A correspondent bank account, also known as a Vostro account, is created by banks to settle transactions on behalf of its clients or partner financial institutions. In most cases, a correspondent bank account holds the funds of top-tier clients or high profile investors of the central bank.
Inability to prevent hacking attacks
In December, Bank of Russia Executive Ekaterina Gelbova, an official in the central bank’s press office, told the Wall Street Journal that the institution is yet to figure out when their correspondent accounts were drained and the funds were stolen.
Although the central bank has allocated a significant amount of manpower and capital to fix various vulnerabilities within the system, it has failed to identify the details of the attack. Artem Sychev, head of the central bank’s department of security and information protection, stated that the bank was able to prevent an additional 3 bln rubles from being stolen.
In February, the Bangladesh central bank lost $81 mln as well, after a Bangladeshi central bank official’s computer was compromised by undisclosed identities. Months after the theft, bank officials failed to locate the money and the only piece of information the bank was able to uncover was the fact that the stolen money was extracted to the Philippines.
With several banks targeted in major hacking attacks that have led to the loss of hundreds of millions of dollars, the International Monetary Fund issued a warning against financial shocks resulting from breakdowns in correspondent banking relationships.
Bitcoin as financial protection
As hackers and criminals develop more sophisticated and intelligent software to exploit banking systems, the importance of security for financial networks and platforms is becoming the sole priority for most financial service providers.
If central banks continue to demonstrate the vulnerabilities of their systems and an inability to deal with these hacking attacks, the general population and bank users will adapt and shift towards encrypted, secure and trustless digital currency networks like Bitcoin.
As was the case with the Bangladesh central bank heist, hackers have gained access to banking systems time and time again by hacking into the computers of high ranked officials within the organizations. This trust-based structure of banks has proven to be the major factor behind these hacking attacks.
Thus, trustless technologies and financial networks like Bitcoin can effectively prevent users, companies and high profile investors from losing hundreds of millions of dollars in theft.