By Toby Duthie, Partner, Forensic Risk Alliance
The chances are you’ll use a cloud based application today but are you aware of the risks this seemingly benign technology could pose to you as an individual or the financial institution you work for? The banking and financial sectors have been drawn to the cloud as wired and wireless broadband internet speeds continue to increase and the proliferation of smartphones and tablets that are big on processing power, but small on hard drive storage, show no sign of abating. From a practical point of view, the cloud also offers a range of cost savings that come about because it has the ability to bring together applications and software within a pool of centrally located servers and allow access to them from any remote location. But it’s not without its risks.
Risk 1: International data protection laws
Cloud-based working necessitates placing company data – potentially including customers’ confidential financial information – on third party servers in data warehouses that could be located anywhere in the world. This carries a potential risk for financial institutions as they could come into conflict with local privacy laws. Keep in mind that data protection laws and rights are applied in the territory in which the data is stored, rather than where it is generated, modified or created. Those with responsibility for assessing operational risk within financial institutions would, therefore, be very wise to have a conversation with their IT department – ideally before a cloud service contract is signed – and check the location of all their provider’s servers.
Risk 2: Data Monitoring By US Intelligence Agencies
Concerns are growing across all industries, but particularly within the global financial community, that the collection of metadata relating to phone calls by US intelligence agencies may well be extended to include Internet metadata. This could feasibly encompass emails, video and voice over IP and social media content stored in the cloud. President Obama’s speech at the start of 2014 did nothing to ease these concerns – in fact it suggested in stronger terms than before that data entering the US through tech companies such as Google, Apple, Dell and Yahoo (to name just a few) could well be subject to wholesale access and monitoring in the future. Financial organisations should be aware that once their data is shared with a third party service provider with a US footprint (such as a cloud service provider or social network site), the expectation of privacy offered by the US Constitution’s fourth amendment risks being forfeited.
Risk 3: How Far Does US Law Actually Reach?
It could be argued that even if a US cloud service or remote back-up and recovery company has servers in a foreign country (which could by feasibly be deemed a “US server”) that server and the data on it could still be subject to FISA (Foreign Intelligence Surveillance Court) rules and related court orders. Time will tell if Microsoft’s servers located outside the US will fall into this category, and if its status as a US company makes the location of its servers irrelevant. This is an important issue for banks and financial services companies that use cloud-based applications powered by US companies. By their nature, cloud-based applications require companies to place their data on third party servers in data warehouses that could be located in the US (or on servers outside the US that are by managed and maintained by US companies). In response to NSA spying revelations, financial organisations need to think seriously about how and where they store their data. Many business leaders might now be asking if the ease-of-use and cost-saving benefits of using applications like Google Docs, Apple’s iCloud and DropBox – or other cloud computing offerings – are worth the risk. Businesses may also be starting to legitimately ask if their regular data back-up and protection policies, which might include making remote back-ups to US-based data centres could bring them into conflict with ever tightening European data protection laws. We strongly recommended that financial, corporate and personnel related data is always housed in its jurisdiction of origin or one that carries similar protections. However, in the light of Obama’s speech, this has never been more important for companies to consider as they assess their data storage, back-up and access policies and weigh up how much use to make of cloud-based computing in their daily work.
Risk 4: Data protection vs. data disclosure
Adopting a cloud computing strategy across the globe can expose multinationals operating in the financial sector to contradicting laws in different countries. For example, if a French company (which is subject to French data protection laws) takes out a service contract with a cloud provider that centrally stores its email data in the US, the company makes itself vulnerable to breaking both French and US laws in the event of US litigation or investigation – even if that data was created or modified outside the US or France. The company may wish to comply with a US discovery request, or US government subpoena, but will need to resolve the conflict that this creates with stringent French data protection and other laws which preclude the transmittal of data outside of France. And the penalties on both sides can be very high, data protection breaches carry fines in the millions as well as criminal sanctions in some countries, and the failure or inability to respond to US discovery risks penalties or even spoliation fines which can be significantly higher. Keep in mind that the same is true in reverse – i.e. for US companies using a cloud service provider based in France.
Risk 5: Where does your cloud service provider store its back-up data?
