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Cybersecurity threats targeting financial services organizations are constantly evolving, making it crucial to establish robust security measures to safeguard customer data and confidential information. According to IBM's research, the financial sector experienced the second-highest average cost of data breaches in 2022, with an average of $5.97 million.
Given these alarming statistics and the ongoing rise in cybercrime incidents and sophistication, it is imperative for financial institutions to be well-prepared and take proactive steps to ensure the security of their digital products.
One effective approach to assess the security posture of financial institutions is through penetration testing. In this article, we’ll explore the concept of penetration testing and examine the regulatory landscape of penetration testing in the financial services sector.
What is penetration testing?
Penetration testing, also called a pen test, involves simulating cyberattacks on computer systems or security infrastructure to identify potential vulnerabilities before hackers can exploit them. The findings obtained from a pen test are valuable in refining IT policies and addressing any security gaps identified.
How can penetration testing help financial institutions
Some key benefits that penetration testing offers to the banking and financial services sector include:
- Showcase true risks: This gives businesses a glimpse into the actions that real-world attackers could execute. Testers may inform businesses that a vulnerability deemed theoretically high-risk may not pose a significant actual risk due to the difficulty in exploiting it. Such in-depth analysis requires the expertise of a specialist, leading many organizations to opt for outsourcing their penetration testing efforts.
- Evaluate your cyber-defence capability and responsiveness: In the face of a cyber-attack, your defence mechanisms should be able to promptly detect and adequately respond to such incidents. Upon identifying an intrusion, an immediate investigation should commence to identify and block the intruders, regardless of whether they are actual hackers or professionals testing the efficacy of your protection strategy.
- Compliance with Regulations: Penetration testing assists in meeting regulatory requirements specific to the banking and financial services sector, such as PCI DSS, GLBA, and FFIEC guidelines.
- Cost Savings: Detecting and addressing vulnerabilities early through penetration testing can save financial resources by avoiding costly security breaches and their associated consequences.
- Trust and Reputation: Regular penetration testing demonstrates a commitment to security and helps build customer trust, enhancing the organization’s reputation.
Common types of penetration testing in financial services
All penetration tests involve simulated attacks against the finance systems. Yet, each type of pen test explicitly targets a different enterprise asset.
Application pen tests
The tests uncover vulnerabilities in various types of applications and their related systems. This includes web applications, websites, mobile apps, IoT apps, cloud apps, and application programming interfaces (APIs).
Testers typically initiate their assessments by examining vulnerabilities outlined in the Open Web Application Security Project (OWASP) Top 10. This dynamic list identifies the most crucial vulnerabilities prevalent in web applications and is regularly updated to adapt to the evolving cybersecurity landscape. Common vulnerabilities encompass malicious code injections, misconfigurations, and authentication failures. In addition to the OWASP Top 10, application penetration tests aim to uncover less common security flaws and vulnerabilities that may be specific to the application being tested.
Network pen tests
Network penetration tests encompass comprehensive assessments of a company's entire computer network. They are divided into two main categories: external tests and internal tests.
External tests simulate the actions of external hackers by targeting internet-facing assets such as servers, routers, websites, and employee computers. The objective of these tests is to identify security issues from an external perspective as pen testers attempt to breach the network from outside the organization.
Internal tests, on the other hand, replicate the behavior of malicious insiders or hackers who possess stolen credentials. The aim is to uncover vulnerabilities that can be exploited within the network. This includes scenarios where individuals misuse their access privileges to gain unauthorized access or extract sensitive data.
Hardware pen tests
These security tests are designed to identify vulnerabilities in network-connected devices, including laptops, mobile devices, IoT devices, and operational technology (OT).
During these tests, pen testers actively search for software flaws, such as operating system exploits that could grant hackers remote access to endpoints. Additionally, they assess physical vulnerabilities, such as inadequately secured data centers that malicious actors could exploit actors. Furthermore, the testing team evaluates the potential pathways hackers could utilize to navigate from a compromised device to other areas within the network.
Personnel pen tests
Personnel penetration testing identifies vulnerabilities in employees' cybersecurity practices and overall awareness. In essence, these security tests assess a company's susceptibility to social engineering attacks.
