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Law360, London (September 9, 2020, 11:37 AM BST) -- Cybercrime and cashless payment technology will be the top priority for regulators as the financial system recovers from the shock of the COVID-19 pandemic, a member of the Bank of England's financial policy committee said Wednesday.
Elisabeth Stheeman, an external member of the body that oversees the stability of the financial system, said her committee will focus in coming months on the changing nature of virtual crime and on payments systems as the global pandemic continues to create havoc.
"The reality is that online fraud and cyber-hacking of digital accounts have outstripped traditional theft of banknotes and gold," Stheeman said. "Payments have undergone rapid innovation in recent years, and the COVID-19 shock has accelerated these trends."
Cybercrime has come under the microscope in 2020 as fraudsters take advantage of the COVID-19 crisis. International crime-fighting agency Interpol said in August that its partners in the private sector reported receiving 907,000 spam messages and discovered 48,000 malicious links "related" to the coronavirus outbreak between January and April.
Stheeman said the financial policy committee believes these two areas will be the most important as regulators seek to ensure that the financial system can recover from the coronavirus crisis.
They will be crucial in creating so-called operational resilience in case of future crises — the ability of the system to contain and withstand unforeseen financial shocks.
Stheeman said the committee will push for more regular stress-testing to establish how well banks can recover from online attack. It will also set out new standards for how quickly and effectively it expects financial institutions to be able to contain such breaches.
Cybercrime has been one of the biggest risks for the financial sector over the last decade, Stheeman said. Some estimates suggest that such attacks could have cost the global system up to £600 billion ($776 billion) in 2017.
Stheeman noted that the COVID-19 crisis has speeded up Britain's move toward becoming a comparatively cashless economy, putting more and more pressure on online payments systems.
This change will mean that responsibility for payments will gradually move away from banks and toward technology companies, she said. It will also mean that the process of making and receiving payments becomes more complicated.
Both of these risks mean that the existing regulatory framework will have to be adjusted, Stheeman said.
The financial policy committee member said that the body is investigating how to protect the system from risks associated with new payments technology.
The payments sector has come under scrutiny in the wake of the high-profile meltdown of German payments company Wirecard. The firm collapsed in June after disclosing a €1.9 billion ($2.2 billion) hole in its accounts. The company's auditor, EY, said the money probably never existed.
--Additional reporting by Ben Kochman and Najiyya Budaly. Editing by Ed Harris.
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