Find out where your cloud services provider backs up copies of your data (they all make copies of client data to maintain 24/7 access and to offer service level guarantees). Ask for the backups they make of your data to be stored in the same location you specified for your original data and applications. FRA strongly recommends that high-risk data – such as financial, corporate and personnel related data is always housed in its jurisdiction of origin or one that carries similar protections. Emails are often highly sensitive in EU jurisdictions and carry strong data privacy rights, which makes transmitting or producing them outside of their jurisdiction of origin, not just risky, but potentially illegal. So, if you can’t get a location-based guarantee from your cloud provider then think very carefully about that data and applications you put into a cloud environment – and carry out a full risk assessment.
Risk 6: Fraud in the cloud…
These days, personal and corporate information is a currency and there are unscrupulous people willing to break the law to get their hands on it and then trade with it. In order to prevent theft of fraudulent activity financial institutions should familiarise themselves with their cloud service provider’s own security policies and determine what procedures are in place to control access to information they hold. In particular they should:
ñ Ask their cloud service provider about its policies on passwords, laptop and portable device use by staff, personal software download policies and their tolerance of cyber-slacking.
ñ Get their IT departments to check the kind of encryption used by their cloud service provider to transport data.
It’s important to make sure these two points are built into any risk assessment of cloud service providers as carelessness in any of both these areas has the potential to expose cloud service providers to data leakage and information theft as well as increasing the possibility of malware getting onto their servers. All of which can compromise data held by financial organisations.
Cloud computing provides many benefits but security, privacy and legal matters must be carefully considered and continuously surveyed. It is likely that, in the not too distant future, companies relying on cloud computing will be subject to litigation along with their cloud service providers. It is, therefore, imperative your organisation fully understands the legal, security and privacy issues that surround the technology before implementation – and that, once deployed, board members, legal teams and IT departments all work together to stay one step ahead to avoid cyber law headaches as well as potential incidents of fraud and corruption.
Editor’s note on FRA:
Forensic Risk Alliance (FRA) is a consulting firm with offices in the US, UK, France and Switzerland. It helps businesses to resolve complex and high-risk financial, legal and regulatory challenges. Its people provide independent, conflict-free advice and litigation support services, often in the local language as its team speaks virtually all of the world’s key business languages, including most European languages as well as Arabic, Mandarin and Cantonese Chinese, Malay and Bahasa Indonesia. FRA collects and analyzes data for use in legal disputes and investigations (often cross-border) in a number of areas, including litigation, fraud, bribery and corruption investigations. The company has extensive worldwide project experience in Latin America, Asia, Europe, Africa and the Middle East. FRA is one of only ten companies in the world approved to carry out validation audits for the EITI (Extractive Industries Transparency Initiative) which evaluate how well a country’s government conforms to the EITI’s standards of transparency in reporting revenue received from the extraction of natural resources. Members of the FRA team also provide expert witness testimony in court when required and have recently contributed two chapters to the Serious Fraud Office’s book ‘Serious Economic Crime – a boardroom guide to prevention and compliance’. For more information, please visit www.forensicrisk.com
About the Author:
Toby Duthie is one of FRA’s co-founders and heads its London office. With experience in cases involving government enforcement in the UK and the US, his expertise lies in internal and regulatory investigations, data protection and complex financial modeling, with particular experience in global, multi-jurisdictional cases. Toby was instrumental in the development of FRA’s service in the anti-corruption and white-collar defense arena across Europe. He spent more than five years in the US, gaining extensive experience advising on damages amounts in a number of complex civil and criminal litigations and in connection with a number of high-profile FCPA enforcement actions (e.g. Panalpina, Bonny Island LNG and Oil for Food). He has also worked on matters involving the UK, Swiss and French regulators.
Toby Duthie, Partner, Forensic Risk Alliance
Phone: +44 (0)20 7 269 7837
Email: [email protected]
Cyber-slacking: The act of avoiding work and/or other responsibilities by scouring the internet in search of games or other non-work related amusements. Cyberslacking is estimated to cost companies billions of dollars a year and has forced some companies to block or limit access to certain types of web sites.
What is loneliness and how can you manage it?
By Iris Schaden Your Business and Personal Coach
A mere century ago, almost no one lived alone. Today, many do and it is not unusual. The recent lockdowns and isolation periods have amplified feelings of loneliness. But why do we feel lonely? Why do our bodies experience social pain? Learn about what we can do to improve our situation, prevent chronic loneliness and minimise the tremendous impact it has on our health.
