By Thomas Kostigen
As more people transact online, there has been a spike in identity theft and financial scams. And this isn’t just relegated to credit card companies and banks. Financial institutions of all sorts—brokerage, fund company, or custody firm—are at risk.
That means mutual fund, 401(k), and trading accounts can be hacked just as easily as checking and savings account these days. With Cyber Monday just around the corner, an important reminder is to mind your online identity because it can be lifted and used to hack into your entire financial life.
According to the consulting firm Accenture, the financial services industry has the highest cost of cyber-crime. To be sure, your bank is hacked the most: $347 billion will be lost by banks over the next five years, Accenture projects. Still, nearly $50 billion is expected to be lost in the capital markets (stock and bond markets) from cyber-crimes. And while the figures “lost” are pointed at financial institutions, it’s really account holders who are hit most.
Individual and institutional assets kept at banks, insurance companies, and broker dealers are what thieves go after. In other words, your money in the form of deposits, forms of credit, and securities.
Financial institutions carry cyber-crime insurance to cover losses, which will amount to more than a trillion dollars of value per year over the next five years, according to Accenture. This is typically how you get credit for any fraudulent activity reported on your account.
Financial services companies secure trading platforms guard against fraudulent activity. And financial professionals have secure, proprietary trading lines to thwart hackers. (Which may be good reason to entrust financial advisers with trading or transferring your money and securities on your behalf.)
But with the uptick in do-it-yourself financial planning and self-directed, online trading comes increased risk, as well. A study by Javelin Strategy & Research shows that three times as many people were subject to identity fraud last year as opposed to just three years ago. New account fraud losses also rose, with criminals beginning to focus their attention on different financial accounts, including retirement accounts, the study said.
So, what steps can you take to thwart cyber criminals?
The Federal Trade Commission, which oversees most financial fraud says, “There are many steps consumers can take to minimize their risk of being an identity theft victim. For example, consumers should closely guard their social security number and shred charge receipts, copies of credit applications and other sensitive documents. Consumers also should review their bills and credit reports regularly and be aware of telltale signs to detect that their identity may have been stolen. In addition, if consumers find they have been victimized, there are a series of steps they can take to recover from identity theft as soon as they detect it, such as placing a credit freeze or fraud alert on their credit report and closing accounts that may have been tampered with.”
The FTC has a raft of information on reporting fraud and filing complaints and even how to recover lost assets on its website.
There may be no easy fix to thwarting cyber-crime, but a relatively quick thing you can do is to ensure your computer is up to date on malware safety. And that’s usually just a matter of a software update. Approximately 25 percent of all malware hacking targets the financial services industry. That’s a big target on your back, and one you might want to erase as soon as you finish reading this column on whichever device you’re using by updating or installing software security as a first step to fraud prevention.
Thomas Kostigen is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.