While cyber attacks occur almost daily in the world, sometimes with catastrophic results, we do not hear about successful attempts of disrupting the world’s largest financial market. Are the systems that support the trading of currencies in the number of trillions of dollars every day impenetrable to hacks, or is the Forex market so secure, attackers do not even attempt to touch it? The truth may be on a median line, as usual, and today we will focus on some of the most critical aspects of FX cybersecurity.
Understanding how Financial Markets Work from a Cybersecurity Point of View
Back in the day, some of the most visible and frequent financial crimes were Ponzi schemes and Pump-and-Dump actions. Since the world began relying on technology more and more, hackers understood quickly that they could employ the same tools to disrupt networks and systems to make a terrific profit.
A PWC survey revealed that financial services became one of the most attractive hacking targets, with 45% of responding financial services (stock exchanges and money transfer services, among others) admitting to having suffered economic crimes.
Recently, the hacker group Lazarus performed a SWIFT/ATM attack on the second largest banks in India, stealing about US$13.5 million via malware infection. The question on everybody’s minds is the following: is it as easy to break into the infrastructure of the Forex market as it is in the case of a bank system?
Fortunately, the answer to this question is “not quite.”Banking systems operate with centralized information and entities. In other words, hackers can find one or two vulnerability points they can take advantage of to make their move. By contrast, the global exchange market works with decentralized data and information.
While there are vulnerability points, they spread all over. Information on who owns what, who trades what, and so on do not reside in a single database. Most of the times, there are no such databases.
It does not mean, however, that traders and the market itself are impervious to cybersecurity attacks. To summarize an International Organization of Securities Commissions report, traders face plenty of cybersecurity risks they should consider:
- Vulnerabilities in the Forex trading platforms (online and computer-based) that rely on a username and a password;
- Phishing attacks that target users to initiate the first stages of compromise;
- Inserting Trojan viruses in users’ accounts;
- The highjack of legitimate user accounts;
- Disruption of trade surveillance systems;
- Fraud of real-time risk management systems;
- Deletion, modification, or corruption of transaction records;
- Interference with bank transfers or credit card moves to fund transactions’ account;
- Disruption of trading bots and the creation of false alerts or actions to execute;
- Feeding you with fake news and false market sentiment analyses to force some trades.
As you can see, financial markets, while liquid, decentralized, and incredibly dynamic are less likely to be the direct victim of cybercrime. In comparison to banks, Forex behaves less like a fortress but an ocean.
It is easier to break into a fortress than swimming into the sea itself. However, this ocean of transactions comes with its vulnerability elements – the “boats” that navigate it: traders and brokering agencies, people and companies.
How Are You Vulnerable to Cybercrime when Trading on Forex and Financial Markets?
On the other hand, traders and their systems are among the most vulnerable elements in the equation for hackers. More severely, hackers can access and disrupt the networks of the brokering agencies themselves.
- If a malicious user or hacker group access passwords, they can perform plenty of unauthorized transactions: selling stocks or trading currencies, transfer money to their newly added own accounts and close them after the execution of the action, and more.
- Malicious users can access a trader’s net worth and trading strategy;
- Malicious users can intercept and alter values in a trading action, alter the bid or ask prices of an instrument, and pusha trader to make a move (buy or sell)while relying on fake information;
- By breaking into a trader’s account or worse, into a broker’s agency system, hackers can have access to personal information, financial history, investment strategies, bank accounts, and any information they can further use to empty pockets and disrupt industries;
- Companies trading on financial markets are also vulnerable to such attack and more – once malicious users gain access and data into a company’s most intimate information, there is anything high-profile hackers cannot do.
What Can Traders and Specialists do to Prevent Such Cybercrimes?
Before anything else, when you select your products to access global markets, consider the security of these products. For instance, instruments such as MetaTrader 4 and 5 (probably the most popular products in their department) are among the safest as long as you safeguard your machine, your home network, and your identity.
Also, make sure you do not use MT4 or MT5 on a public machine or a public network, and keep the passwords as secure as possible. Other than the minimum self-protection mechanisms, there is little to no point for hackers to break into your MT platform.
On the other hand, malicious users can have a field day with machines and platforms relying on unpatched OS, out of date browsers, or lacking firewalls.
Moreover, when you use trading apps, make sure to check whether they send cleartext passwords to unencrypted XML configuration files or the logging consoles, they send sensitive data to unencrypted log files, use insecure communications (allowing MITM attacks), and so on. Most importantly, if you use trading apps, make sure you never lose your phone.