through banks. Savings are considered as financial services that can be extended out to the poor and the vulnerable. Unsurprisingly, for them, savings are more common at arisan (community gatherings) that can act as savings clubs, compared to formal financial institutions. Another type of financial services is loans, and in Indonesia borrowing from family members and/or friends is more popular than borrowing from financial institutions.
Promoting financial services for the poor and vulnerable would require efforts from all relevant agencies. Financial inclusion is about reaching out to the poor and vulnerable in ways that allow them to take part in the world of financial services either for saving or getting credit. There are at least three ways to do this. First is by providing savings access to the poor and second is a microcredit scheme for the poor and vulnerable. And last is by enhancing Government-to-Person (G2P) or public transfer payments.
International experience has shown that savings and credit product design has significant impacts on individual decisions to use financial services. The design of savings products needs to consider some factors that might cause exclusions on saving. It ranges from soft persuasion such as prized savings (Kenya, Venezuela and Japan) and lottery-linked savings to coerced saving like the social-security program in the US -- involuntary saving and financed by the government. To deal with the lack of discipline and to remove the family pressure of sharing, there are commitment savings like in the Philippines. In some countries, promotion of basic savings accounts (minimum balance, minimum documentation requirements and low fees) is still ongoing. In Indonesia, TabunganKu, an initiative of Bank Indonesia, is a generic individual savings account with relatively simple terms and conditions.
On the credit side, one of the best innovations in credit is group lending. In Bangladesh, Grameen Bank implemented solidarity lending where most of the clients are women and loans are typically for agriculture or retail purposes. Loans have low interest and do not require collateral but when one member cannot pay the loan on time,
other members must cover the repayment. A similar mechanism also exists in Indonesia, known as Simpan Pinjam (Kelompok) Perempuan or SPP, which was established under women's business groups in rural areas.
Another innovation is branchless banking, where banking services are conducted through third parties as depicted in Figure 2. Further development of ICT enables the creation of new and mutually beneficial business models where branchless banking can extend a consumer basis to unbanked people using banking infrastructure and/or other technology platforms such as mobile phones. Bank Indonesia's pilot project on branchless banking conducted by five banks in 2013 showed promising results. Most customers use the service for saving with frequent cash-in transactions with small ticket sizes. Trusted agents and brands are important and rural agents are better since they feel benefits more.
With the ratio of mobile phone subscribers at 121 percent in 2013, mobile branchless banking with agents is the way forward for Indonesian financial inclusion. Electronic payment systems can be a gateway for people to financial services products both from the demand and supply sides.
This system can also enable consumers who are relatively new to financial services to trust the services as well as the institutions that manage them. One key element of this system is electronic money (e-money) or mobile money (m-money). One example of an m-money scheme that is quite successful in delivering G2P transfers was developed for the distribution of conditional cash transfers in Brazil, called Bolsa Familia.
On Oct. 8, 2014, Indonesia started to use digital payments for the distribution of conditional cash transfers to 1,860 Program Keluarga Harapan (PKH) families using mobile branchless banking with agents (Agen Layanan Keuangan Digital) of two banks (Bank Mandiri and BRI). Moreover, Otoritas Jasa Keuangan is currently preparing regulations on branchless banking (Layanan Keuangan Tanpa Kantor, or LAKU PANDAI). With the stipulation of LAKU PANDAI regulations, the development of branchless banking in Indonesia will be accelerated.
The writer is an economist and head of the Mandiri Institute, an independent research institution established by Bank Mandiri.