The US government has warned that hedge funds are weakening US financial system defences against cyber hackers and terrorists, the Financial Times (FT) reports.
According to the FT, The Department of Justice has also told hedge fund investors that their data could be at risk if they do not increase cyber security.
Assistant Attorney-general for national security, John Carlin attended a hedge fund conference last week and demanded that managers pay more attention to cyber threats and share more information with the government if hackers attempt to penetrate their systems.
Carlin told the FT that hedge funds have not woken up to the risks of cyber threats after a number of high profile cyber attacks, unlike banks which are starting to take action. “Hedge funds hold a tremendous amount of capital, incredibly sensitive proprietary information and valuable algorithms, but they are small shops and often have very weak IT,” he said.
At a private meeting during the SkyBridge Alternatives (SALT) Conference in Las Vegas, Carlin told managers they need to share more information if they are to beat cyber threats from criminal gangs and foreign governments.
By failing to report incidents, Carlin said that it’s a “payday” for hackers and means they can conduct their hacking activities cost-free and get better at stealing information. The FT reports that the warning issued to hedge fund investors by the Department of Justice is piling on the pressure for them to act sooner rather than later. “Investors should demand funds set out their cyber security policies,” Carlin said.
However, Anthony Scaramucci, founder of SkyBridge Capital told the FT that Carlin faces a tough sell because many people in the financial sector do not feel threatened until they face a cyber security breach. “You do not feel threatened until you are breached. The average person in the financial sector – myself included – is not as focused on these threats as they need to be,” he said.