Spotlight on Public Finance, Spring 2019

Spring 2019 Newsletter

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FEATURED ARTICLES Hackers Continue to Target Public Sector Entities; Credit Ratings and Infrastructure at Risk By Phil Bezanson and David Springer Over the last year, hackers have targeted state, municipal and local government entities at a seemingly unpresented rate. In an article published last spring, we highlighted our concerns that hackers were increasingly pursuing lower profile and less protected targets as the federal government and large private companies strengthened their defenses. The pace of this trend will likely accelerate through 2019 and continue to threaten budgets, credit ratings, public trust, and the functioning of physical or emergency infrastructure. The Threat In the first quarter of 2019, cyber-attack victims included the City of Akron, Ohio, Jackson County, Georgia, the Aurora City (Ohio) School District, Boston’s public legal defender service, and a massive semi-public aluminummanufacturer in Norway (among others). Most of the recent incidents appear to have been financially motivated—with hackers either holding networks hostage for ransom payments or directly stealing sensitive financial information. Although technical methods used continue to evolve, financially motivated cyber-crime still tends to fall into three threat categories: Business email compromise schemes. It is likely that the most pervasive cyber threat does not involve hacking in the traditional sense. Criminals often send emails that appear to come from an internal executive, accountant, regulator or other trusted third- party who directs an unwitting employee to initiate a bank transfer to an account controlled by the criminal (no longer just requests from a “deposed prince”). Well-meaning employees trying to satisfy urgent requests frequently fall victim to this scam, which is low-cost and low-risk for the criminal. Public entities are especially susceptible to business email scams because open records and open meetings laws and transparent operations make it easy for criminals to conduct reconnaissance on employees and transactions.

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