Any industry that has strict regulations and compliance requirements is a complex one, and banks know this all too well.
Regulatory compliance for banks is one of the hardest standards to adhere to in software development. In order for software development to safely follow these best practices it is critical to partner with people that know how to do it correctly the first time.
We want to delve into the details of how regulatory and security requirements tie into your main project, and who specializes in supporting companies that undertake such projects.
Cyber security in banking has become one of the most challenging issues in the sector. There are hundreds of thousands of potential attackers that are geared towards illegally accessing client funds through various attack vectors.
The only way to prevent these kinds of attacks from being carried out successfully is to integrate best practices directly into your software.
One of the best examples of this are the OWASP Top 10 Proactive Controls which outlines how to prevent data from being accessed by third parties such as hackers, sniffers and malware.
If you are looking to build your own banking app with built in protection against security threats then you need to ask questions. Think about what you can build into your banking solution that lines up with your security requirements. Compliance is a huge issue in the banking sector, and if you want to compete then you need to make sure that your products are in line with these regulations.
Information security and regulations are two areas in your product development where you will spend a large amount of time as they directly impact your ability to access the market. If you don’t get this right, then you risk losing your license. If this happens then you cannot compete at any level in the market, which could be catastrophic to your business.
Project Planning
A lot of businesses make the mistake of rushing through the planning stages of an app development project, hoping to fill in the blanks as they make progress.
This might be a valid approach in some industries where failure is an acceptable part of the prototyping phase, but this is not the case with a banking system. Online banking security has to be at the core of the application’s development, and that security has to be in accordance with the compliance requirements of the banking cyber security regulations.
As you can see these issues are nested within a larger framework of compliance and security, which is not something that most software development teams are familiar with.
Internet banking security has come under intense pressure in previous years, thanks in part to its popularity and the fact that cyber criminals have become more tech savvy as targets move into the online space.
Mobile banking security also plays a massive role with many people opting to interface with their banks via a mobile device.
Once you have established a baseline of objectives and solutions for your project then you need to start mapping these controls out onto the security frameworks that you will be following.
For example if we think about user journeys as they log into an application. How are we storing that Personally Identifiable Information? Where is it being stored? Which compliance must be followed for this region? Is GDPR a concern for this user? Which regulatory bodies do you have to communicate with in order to meet their compliance requirements?
On the back end, you also need to ensure that the compliance standards are followed regarding data access and controls.
Who can access user data? What kind of change controls are in place? What regulatory compliance is needed to store audit logs of data access? Access control is a huge part of the cyber security puzzle, and compliance naturally dictates implementation.
So in order to comply with regulations you not only need to follow the market regulations regarding user data, you also need to follow the regulatory guidelines on implementing the safeguards that make compliance possible in the first place.
This is not an easy undertaking for any development team as they need to take the following into account:
Banking Security Standards
Your products must comply with these standards and also follow any and all recommendations. Your applications are audited and scrutinized to ensure compliance within the region that you are operating.
If your product services multiple regions then it must segment that data accordingly so that it complies with data security practices as well.
Banking Cyber Security Regulations
If you are implementing an online application that requires that users log in with Personally Identifiable Information then you have to ensure that your systems are water-tight.
In order to deploy your application you will have to submit it to intense pen testing and other evaluations to ensure that you are following security best practices.
Banking Regulations Compliance
After taking the previous two elements into consideration you then have to contend with the actual banking regulations compliance aspect of your product.
How does the inner workings of this product, application or service work? Does it align with pre existing products, or does it need to be run through a verification process to ensure that it operates responsibly within the banking sector?
And again we have more layers of complexity within each of these items mixed in with security challenges and security risks. The result of all of these factors again points to the need for an experienced partner that can help navigate these issues as they relate to regulations and cyber security in banking.
International Banking Security Standards: Ensuring Global Trust and Compliance
International banks must comply with security frameworks recognized worldwide to operate securely. Here are some of the most recognized banking security standards:
- Payment Card Industry Data Security Standard (PCI DSS). The PCI DSS banking security regulations protect cardholder data. It applies to all entities storing, processing, or transmitting cardholder data.
- ISO/IEC 27001. This is one of the most widely adopted international standards for information security management systems (ISMS). Many banks use ISO/IEC 27001 as a framework to identify, manage, and mitigate cyber risks.
- SWIFT Customer Security Program (SWIFT CSP). It sets security requirements for banking organizations that use SWIFT for financial transactions. The mandatory controls in SWIFT CSP cover areas like security policies, user management, system monitoring, and incident response. All SWIFT users, including banks, must comply with the baseline security requirements.
These cybersecurity regulations for banks play a crucial role in safeguarding the banking industry against cyber risks. By complying with these standards, international banks can:
- Mitigate cyber threats. By implementing robust security controls and best practices, banks can significantly reduce the cyber risk in the banking sector. Regular security assessments and audits help identify vulnerabilities and ensure timely remediation.
