Protecting the financial system against the coming cyber storms

Protecting the financial system against the coming cyber storms
© Greg Nash

Moving the U.S. Secret Service from the Department of Homeland Security back to the Department of the Treasury is critically important in the wake of the COVID-19 pandemic. Sens. Lindsey GrahamLindsey Olin GrahamObama announces first wave of 2020 endorsements Trump putting TikTok ban on hold for 45 days: report This week: Negotiators hunt for coronavirus deal as August break looms MORE (R-S.C.) and Dianne FeinsteinDianne Emiel FeinsteinDemocrats want Biden to debate Trump despite risks Mini-exodus of Trump officials from Commerce to lobby on semiconductors Doug Collins questions Loeffler's trustworthiness in first TV ad MORE (D-Calif.) recently introduced a bill to make this happen.

Most people don’t know that the Secret Service’s mission is not only focused on protecting the nation’s leadership but protecting the integrity of our financial system, namely through its cyber-enabled financial and counterfeiting investigations. Leveraging the Secret Service’s capabilities more effectively will be important in the coming months and years.

The financial sector is currently facing unprecedented challenges due to the virus. Banks had to adapt quickly to employees working from home. Customers are switching, sometimes leapfrogging, to digital financial services. States are pouring trillions of dollars of stimulus into their economies, and the financial system is the mechanism to distribute these recovery funds to businesses and citizens. Meanwhile, crypto-currencies and exchanges are assuming a more prominent role in the financial system.

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Hackers and fraudsters are taking advantage of the crisis.

Security agencies and regulators around the world have warned of skyrocketing fraud. The U.S. Secret Service and the FBI have advised that “The COVID-19 pandemic provides criminal opportunities on a scale likely to dwarf anything seen before. The speed at which criminals are devising and executing their schemes is truly breathtaking.”

Beyond the current pandemic crisis, strengthening the U.S. Treasury is more urgent than ever to better protect the safety and integrity of the financial system in the long run. It is not just criminals who pose a threat. There has been growing concern among regulators of more sophisticated, destructive attacks from state and non-state actors that could undermine financial data, payment systems and ultimately faith in the financial system. Last month, the U.S. government warned that North Korea’s “malicious cyber activities threaten the United States and … pose a significant threat to the integrity and stability of the international financial system.”

With the need to focus intently on the stability and security of the financial system, the Secret Service is better placed within the Treasury Department.

Treasury Secretary Steve Mnuchin highlighted that the move would “result in efficiencies that will maximize the Secret Service’s effectiveness and better equip our government to anticipate and counter sophisticated and evolving threats of tomorrow.”

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This is therefore not just about returning the Secret Service to its historical home at the Treasury, but instead about addressing more complicated systemic threats. This allows Treasury to better align policy, regulatory, intelligence and enforcement attention on protecting the integrity and resilience of the American financial system.

To recall, the U.S. Secret Service was created by Abraham Lincoln to protect the integrity of the U.S. currency in the wake of the Civil War when approximately one-third of all currency in circulation was counterfeit. The protection mission was added after the assassination of President William McKinley at the turn of the last century. After 9/11, its was expanded with more Electronic Crimes Task Forces and moved into the newly formed U.S. Department of Homeland Security because of its protective mission. This move left Treasury without a critical law enforcement arm to protect the financial system and currency. Now it is just one of many agencies within DHS that also protect the full range of critical infrastructures.

The Treasury should also seize this moment to build an international coalition to protect the financial sector — especially at a time when rogue actors like North Korea may try to use their cyber arsenal to profit, evade sanctions and perhaps further disrupt an already fragile global economy.

Secretary Mnuchin can lead the way for the broader international community to develop a strategy focused on advancing a comprehensive and robust cyber financial security against disruptive actors and alliances. 

Leveraging its G7 presidency this year, the United States should launch a process similar to its creation of the Financial Action Task Force in 1989. The cornerstone of today’s global anti-money laundering efforts, FATF began with a G7 communique kickstarting a two-year process open to non-G7 countries who then developed recommendations — a process that has helped establish the modern anti-money laundering, counter-terrorist financing and counter-proliferation finance regime globally. The FATF — which has expanded and now includes major economies like China, Brazil, and India — is now the standard bearer for ensuring financial transparency globally and the assessor of whether countries have effective regimes.

Such a process focused on protecting the financial system against cyber threats would build on what the Trump administration has already done with its inter-agency focus on cyber threats, collaboration with the private sector and use of sanctions against cyber-malicious activities.

With the joint bill introduced by Graham and Feinstein, Congress has a unique opportunity for a strategic realignment to strengthen the U.S. Government’s ability, through the Treasury, to be better prepared and fully equipped to not only manage but actively shape the protection and transformation of the financial system.

Juan Zarate is the global co-managing partner of K2 Intelligence/Financial Integrity Network, the Chairman of the Center on Economic and Financial Power at the Foundation for Defense of Democracies, and was the deputy assistant to the president and deputy national security advisor for combating terrorism (2005-2009) and first-ever assistant secretary of the Treasury for terrorist financing and financial crimes after 9/11.

Tim Maurer is the co-director of the Cyber Policy Initiative at the Carnegie Endowment for International Peace and author of “Cyber Mercenaries” (Cambridge University Press, 2018)