Solitude and choosing to be alone can be bliss. Over the last sixty years the number of people living alone has increased in developed countries by more than 50 percent. In countries such as Denmark, Sweden and Switzerland, it is very common for people to live alone. But this does not translate into higher levels of self–reported loneliness. Many people have friends or family they can interact with on a regular basis.
However, it is important to recognise that this choice is different to loneliness, which can be a state of profound distress. Loneliness is a purely subjective and individual experience that can be felt by anyone, no matter their social, educational, gender or age demographic. Humankind are social creatures by nature – we struggle without it – and social connections are important to our health and emotional wellbeing.
Loneliness is a problem when we feel that no place is home; when we are in a group and we still feel social separation; when we spend time with our family but we feel like we don’t belong; or when we lose a relationship and struggle to adjust. It is a growing phenomenon in modern times, a by-product of our individualism, long-distance study and career opportunities or time-consuming work commitments.
The pandemic, with its required isolation and social distancing, has added additional stress to many households, but feelings of loneliness or adverse effects of social isolation are particularly prevalent in one-person households and young people aged 12–25. According to a study by VicHealth, even before COVID-19 young adults and adolescents reported high levels of loneliness, social isolation, social anxiety and depressive symptoms. Additionally, it is men who tend to report higher levels of loneliness than women.
Reported loneliness is on the rise. In 2017 and 2018 former US Surgeon General Vivek H. Murthy declared ‘an epidemic of loneliness,’ and the UK appointed a Minister of Loneliness. In these two countries, one in five adults reported that they often or always feel alone; in Australia, it was one in four adults. And this was before COVID-19, which makes us realise the mental and emotional impact lockdown has on individuals.
What happens to our bodies when we experience loneliness?
Neuroscientists, such as John Cacioppo, identify loneliness as ‘a state of hypervigilance whose origins lie among our primate ancestors and in our own hunter-gatherer past’. Our ancestors needed to belong to an intimate social group to survive. Cacioppo explains that our bodies respond to being alone, or being with strangers, as though we were in a dangerous situation.
Separation from other people (the group) triggers a fight-flight-or-freeze response and we feel social pain. While physical pain is primarily a sensory experience, social pain is the emotional state that comes from the distress of being lonely. Like the bodily sensation of hunger, it alerts us to a need, but instead of food the need is social interaction.
Loneliness generates anxiety: our breathing quickens, our heart races, our blood pressure rises and we struggle to sleep or sleep well. If we don’t pay attention, over time we start to act more fearful, defensive and self-involved. All of these actions drive others away and tend to stop those experiencing loneliness from doing what would benefit them the most: reaching out to others. It is a vicious cycle and one that is especially challenging for older and younger individuals.
Tactics to help cope with feelings of loneliness.
To belong is to feel at home in a place or situation where you feel included, comfortable and connected with others. In his assessment, Vivek H. Murthy wrote, ‘To be at home is to be known … You can feel at home with friends, or at work, or in a college dining hall, or at church, or in Yankee Stadium, or at your neighbourhood bar. Loneliness is the feeling that no place is home.’ Having relocated to different cities and countries and re-establishing my life over and over again, I can certainly say that loneliness can be a challenge.
How can we combat the feelings of loneliness and the anxiety that comes with it, before it becomes chronic and we find ourselves even more isolated over time?
The first step in moving forward is acknowledging how you feel. Give those feelings a name with a specific timeframe; for example, today I feel alone or since I’ve been in lockdown, I have felt alone or since I lost my partner, I feel disconnected and lost. By doing this, we focus on the present and do not label our entire existence as lonely.
My personal strategy is to go outside if the loneliness gets too ‘heavy’; connect with other people through looks and smiles (even under a face mask our eyes can smile); call friends and family regularly; or schedule a brunch or glass of wine with friends (in person or video chat).
Practising random acts of kindness and gratitude, for others and ourselves, is another very effective and very positive way of bringing us back into the present moment and improving our overall wellbeing. Energy flows where our focus goes. It takes effort and sometimes it is indeed easier to just give in and watch a light-hearted movie on the couch. And that’s fine too!
If you are ever experiencing loneliness, I recommend exercising your social muscles and also seeking support. Remember that your feelings are normal as we are biologically fine-tuned to being with and interacting with others. However, you will need to make changes to avoid jeopardising your health. Once loneliness becomes chronic it becomes self-sustained and you will begin exhibiting defensive behaviour. As a defence mechanism, loneliness makes you assume the worst of others and you (your brain) become hypersensitive to social signals that might be interpreted as hostile towards you, when in reality people might just be trying to help you.
