Digital payment service firms should be held to stricter data security procedures, according to a report from the Federal Reserve released last week.
The Fed’s Board of Governors can “enhance its oversight” in this area and others, according to the report.
More from FCW:
The Fed’s Financial Stability Oversight Council has highlighted cybersecurity risks as a major concern in annual reports to Congress for five years running, and that concern isn’t going away. As digital threats evolve, regulators should be preparing to counter “significant cybersecurity attacks,” the OIG warned.
The OIG recommended improving oversight of MDPS firms through enhanced governance structures. In addition, efforts should be made to ensure that regulators working in intelligence and incident management have a better understanding of the technologies these firms use.
The report also highlights the need for greater continuity in cyber operations, identifying opportunities to improve recruiting, retention, tracking, and succession planning for cybersecurity resources.
The OIG found systemic reasons for weak cyber practice. Take the rule that financial institutions notify regulators of new vendor relationships within 30 days, for instance. With the rise of new financial tools such as digital payment services, it’s become difficult to tell the difference between a “product” and a “service.” That leaves the reporting requirement vague at times, and opens the door to cyber vulnerabilities.
However, the Fed may not have the resources to police this area. Cybersecurity threats have grown tremendously in recent years, but the Fed’s budget hasn’t kept pace. From FCW:
Overall, the OIG found the Fed’s Division of Supervision and Regulation is lacking a sufficient framework to address cyber concerns in MDPS firms and technology service providers. These entities have grown significantly in recent years, processing billions of transactions annually, and yet the Fed has not developed an oversight structure that recognizes their size and importance in the financial system.
Read the full report here.
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