Bank and credit unions that offer retirement account services now face a new cybersecurity threat. As credit card companies have up'ed their security features, including AI-based threat detection, real-time notifications, and enhanced authentication, hackers are starting to turn to retirement accounts as a way to siphon money from unsuspecting investors.
The overall trend in cyber fraud has been on a decline. Retirement accounts have mostly been immune to cyberfraud over the years. But that is all starting to change. In 2019, the National Association of Plan Advisors said that fraud in retirement accounts is on the rise.
“Hackers are finding it’s getting harder to hack bank accounts, so they’re saying where else is there more money? Where can we go? And they’ve started to discover 401(k) accounts, they’ve started to discover retirement funds,” Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Research Interest Group, said to Yahoo Finance.
Unlike credit cards, retirement accounts have limited protections against stolen funds. This limitation makes retirement accounts a high risk for investors. While many mutual fund companies say they will reimburse funds lost to fraudulent activity, that promise hasn't been put to the test. There isn't a federal law that provides investors with the same level of protection that credit cards or FDIC Insurance currently provide.
What are retirement account investors to do in such a situation? The best defense that investors, banks, and credit unions have is to ensure that their clients are following good security practices. Additionally, banks and credit unions should offer state-of-the-art cybersecurity features such as two-factor authentication, strong password requirements, notifications, and AI-based threat detection.
Retirement account investors need to understand what level of protection their bank, credit union, broker, or mutual fund company provides in the event that their funds are fraudulently stolen. Investors should also be aware of what the process is to recover funds and how long it may take?
This might be new territory for investors and some financial institutions alike. But knowing the threat is real gives every a chance to make preparations and establish clear guidelines
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