Large studies have shown that feeling lonely has a tremendous impact on your health: it can make you age quicker, cause dementia to advance faster, weaken your immune system and lead to anxiety and depression. Many people turn to substance abuse which only serves to numb the symptoms, rather than treat the source. And while you can find so much information online, knowing is not enough. Remember that reaching out for help is not a sign of weakness but one of strength. So please reach out to your network, talk to your health professional or get in contact with me.
There are different ways to improve your overall wellbeing. Let’s discuss.
Payments in a pandemic: UK consumer trends emerging from COVID-19
By Philip McHugh CEO at Paysafe
The outbreak of COVID-19 has been a global catalyst impacting many industries, including payments. It has forced consumers to adjust to different ways of purchasing goods and services; according to our latest Lost in Transaction research, a survey in which 8,000 consumers globally were asked about their payment habits, over half (54%) of UK consumers said they have used a payment method new to them since COVID-19 began.
This change in consumer behavior will serve as a tipping point for the payments industry. Consumers are demanding more choice, and more convenience in how they pay, with 84% of people we surveyed admitting to thinking about payments differently in 2020.
Here are four trends coming out of the COVID-19 pandemic we believe will permanently alter the global payments landscape.
- Major shifts to digital
This pandemic has not only been the impetus for change from consumers, but for businesses too. For cash consumers, particularly those who are unbanked, the short and long-term impact of only having to access to products and services digitally is going to be substantial. Providing a smooth transition from retail to online payments will be key. According to our research findings, COVID-19 has led 21% of UK consumers to try online shopping for the first time and 12% using a digital wallet for the first time to make an online payment.
Digital merchants must take this into strong consideration when thinking about the evolution of their checkout. There are many viable options, including incorporating an eCash solution to give the buyer the option to maintain cash as their primary payment method, or introducing a digital wallet that enables people to shop online without sharing their financial data with merchants and potentially compromising their financial security. By 2023, digital wallets are expected to become the most popular online payment method in the UK, accounting for 33% of the market.
Already, nearly half of UK consumers (43%) said they increased their online shopping habits because of restricted access to high street stores and this percentage is expected to grow further. It’s vital that businesses begin to diversify their payment offerings otherwise they’ll fail to meet consumer expectations and risk losing out to their competitors.
- The growth of contactless
Despite the World Health Organization not issuing an official warning against using cash, the psychological perception of the safety of handling cash has made an impact. Nearly two thirds (63%) of UK consumers surveyed said they will be using contactless more in the short term due to health and safety concerns, and 61% saying they are happier using contactless now than they were last year.
At the end of March, cash usage in Britain halved, according to Link , operator of the UK’s biggest network of ATMs. In addition, contactless card limits for in-store spending rose from £30 to £45 to cut the need for physical contact in shops. Increased adoption of mobile wallets like Apple Pay or Google Pay across all generations may be on the horizon, making payments more accessible to society. Restaurants and pubs are also encouraging the trend towards cashless as well, such as prompting people to use an order-ahead app to pay for drive-through orders or removing the need to press a “pay now” button before a contactless payment.
- The importance of remittances
With travel restrictions still in place around the world, sending money home quickly, seamlessly, and cost-effectively remains more vital than ever. Half of consumers have given money to family or friends since the crisis began, and nearly a quarter (20%) have done this at least three times. According to our research, 74% of consumers would use a digital payment method to send money abroad, either through a digital wallet, direct bank transfer, or online money transfer services. Effective remittance channels are needed to combat specific issues caused by this crisis, including being financially inclusive for those needing financial support for the first time and who may not have a bank account, or access to digital payment methods because of displacement and isolation.
- Embracing the power of technology
Our recent Lost in Transaction research shows that consumers are already adapting to challenges in purchasing, including getting to grips with alternative payment methods, and it is the industry’s job to make those methods even more accessible to society. Both payment providers and online retailers must adapt in line with the demands of consumers, and the requirements of the situation. Ultimately, the accelerated change and improvements made to digital commerce throughout this pandemic will pave the way for the future of both digital and in-store payments.
