Top Security Risks of Credit Unions And How To Prevent Them  

With the growing number of people relying on online banking services, there’s also an increased risk for cyberattacks. This threat is especially prevalent among small and mid-sized credit unions who may not be as prepared and equipped as the bigger financial institutions when it comes to cybersecurity. 

So what are some of the common security issues that credit unions face? Some of the modern cybersecurity challenges that credit unions experience are data breaches, network security attacks, account takeovers or identity fraud, employee misuse of data and theft, ransomware, and payment card fraud. They may also struggle with threats to their physical security such as skimming, robberies, and larceny. 

Understanding Security Risks Today: Physical and Online

With the breadth of information and wealth that they contain, financial institutions have a huge responsibility of building their security defenses and resilience to keep the trust of their customers. According to reports, the devastating impact of security attacks can cost credit unions around $190,000 to $1.2 million in financial damages. 

It’s important to understand that security issues in the financial industry are not limited to online risks. For some credit unions who are operating in branch locations, they can also be faced with several physical threats. These physical risks can stem from any compromise to their security controls that are intended to guard its personnel, resources, and network systems. Some examples of physical challenges to credit unions are: 

  • Unauthorized access to their facilities: Some credit unions may have vaults or safe-deposit boxes where their members can store their assets and documents. Unfortunately, this method of safekeeping is vulnerable to external thefts and physical breaches like break-ins, robbery, and larceny. This can happen in credit unions located in particularly remote locations where there is less traffic and police visibility.
  • Compromised machines: Nowadays, many physical fraudsters attempt to steal critical information by means of skimming. This illegal method is usually done by placing small tools such as card readers or skimmers to get the information that is stored in the card’s microchip. They may also put overlaid number pads or cameras on the ATM machine which can allow the thieves to know a person’s PIN and passwords so they can use the card. 

6 Common Security Threats Faced By Credit Unions 

Unlike most traditional banking institutions, credit unions operate on a smaller scale and they usually cater to serve a specific member group, community, or industry. They are a not-for-profit institution and this nature of credit unions can also mean that they have a smaller budget for investing in essential technologies and IT staff resources for network security. 

Here are some of the common cybersecurity challenges that credit unions may encounter: 

1) Data breaches 

A breach happens when an unauthorized person or third-party attacker gains access to any confidential, sensitive, or protected information. According to cybersecurity experts, data breaches are an inevitable threat to almost any business, government agency, and banking institution. During the COVID-19 pandemic, the increase in online transactions only enhanced the threat of breaches and this greatly put credit unions at risk. 

Data breaches can happen due to weaknesses in a credit union’s technology and network infrastructure. Without robust network security, it’s very easy for skilled cybercriminals to expose your weak points and get inside your data source to steal user information and credentials. 

However, data breaches are not limited to outside attackers. It’s also possible for loss of data to happen due to the loss of devices that store important information. Some credit unions may also have malicious insiders who are causing harm to the organization by sharing unauthorized data with outsiders. 

2) Network security attack 

This cybersecurity issue refers to any unauthorized actions or attempts to access a credit union’s digital assets by infiltrating their network systems. The usual goals of a network attack are to manipulate, change, destroy, or steal private data and information. 

Network attacks come in two main types: passive and active. A passive network attack happens when attackers have access to a system and monitor it constantly with the objective to look for any vulnerabilities without doing any changes to the data or information. 

Meanwhile, an active network attack already involves making modifications to harm sensitive data or information. These attacks can greatly damage the security integrity of a credit union and can compromise the overall protection of its network systems and resources. 

3) Identity theft or account takeover fraud 

When a data breach happens, there’s a possibility that the attacker can assume the identity of the other person and take advantage of the stolen information to enjoy financial and credit benefits. This situation is called identity theft and it’s one of the most common fraudulent activities of many cybercriminals. 

Online attackers can easily prey on unsuspecting users and extract their information through email phishing scams, bad links, malware, and social engineering. They may also use other tactics such as listening on phone conversations and stealing mail to get their personal data. 

Account takeover is a sub-form of identity theft and it specifically pertains to stolen online account credentials which fraudsters can use to perform unlawful financial transactions. These criminals may use a person’s financial assets for illegal wire transfers, ACH fraud, or opening a new credit account. 

4) Employee misuse of data and data theft 

Rather than an external threat, this security risk can be classified as an issue in internal management for credit unions. An employee misuse and theft of data can happen when personnel maliciously steals member data or information for their own benefit. It can also occur when an employee doesn’t follow proper data handling practices and protocols which can lead to unintentional leaks of information to outsiders and unauthorized persons. 

Most cases of employee misuse of data and theft can significantly damage the reputation of a credit union and subject them to legal actions and hundreds of dollars in financial penalties. Moreover, this can harm their user’s personal information security and safety and may cause them to lose members. 

5) Ransomware attacks

A ransomware attack involves the use of malware to infect and infiltrate an organization’s network systems. The common modus operandi of cybercriminals is that they will install the malware to block the IT’s access to their data and system, and they will demand ransom money in exchange for releasing the data. 

There are many companies that fall victim to ransomware attacks every year. According to one report, there are at least 1,097 ransomware incidents that occurred in the first half of 2021. Some experts have also estimated that at least one ransomware attempt happens every 11 seconds, which is why credit unions need to be vigilant and proactive in protecting their systems against these threats.  

6) Payment card fraud 

Like other banks and financial providers, credit unions can also offer physical cards on major networks. However, as more people use their debit and credit cards to do cashless or online transactions, more cybercriminals have also been more active in compromising these payment tools. 

Unfortunately, some issues of compromised cards and fraudulent actions may be outside of the control of the credit union since there are breaches that can happen directly with their third-party card provider or with another merchant.  

How Credit Unions Can Lessen Their Security Risks 

To protect their employees, stakeholders, and members, credit unions should take precautions to fortify their database and network systems from unwanted cyberattacks. Cybersecurity should also be a concerted effort between the leadership team, management, and employees to create a culture of security to reduce threats in their operations. 

Here are some ways that credit unions can mitigate external risks and online attacks: 

  • Regularly update their security software and install the latest patches to strengthen their cybersecurity capabilities 
  • Invest in advanced endpoint detection and protection tools so they can actively monitor their endpoint environments for potential attacks 
  • Install anti-virus programs in the company’s central database and network systems to help detect and block malicious activities or malware 
  • Perform regular risk assessments to identify and address the weaknesses in their network 
  • Store backups of important data and information to avoid losing them in case of a ransomware attack
  • Make sure that your third-party vendors have proper security safeguards in place to protect the members’ data 
  • Conduct cybersecurity awareness training and workshops to lessen security risks that can happen due to human fault  
  • Implement logging and monitoring systems to easily track history for any suspicious events or anomalous logins from unauthorized users 

Protect Your Members’ Data and Transactions With Abacus

Lack of cybersecurity defenses and protocols can bring significant financial consequences to many banks and credit unions. Financial institutions should implement reactive management and set up preventive measures to lessen the impact of criminal attacks and online threats on their employees and customers. 

Abacus Managed IT Services have more than 15 years of experience and expertise in helping credit unions improve their security posture in the industry. We’re proud to offer a wide variety of solutions that support their daily operations and safeguard their network systems. Call us today at (856) 505 – 6860 to know more about how we can help you. 

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The Abacus Blog Team
At Abacus IT, our blog is authored by a team of IT experts with a wealth of experience in various facets of technology. Our primary blog author is a seasoned IT professional with over 20 years of experience in the industry. With a deep understanding of cybersecurity, cloud solutions, network infrastructure, and IT management, our author provides valuable insights and actionable tips to help you optimize your IT operations.

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