Preparing for the End of SMS Authentication

Over the last several years, wealth management/asset management firms have been integrating their systems with banking, trading and other financial platforms. One of the largest challenges wealth management firms face, from a technology standpoint, is managing multi-factor authentication when connecting to the accounts of their clients. In the coming year to eighteen months, this is likely to get even more challenging as SMS-based authentication is phased out. 

Today, many financial web sites, applications and phone apps require the use of SMS one-time security verification codes to be sent via text to the user. This usually happens once the user has entered their login and password to the system, after which it triggers the credential to be sent to their mobile phone number on record. The user then inputs this code into a form on the system and it is verified, and if correct, allows the user to proceed to access the application. This is called two factor authentication/multi-factor authentication (“MFA”) and is one of the most common mechanisms for performing this type of user authorization.

The problem with this mechanism for regulating sign ins to applications is that the method of sending the code is insecure. Attackers have a variety of means of intercepting SMS text messages and thus defeating this type of authentication. Just do some quick Google searches and you’ll find plenty of examples of this attack being successful. You’ll also find regulatory guidance about ending SMS authentication from a variety of sources like NIST and various financial regulators around the world. 

The likely successor to SMS text message authentication is the authenticator app on user mobile devices and smartphones. These authenticator apps reside in encrypted storage on the user’s phone and when prompted, provide a one-time password (“OTP”) just like the code sent in the text message. The difference is, through a variety of cryptographic techniques, once the application is setup and  the settings configured, it doesn’t need to communicate with the financial platform, and thus is significantly more difficult for attackers to compromise. Indeed, they must actually have the user’s device, or at the very least, access to the data that resides on it. This greatly reduces the risk of interception and mis-use of the codes in question, and increases the security of the user’s account with the financial institution.

This presents a significant problem, and opportunity, for wealth management firms. Transitioning their business processes from integrating with SMS-based authentication to authenticator apps can be a challenge on the technical level. Updates to the user interaction processes, for those firms that handle it manually, usually by calling the user and asking for the code, are also going to be needed. It is especially important, for these manual interactions, that some passphrase or the like is used, as banks, trading platforms and other financial institutions will be training their users to NEVER provide an authenticator app secret to anyone over the phone. Attackers leveraging social engineering are going to be the most prevalent form of danger to this authentication model, so wealth management firms must create controls to help assure their clients that they are who they say they are and train them to resist attackers pretending to be the wealth management firm. 

Technical and manual implementations of this form of authentication will prove to be an ongoing challenge for wealth management firms. We are already working with a variety of our clients, helping them update their processes, policies and controls for these changes. If your organization has been traditionally using SMS message authentication with your own clients, there is even more impetus to get moving on changes to your own processes. 

Let us know if we can be of service. You can reach out and have a no stress, no hassle discussion with our team by completing this web form. You can also give us a call anytime at 614-351-1237. We’d love to help! 

All About FINRA Risk Assessments

FINRA (Financial Industry Regulatory Authority) requires an enterprise risk assessment once per year for all member firms. This risk assessment should be completed using the NIST Cyber-Security Framework, if appropriate for the size of the organization. At MSI, we fully embrace the NIST framework and use it routinely for our approach to information security and risk management.

Who Performs the FINRA Risk Assessment?

The FINRA requirements for risk assessment include that it be completed by independent third-party assessors, if possible, or otherwise by internal information security experts (if qualified and available). MSI’s approach is to work WITH our client’s internal team members, including them in the process, and leveraging their deep knowledge of the firm’s operations, while still maintaining our independence. In our experience, this provides the best return on investment for the risk assessment, and allows granular analysis without draining critical internal client resources.

What Analysis Does the FINRA Risk Assessment Require?

Each FINRA risk assessment should include an inventory of all critical data, PII and other sensitive information. Then, each asset should be reviewed for its impact on the business and identification of relevant controls, risks, mitigations and residual risks should occur. This process requires deeper knowledge of cyber security than most firms are comfortable with, and the experience and attention to detail of the assessor can make or break the value of the assessment.

Is the FINRA Risk Assessment Affordable?

Since the workload of a risk assessment varies greatly based on the size and complexity of the organization being assessed, smaller firms are naturally more affordable than larger firms. Risk assessments are affordable for nearly every firm today, and the work plans can be easily customized to fit even the tightest of budgets. In addition, when working with experienced and knowledgable assessors, the cost can be even lower and the results even more valuable. At MSI, our assessment team has more than 15 years of experience, across a wide variety of size, type and operational styles of client firms. You won’t find any “on the job training” here, our experts are among the best and most recognized in the world. We are excellent at what we do, and we can help your firm get the best ROI on a risk assessment in the industry.

How Do I Get Started on a FINRA Risk Assessment from MSI?

Simply drop us a line via this web form, or give us a call at (614) 351-1237 to arrange for a free, no hassle call with our team. We’ll explain how our process works, gather some basic information and provide you with a proposal. We’d love the chance to talk with you, and be of service to your firm. At MSI, we build long-term client relationships and we truly want to partner to help your firm be more successful, safer and manage the risks of the online world more easily. Give us a call today!