Once the world resumes ‘business as usual’, the payments industry, guided by changing consumer behavior, will develop further thanks to new technologies such as 5G technology, artificial intelligence and automation – all helping to speed up transactions, improve in-store payments, and enhance user experience. Online and mobile banking will become more ingrained in the mainstream and consumers will come to expect a fully-integrated, unified experience across all channels and touch points. We were already on this path, but the pandemic has served to accelerate consumer appetite for enhanced products and services.
FinTech Landscape: Synergy and Disruptive Innovation in Investment Banking
By Mr. Kunal Sawhney, CEO at Kalkine
While technological leaps seem to be defining brighter future for some businesses in the post-COVID era, FinTech continues to thrive and transform the landscape of financial services industry. It is about staying ahead of the curve in this race against grabbing a bigger chunk of market amidst shrinking consumer and business confidence – as adoption of advanced technology can be the secret sauce in attracting and retaining customers in the digital era.
Asset management, insurance and lending companies are some of the prominent segments in the broader financial segment that have very swiftly embraced the latest digital technologies. Looking at Investment Banking (IB) space, while COVID-19 pandemic initially brought the sector to its knees, latest trends in financial technology adoption seem to be getting them back on their feet, driven by advanced and streamlined offerings pertaining to M&A advisory, risk management and financial assets management.
In general, we have heard about versions – Fintech Version 1.0 & Fintech Version 2.0, but the modern theory around investment using financial technology does not end here. There is a multitude of factors that can push and prod the IB thematics while channelising the way technology can slither through and give a spin to each and every product and service in Investment Banking space. Tech-based end-to-end models appear to take things one notch up when it comes to dealing with risk profiling, lending, fraud analysis, payments etc. Let’s look at how this is made possible in today’s world:
AI Technology Penetration – The ‘New Normal’: Penetration of Fintech in IB models is charting out new growth prospects for the financial services industry, ensuring cost optimisation of due-diligence, enhancing value for M&A prospects, streamlining legal checks and advancing asset-reporting discrepancies in acquisition deals. Besides, AI-empowered actuarial software is providing a firm nudge to offering top-notch, faster and accurate risk advisory services.
Moreover, seamless utility and penetration of AI and ML in algorithm trading, stock market prediction, fraud detection and prevention, acquisition of new customers, risk profiling and network security deserve much applause. Amidst COVID-induced market volatility, technology-enabled valuation models play an important role in carving out future stock predictions and aiding sound investment decisions.
Big Data Analytics Driving Value-Based Offerings- IB players are increasingly adopting big data models in evolving and providing advanced offerings in terms of building customer-centric asset portfolio valuation models, offering trading and investment support, risk advisory and M&A support. Meanwhile, big data is also leveraged to optimize internal processes such as automated customer support, salary optimization, attrition modelling, fraud analysis, credit/operational risks, etc.
Besides, the concept of algorithm trading seems to be gaining wide acceptance across major IB players in ensuring efficient execution of financial trades and robust investment decisions without human intervention.
Empowering revolution in the IB space, adoption of unique predictive models, sophisticated statistical techniques and ensuring privacy and integrating of data is crucial here. Specific set of challenges needs to be carefully catered to, in order to ensure that big data boosts competitiveness and support deeper market penetration.
Robo Advisory – The Next-Gen Frontier: Robo Advisory engages high-tech algorithms and provides secure, faster and self-service functionality via online investment management platforms. As per market experts, asset under management using Robo Advisory is expected to grow multifold in the post COVID era.
With minimal manual efforts, Robo Advisory allows automatic adjustments and rebalancing of the portfolio allocation based on algorithms and pre-defined investment rules. The investments are entirely automated and have self-learning algorithms, while the cost of running a robotic automation tool is far less than doing the same work manually.
Cash Less Transactions – The Immediate Future: With increased comfort and safety associated with online cash-less transactions amidst current health crisis, IBs are able to improve and augment existing products and services, in addition to developing new business models. While social distancing is becoming a new normal in the coronavirus era, financial advisors appear to be harnessing the fruits of tech transformation and heightened cashless transactions.
Undoubtedly, banking giants that are fast in adopting digital technologies have an edge over their peers. However, the biggest challenge for FinTech is data privacy, as transactions that go digital are highly prone to cyberattacks. Nevertheless, digital transition may see emergence of a digital-first model in the near term, ensuring radical shift in the value proposition offered to clients, with an ever-increasing emphasis on digital toolkits and electronic market access. All in all, it’s how firms refine their transformation objectives, evolve from the lessons learned from the pandemic and review their broader strategic agenda.
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