AI Hacking Hits South Korean Financial Sector, Putting Governments Worldwide on Alert

As hacking powered by artificial intelligence (AI) threatens South Korea's financial sector, financial authorities around the world have sprung into action. Governments are accelerating preemptive measures to prepare for the threat AI-powered hacking poses to financial security.

Financial institutions rely on encryption based on complex mathematical operations to protect consumer assets, transaction records, and personal data. The current security framework has been built on the assumption that breaking encryption requires enormous computing power and time. But with AI now showing remarkable ability to solve complex mathematical problems, some observers warn this assumption could be shaken. The Financial Times reported that such concerns are spreading. Australian mathematician Jodie Williamson said, "Modern cryptography is based on the premise that certain mathematical problems are hard to solve," adding that "major changes could lie ahead."

Real damage has already occurred. Beginning in early October, a string of hacking incidents hit South Korea's financial sector, with banks, brokerages, asset managers, and cryptocurrency firms reporting data breaches caused by external attacks. Reuters reported that CrowdStrike, a U.S. cybersecurity firm, had identified signs that Chinese AI tools were used in cyberattacks targeting South Korean financial institutions.

Governments' responses have also quickened. The UK's Financial Conduct Authority (FCA) is piloting a supervisory tool to assess how prepared 50 major financial institutions are for threats from emerging technologies such as AI and quantum computing. "Firms cannot afford to drag their feet," the FCA said, adding that they must "gauge their current security posture in line with technological advances and prepare for the future." According to the Financial Times and Reuters, the U.S. Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation are also reviewing how financial institutions manage AI-related risks. The European Central Bank (ECB), too, is pressing banks to strengthen their defenses against AI-driven cyberattacks.

In its financial system report released on October 23, the Bank of Japan warned that cyberattacks exploiting AI could affect the financial system as a whole. "Cyber incidents pose a serious macroprudential risk," the report said, "because damage can spread from individual financial institutions and their customers to other financial institutions."

Companies are also stepping up their preparations. Google and Microsoft are working to migrate from existing encryption to post-quantum cryptography, which is based on mathematical problems that even quantum computers would struggle to solve.