Doubts Over UK’s “Fintech” in Age of Cyber War
by Mark O’Byrne, GoldCore
– Doubts over City of London’s “fintech” in age of cyber war
– Thousands left in “financial limbo” after tech “error”
– 600,000 RBS customer payments go “missing” in “system failure”
– Glitch comes after bank was fined £56 million in November for 2012 tech fiasco
– Failure is “the latest of many in the industry” – Treasury Committee
– Banks “ageing tech systems” ill-equipped to deal with cyber-terrorism, cyber-war
– Gold coins, bars held outside tech dependent banking system not vulnerable to cyber-attacks
Banks’ “archaic technology systems” are unable to cope with the demands of modern online banking according to the Financial Times. The claim was made over the weekend in an FT article discussing the latest fintech glitch suffered by Royal Bank of Scotland last Tuesday in which payments of 600,000 customers “went missing.”
The latest fintech failure affected RBS customers and customers of ITS , Coutts and Ulster Bank in Ireland.
Customers were left without cash for three days after a computer “glitch” led to 600,000 payments – including wage packets, benefits and tax credits – going “missing.”
The UK regulator, the Prudential Regulation Authority (PRA) has said it will review this latest issue when the affected customers have been dealt with. In November RBS was hit with a £56 million fine after the June 2012 fiasco which left 6 million customers inconvenienced for weeks, many of whom could not access funds.
The FT warns that
“The latest problems throw doubts on the ability of banks’ archaic technology systems to cope with the increasing number of customer transactions spurred by digital banking.” The Chairman of the Treasury Committee at Westminster, Andrew Tyrie, said “This looks like a serious IT failure at RBS, the latest of many in the industry.”
In January, Sam Wood – a director at the PRA – told a committee
“I feel we are a very long away from being able to sit here with confidence and say that the UK banks’ IT systems are robust.”
In March, International Financial Data Services, “the main record keeper of investment transactions in the UK” experienced a “systems hardware failure” which delayed investment payments into the UK, according to the FT.
In October, 22 million customers at Britain’s largest retail banking group, Lloyds, could not access cash following a systems failure. There have been multiple systems failures in the U.S. also.
It would appear that the banking behemoths that have dominated the landscape for decades have grown too large and unwieldy to adapt to the constant and rapid evolution of 21st century financial technology and fintech.
Their “archaic systems” are unlikely to be sufficient deal with a concerted cyber-attack by sophisticated hackers working for hostile nation states or terrorist groups.
We have documented how cyberwar poses a real threat to the nuclear, finance and banking sectors. Our modern technology systems and the vital infrastructure of such critical industries as finance and banking are exposed like never before.
It is believed that some nation-states have engaged in cyber-attacks against the infrastructures – including financial infrastructures – of their rivals.
In February, we covered how Kaspersky Lab demonstrated how an international criminal group hacked over 100 banks worldwide gaining full access to customer accounts – changing their bank balances at the touch of a key – and stealing $1 billion.
With no end in sight to the new Cold War it is a certainty that cyber warfare will be increasingly employed against populations of the East and West. If vulnerable banking systems were targeted it would cause chaos if records of who owns what and vital records of deposits were changed or destroyed.
The U.S. has accused Chinese hackers of building huge databases that could be used to recruit spies. The massive breach of a federal personnel database was “classic espionage” on an unprecedented scale, according to a senior administration official yesterday.
“This was classic espionage, just on a scale we’ve never seen before from a traditional adversary,” the official said.
Last year China shut down a bilateral working group on cyber security after the United States charged five Chinese military officers with hacking American firms.
Chinese Foreign Ministry spokesman Lu Kang said Internet security was something that the international community needed tackle together, as it was a common problem.
Separately, overnight came the latest Edward Snowden revelations alleging that the U.S. NSA and the UK’s GCHQ worked together to subvert popular anti-virus software products like Kaspersky Labs’ software.
The spy agencies are understood to have reverse engineered popular anti-virus software packages and monitored email and web traffic to discreetly get past the software and obtain intelligence.
We previously referred to Russian Prime Minister Medvedev’s threat of cyberwar. He stated that Russia’s response to U.S. attempts to have it locked out of today’s international payments system (SWIFT) would “economically and otherwise” … “know no limits.”
Fintech solutions are coming and not before time but many of these solutions are also vulnerable in the short term as the nascent industry grows and the best solutions survive and thrive and less safe ones are slowly found out by the market and disappear.
The risks posed to bank deposits, markets and indeed all online investments by hacking, cyberterrorism and cyberwar remains very under appreciated.
Given these real risks, tangible gold becomes not important but a vital means of preserving wealth. Physical gold coins and bars, due to their tangible nature, are not vulnerable to crises that may afflict electronic digital currency and other digital wealth.
Those who hold physical gold and silver coins and bars outside the banking system as an insurance policy would certainly weather the storm better than those who do not.
It is an increasingly risky world and yet these risks are far from appreciated. While many will say the risks will not materialise, we believe that it is prudent to be aware of and take appropriate measures to protect your wealth.
Our modern western financial system with its massive dependency on single interface websites, servers and the internet faces serious risks that few analysts have yet to appreciate and evaluate.
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Today’s AM LBMA Gold Price was USD 1,183.35, EUR 1,052.24 and GBP 749.17 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,193.70, EUR 1,052.14 and GBP 752.53 per ounce.
Gold fell $15.70 or 1.31 percent yesterday to $1,185.10 an ounce. Silver climbed $0.09 or 0.56 percent to $16.20 an ounce.
Gold in Singapore for immediate delivery hovered at at $1,185.50 an ounce near the end of the day, while gold in Switzerland was also flat.
Gold held overnight losses as its safe haven appeal was overshadowed by the possibility of Greece making a deal with its creditors by the deadline on June 30th. Yesterday, Eurozone leaders welcomed Greece’s new budget proposals as a step in the right direction.
Donald Tusk, European Council President, said that his goal is to have the the Eurogroup finance ministers approve a cash-for-reform package by Wednesday evening and put it to euro zone leaders for final approval on Thursday morning.
With the news that a deal is imminent investors put money into riskier assets and stocks have again surged internationally in another bout of “irrational exuberance”.
In late morning European trading gold is down 0.15 percent at $1,183.95 an ounce. Silver is off 1.16 percent at $15.99 an ounce while platinum is up 0.98 percent at $1,073.30 an ounce.
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