You’ve seen so many hacks and data breaches in the news that it can be hard not to worry. Unless you have directly faced fraud or theft from one of these breaches, it’s easy for everything to feel esoteric and out of reach. Still, you may wonder just how much these activities put you and your finances at risk. Here’s what you need to know.
Big Hacks
This year has been crazy on many fronts, and part of that includes unprecedented data breaches from major financial institutions. In the first half of 2016, a major ring was busted that had stolen data from a dozen of the biggest names in banking, including JPMorgan and Fidelity. Many millions of Americans were put at risk by the breach, and the damage was large for the institutions.
Other major hacks this year have affected the U.S. government, UCLA Hospital, health insurance providers and many others. Even the Office of Personnel Management was compromised, showing that online data is accessible no matter how careful you are as a consumer.
The Risks
It’s important to understand how these hacks really pose a threat to you. The most obvious is that a breach of data can lead to fraud that will steal money directly from your accounts or tank your credit with fraudulent borrowing.
There are a number of protections in place for individual account holders, but all of them are contingent on you identifying and reporting problems in a timely manner. You are also liable for handling your information safely. In some cases, individuals did not get their money back because they had been deemed responsible for the security breach in the first place.
Still, for most people the cost of these breaches is mostly measured in inconvenience. The real threats are much farther reaching. Financial institutions are forced to spend much more on cyber security every year, and those funds have to come from somewhere.
Increased business insurance and other expenses have forced major banks and money managers to increase fees steadily. The cost of doing business with a bank is rising, and it is a mostly inevitable expense.
The Trend
It is also clear that hacks and malware targeting banks is on the rise. So far, 2016 has seen a 50 percent increase in breach attempts and successes over last year. The scariest part is that the bulk of those attempts target smaller businesses that can’t afford world-class security.
Roughly 80 percent of data breaches this year have been from institutions with an annual revenue below $35 million. While no one breach affects as many people, the culmination of attacks has increased the range of threat by tens of millions.
Data breaches have always existed. The digital age just enables them to reach more people in shorter spans of time. This year represents the first time in American history that the majority of data breaches came from malicious attacks. In the past negligence and leaks led to most security issues. Now, hacking and malware have taken center stage.
Defense
It isn’t all bad news. There are a number of things institutions can do to defend against these attacks, and for the most part they are taking those actions. Federal regulation has produced a new set of standardized security, and all banks will need to comply within a few years.
On top of that, insurance agencies have stepped in to help manage the operational costs of data breaches. The biggest companies are already protected, and policies are being crafted for smaller banks. Within the next few years, the effective cost of managing a breach is expected to drop.
As for the individual, you receive the most protection. By law, you are not liable for money lost to fraud or theft, except in rare circumstances. The government backs your money through FDIC and other programs, so, in almost every case, stolen money is returned.
The big rule that makes all of this true is this: you must report any event within 60 days of it occurring to be protected. This should emphasize just how important it is to keep an eye on your finances and be very vocal when things don’t look right.
The Bottom Line
There is no doubt that hacks present a threat and risk, but you are not powerless or without hope. As long as you maintain a healthy watch on your end of things, you are primarily protected against the hacks. The key is to take them seriously and stay proactive. If you stick to those rules, your retirement will be safe from hackers, although you may suffer a few fee hikes along the way.
Regards,
Ethan Warrick
Editor
Wealth Authority
