Cyber War Poses Risk of Bail-Ins to Banks and Deposits

from Gold Core The threat posed by cyber war to our increasingly complicated, technologically dependent and vulnerable financial institutions, markets, banks and indeed deposits becomes more clear by the day. cyber_war British and US agents will carry out a mock cyber attack or ‘cyber war games’ on the Bank of England and commercial banks in City of London and on Wall Street in the coming months as part of tests on critical, but vulnerable financial infrastructure. Should banks be hacked and customers deposit accounts compromised then the vista of potential bail ins becomes a real one. In June, JP Morgan Chase were hacked by unknown parties who stole the personal details of 83 million customers. In July of last year Bloomberg reported that malware had been detected in the system of the Nasdaq exchange. Its purpose was unclear but it was believed to have been embedded there by Russian hackers. There is also the alleged hacking of Sony Pictures by North Korea and the alleged hacking of Facebook, Instagram and Tinder yesterday. David Cameron announced measures two weeks ago that he said were designed to help companies, government organisations and banks and prevent a repeat of hacking attacks. The alleged busting of a Russian spy-ring in New York on Monday, for gathering intelligence that could be used for “destabilisation of the markets”, highlights yet again that the threat posed by cyber-warfare is a growing one. The accused is a journalist working for The News Organisation, a Russian media company which is used by Russia’s SVR intelligence agency to gather information according to a statement issued by the U.S. Department of Justice on Monday. The claim was made based on an intercepted conversation where the accused discusses with another Russian – a banker based in New York – what three questions he should ask the “New York Exchange.” His associate suggests looking at ETFs: “How they are used, the mechanisms of use for destabilization of the markets.” He adds, “Then you can ask them what they think about limiting the use of trading robots. . . . You can also ask about the potential interest of the participants of the exchange to the products tied to the Russian Federation.” While the claim that this conversation is evidence of espionage is a flimsy one, it along with recent events serves to highlight the vulnerability of the internet, our websites and the financial system – a system that has grown so vast and unwieldy that managing security has become and ad hoc process. Yesterday morning social networks Facebook and Instagram were allegedly hacked by ‘Lizard Squad’, a group of hackers. The group have previously hacked Malaysian Airlines. The first high-profile case of nation-states using cyber-warfare was the unleashing of the “stuxnet worm” – apparently created by Israel and the US – on Iran’s nuclear energy enrichment plant in Netanz in 2010. It almost caused a major environmental catastrophe. In 2012, Iran devastated the computer network of Saudi Aramco in a similar attack. From the above examples we can see a panorama of human activities which grow more vulnerable as hackers and cyber-warfare grow more sophisticated. Russia’s Prime Minister Medvedev yesterday warned that if the U.S. succeeds in it’s plans to cut Russia out of the SWIFT banking transfer system, then the “Russian response – economically and otherwise – will know no limits.” Given that a military confrontation is not desired by Russia it would seem that cyber-warfare will certainly be part of the mix that Medvedev alludes to. Banks have been hacked, stock exchanges have been hacked and critical infrastructure have been hacked in recent years. It is likely that many of these small scale attacks have been merely testing of defenses. A concerted attack on the western financial system would likely include attempts at disabling various exchanges including stock markets and foreign exchange markets. Banks could be attacked in such a way that bank balances, which are merely digital figures, could be erased. In a worst case, scenario such attacks could be done in conjunction with countries hostile to the West dumping vast quantities of dollars onto the market. In such an environment the West, which is so dependent on technology and the monetary system, would be economically paralysed and the primary wealth that would remain would be tangible wealth. Tangible assets include gold and silver bullion, agricultural land, water, property etc. We are not predicting such an outcome. We are simply looking at the facts as they are, in the context of intense geopolitical tensions, and surmising that it would be prudent to take necessary precautions. Continue Reading>>>

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