Last week, FinCEN (Financial Crimes Enforcement Network) issued a formal Advisory to Financial Institutions
and published FAQs
outlining specific cybersecurity events that should be reported through Suspicious Activity Reports (SARs). This Advisory follows former FinCEN Director Jennifer Shasky Calvery’s recent statements
reminding “financial institutions to include cyber-derived information (such as IP addresses or bitcoin wallet addresses) in suspicious activity reports.” It also follows the launch of the Federal Financial Institutions Examination Council (FFIEC) Cybersecurity Assessment Tool (CAT)
. Although the Advisory does not change existing Bank Secrecy Act (BSA) requirements or other regulatory obligations, the Advisory highlights a series of cybersecurity events–such as Distributed Denial of Service (DDoS) attacks and ransomware incidents–that should be reported on SARs filed with FinCEN, even though they often (but not always
) fall outside the traditional notion of a data breach or a compromise of personal information.
FinCEN Recommends a Broader View of Reportable Events
A financial institution is required to report a suspicious transaction conducted or attempted by, at, or through the institution that involves or aggregates to an applicable monetary threshold. If a hacker, for example, stole personal information such as credit card numbers, account numbers, or passwords/PINs, without stealing any funds at the same time, the financial institution should still file a SAR if it “reasonably suspects” that the purpose of the theft was to facilitate transactions aggregating to the applicable threshold.
The Advisory cautions against construing cyber events narrowly, and instead recommends that financial institutions consider whether a cyber event was intended in whole or in part
to conduct, facilitate or affect a transaction or series of transactions. The guidance discusses cases involving DDoS attacks that FinCEN indicates would require SAR reporting.
DDoS attacks are sometimes viewed as non-reportable events. In a typical DDoS attack, attackers using botnets or aggregated IoT devices to bombard online systems with requests, thereby overloading the systems and shutting them down. Criminal actors monetize these attacks (much like with ransomware attacks) by extorting money from the victims in exchange for shutting the attack down. Some organizations have assumed that events of this kind are not SARable. However, FinCEN advises that if the attack prevented or distracted
cybersecurity or other appropriate personnel from immediately detecting or stopping an unauthorized wire transfer, then the financial institution should report that incident on a SAR. FinCEN reasons that the DDoS attack may have been perpetrated to conceal the unauthorized wire transfer. FinCEN further encourages voluntary reporting of more “vanilla” DDoS attacks that simply result in disabling systems, because the attack “caused online banking disruptions that were particularly damaging to the institution,” and may provide law enforcement with valuable information.
What Information to Include?
Whereas former Director Shasky Calvery previously focused on including IP Address information in SARs relating to cyber events, the Advisory and the accompanying FAQs recommend that financial institutions include a broader range of technical information and identifiers, including:
- Source and destination information such as URLs, command and control nodes, and port information with UTC time stamps;
- File information, such as malware names, hash values, and e-mail content;
- Subject user names, including e-mail addresses and social media account names and handles;
- System modifications, including registry modifications, IOCs, and CVEs; and
- Involved account information.
There is an important potential benefit for financial institutions in collecting and carefully reviewing this information. Reporting individual cyber events can be resource-intensive, especially where a large number of events are associated with a particular malware or attacker. Accordingly, the Advisory and the FAQs both allow financial institutions to file a single cumulative
SAR to report multiple cyber events when they are too numerous to report individually, and where they share common indicators/identifiers or are believed to be related and part of a larger scheme. Reviewing the kinds of technical information requested by FinCEN could help financial institutions identify commonalities that would allow them to report numerous events on a single SAR.
The Advisory encourages internal information sharing among BSA/AML staff, cybersecurity personnel, fraud prevention teams, and other potentially affected units to reveal patterns and identify previously unknown suspects. Moreover, it encourages external information sharing among financial institutions for the purpose of identifying and/or reporting potential money laundering or terrorist activities, highlighting the statutory safe harbors from liability available to financial institutions that voluntarily share information under the Cybersecurity Act of 2015 and Section 314 of the USA PATRIOT Act.
Again, FinCEN stressed that its Advisory does not change existing regulatory obligations for financial institutions. But, regulated financial institutions should read between the lines and view the latest word from FinCEN as an emphatic recommendation to implement changes to their anti-money laundering and cybersecurity compliance programs. In fact, the Advisory appears to be another warning to financial institutions that it takes seriously the implications of cyber events in the enforcement of financial crimes, and that formal requirements regarding the adoption of these new tools and systems may be coming sooner rather than later.
Of course, developing new information collection tools and information sharing systems is not a costless exercise, and for some financial institutions implementation will require a significant reallocation of resources. Moreover, large institutions each day block
hundreds or thousands of attempts to improperly access financial data. To the extent FinCEN would consider such attempts “cyber events,” such institutions will need to determine how to operationalize FinCEN’s guidance without overwhelming their AML and cybersecurity resources. But, to the extent possible, financial institutions should begin to view their role in collecting and reporting cyber information as a priority. The changes encouraged by FinCEN will be valuable, not only to law enforcement, but to regulated institutions themselves. Affecting the merger between AML and cybersecurity programs now will be key to fostering a culture of compliance that will serve institutions well in their normal course of business, and will ensure that institutions are well situated if and when regulatory changes arrive.