- Protect customer data. The banking sector possesses extensive quantities of confidential customer data, encompassing personal and financial information. Following security protocols guarantees that this data stays confidential and safeguarded against unauthorized entry.
- Maintain trust and compliance. Compliance with international security standards demonstrates a bank's commitment to ensuring the highest level of security and compliance. This builds trust among customers, investors, and regulators, strengthening the overall reputation of the financial industry.
By adhering to internationally recognized security standards like PCI DSS, ISO/IEC 27001, and SWIFT CSP, banks can proactively address cyber risks and protect sensitive information. As digital attacks continue to change and advance, banks must remain watchful and modify their security protocols to continue leading the fight against cybercrime.
Compliance and Cybersecurity Differences Between the European and US Banking Sectors
Compliance and cybersecurity practices differ significantly between the European and US banking sectors due to varying banking security standards and regulations. In the European Union, financial institutions are obligated to adhere to the General Data Protection Regulation (GDPR), which prioritizes the confidentiality and security of personal information.
The implementation of suitable security measures and controls is required by the GDPR to safeguard the privacy, accuracy, and accessibility of personal data. Failure to comply can result in hefty fines of up to 4% of annual global turnover.
In contrast, US banks are not subject to such a broad privacy law and instead must comply with a patchwork of cybersecurity regulations for banks. Most notable is the Gramm-Leach-Bliley Act (GLBA), which requires the safeguarding of customers’ private financial information. While the US lacks an overarching law like GDPR, regulatory penalties for violations can still be severe.
The US banking industry adheres to the recommendations of the Federal Financial Institutions Examination Council (FFIEC). It requires financial institutions to implement information security programs to protect customer data and ensure operational resilience.
The FFIEC guidance includes the Cybersecurity Assessment Tool, Cybersecurity Resources for banking organizations, and the IT Examination Handbook. US banks also adhere to banking security regulations like the Gramm-Leach-Bliley Act.
While the US has a principles-based approach that provides high-level guidance, Europe tends to favor prescriptive regulations with strict requirements. European banks sometimes face complexity in navigating different rules across markets. Though approaches differ, the end goal of securing the banking ecosystem unites regulators and banks in the US and Europe.
As cyber risk in the banking sector becomes more advanced and regulations expand, financial industry institutions should invest heavily in security technologies and talent to:
- monitor networks;
- detect anomalies;
- respond to incidents;
- protect sensitive data.
Compliance with applicable laws and guidelines is the minimum requirement; truly robust cyber risk management is crucial for the long-term stability of the banking system.
The Impact of AI Technologies on Banking Security Standards: A New Era of Protection
AI-powered solutions are enabling banks to detect and prevent fraud, authenticate users, ensure adherence to relevant banking security regulations, and secure sensitive data in real time.
AI Fraud Detection
Through the analysis of extensive customer data and transactional activity, AI algorithms have the capability to detect patterns and anomalies indicative of fraudulent behavior. It allows banks to be quicker than traditional rule-based systems when:
- catching credit card fraud;
- identifying theft and money laundering;
- noticing account takeovers.
AI fraud prevention enables banks to save millions in lost revenue while better protecting their customers. In addition to enhanced accuracy, AI also facilitates real-time fraud detection.
Rather than relying on analyzing past transactions, AI systems can spot fraudulent activity as it occurs. It allows banks to immediately send alerts to customers about unrecognized transactions and potentially freeze compromised accounts before substantial damage is done. Real-time monitoring significantly shrinks the response time to cyber risk in the banking sector.
Biometric Authentication
Biometrics serve as an extra layer of protection beyond passwords and PINs, which can be lost, stolen, or compromised. AI matches biometric patterns in an instant to verify a customer’s identity. AI can effectively improve banking security standards through biometric authentication processes like:
- fingerprint scanning;
- facial recognition;
- voice recognition.
It provides a more reliable way for banks to verify customer identities remotely and combat fraudsters.
The accuracy level biometric AI systems can provide far surpasses what humans can match. As consumers grow more comfortable using biometric authentication, its adoption in banking should continue to rise.
The unique capabilities of AI are ushering in a new generation of cybersecurity and fraud prevention for the financial industry. Compliance with stringent industry cybersecurity regulations for banks is simplified by AI automation.
As banks continue to deploy these intelligent systems, they can enable more robust protection of customer data and assets from internal and external threats. The future of banking security lies in AI.
Choosing the Right Partner for Your Project
When it comes to partner choices in the Fintech space, there are few with experience like S-PRO. We are familiar with standardized Fintech security practices and requirements especially as they relate to banking security standards, compliance and regulations.
As a result we can help you with PCI DSS/PA DSS compliance and PSD2 integration. We have the experience in adapting projects according to the EU's Payment Services Directive PSD2 so we will be able to steer your project in the right direction.
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