On Dec. 30th, 2011, the Economist reported on the the risks that US financial system faces. Noting that 75% of all phising attacks are directed towards the financial sector, the article raised the concern that cyberattacks on the financial system might escalate from simple theft to intentional destruction. To this end, in 2011, the Obama administration issued an executive order that made infiltration of financial markets by transnational criminal groups a national emergency. Moreover, the article made an interesting claim: the financial collapse of 2008 might have been accompanied by economic terrorism.
The article cited a report for the Pentagon’s Irregular Warfare Support Programme (IWSP). That report raised the possibility of economic terrorism evidenced by irregular trading patterns around the Lehmans Bros. collapse. Now, at this point the article got somewhat complicated, so I recommend checking out the Economist article for more in-depth analysis. However, as a quick summary, the article mentioned an arrangement called "sponsored access" where brokers can rent their identities to other brokers. Under this sponsored access arrangement, brokers shorted a number of troubled stocks. There is no firm evidence, but the article mentioned that there is speculation that this practice was motivated by "those with non-economic motives." While economic terrorism probably didn't trigger the 2008 collapse, it certainly could have exacerbated it.
The article went on to say that hackers could cause significant damage by precipitating a flash crash, similar to the flash crash of 2010.
Whatever the case, an attack on the financial system could be catastrophic. Moreover, "politicians, regulators and the industry have struggled to forge a coherent response." The article concludes that many agencies have a hand in financial cybersecurity, but there is little overall cohesion.
Again, a complicated, but very interesting article. I recommend checking out the Economist article here to get the full analysis.
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