During personnel pen testing, experts utilize techniques like phishing, vishing (voice phishing), and smishing (SMS phishing) to deceive employees into disclosing sensitive information. Additionally, personnel pen tests may involve evaluating physical office security. For instance, testers might attempt to gain unauthorized access to a building by disguising themselves as delivery personnel, a method known as "tailgating," commonly employed by real-world criminals.
Penetration testing stages
Before the commencement of a penetration test, the testing team establishes a defined scope for the test. This scope outlines the specific systems to be tested, the testing timeline, and the permissible methods that pen testers can employ. It also determines the level of information provided to the pen testers in advance:
In a black-box test, pen testers are provided with no prior information about the target system. They must rely on their own research and skills to develop an attack plan, similar to a real-world hacker.
In a white-box test, pen testers are granted complete transparency into the target system. The company shares comprehensive details, including network diagrams, source codes, credentials, and more.
In a gray-box test, pen testers are provided with limited information. For instance, the company might share IP ranges for network devices, requiring the pen testers to independently probe those IP ranges for vulnerabilities.
After establishing the scope, testing teams proceed to select appropriate testing methodologies. Widely used methodologies include OWASP's application security testing guidelines, the Penetration Testing Execution Standard (PTES), and the National Institute of Standards and Technology (NIST) SP 800-115.
Regardless of the specific methodology employed, the penetration testing process typically encompasses the same core steps.
1. Reconnaissance
In this phase, the testing team collects information about the target system. Pen testers employ diverse reconnaissance methods tailored to the specific target being assessed. For example, when targeting an application, pen testers may analyze its source code, while for a comprehensive network assessment, packet analyzers are utilized to examine network traffic flows.
Open-source intelligence (OSINT) is also commonly utilized by pen testers. By researching public documentation, news articles, and even scrutinizing employees' social media and GitHub accounts, valuable insights about the target can be obtained.
2. Target discovery & development
Building upon the information gathered during the reconnaissance phase, pen testers proceed to identify exploitable vulnerabilities within the system. Techniques such as port scanning with tools like Nmap are employed to find open ports for potential malware deployment. In the case of a social engineering pen test, the testing team may develop a fabricated story, known as a "pretext," which will be incorporated into a phishing email to deceive employees and acquire their credentials.
During this phase, pen testers will also examine how security features respond to intrusion attempts. For example, they may send suspicious traffic to the company's firewall to observe its behavior. The insights gained from these tests allow pen testers to adjust their tactics and avoid detection throughout the remainder of the assessment.
3. Exploitation
Once the testing team initiates the actual attack phase, pen testers will attempt numerous attack techniques based on the target system, identified vulnerabilities, and the defined scope of the test. Here are some common tested attacks:
- SQL injections: Pen testers aim to insert malicious code to extract sensitive data from webpages or applications.
- Cross-site scripting: Pen testers attempt to inject malicious code into a company's website, potentially compromising user data or exploiting vulnerabilities.
- Denial-of-service attacks: Pen testers overload servers, applications, or network resources with a high volume of traffic, aiming to disrupt or temporarily disable them.
- Social engineering: Pen testers utilize phishing, baiting, or pretexting tactics to deceive employees and compromise network security.
- Brute force attacks: Pen testers employ automated scripts to constantly generate and test various password combinations to gain unauthorized access to a system.
- Man-in-the-middle attacks: Pen testers intercept network traffic between devices or users, seeking to extract sensitive information or introduce malware
4. Escalation
After successfully exploiting a vulnerability to gain initial access to the system, pen testers proceed to navigate and expand their access within the network. This phase is often referred to as "vulnerability chaining" since pen testers systematically exploit vulnerabilities to penetrate deeper into the network.
During this stage, the primary objective of the pen tester is to maintain access and elevate their privileges while evading security measures. The goal is to replicate the tactics of advanced persistent threats (APTs) that can persist within a system undetected for extended periods, ranging from weeks to months or even years.
5. Cleanup & Reporting
Upon completion of the simulated attack, pen testers remove any traces of their activities, such as eliminating backdoor trojans or reverting changes configurations. This meticulous cleanup ensures that real-world hackers cannot leverage the exploits used by pen testers to compromise the network.
Following the cleanup, pen testers prepare a comprehensive report on the attack. This report typically highlights the vulnerabilities discovered, exploits utilised, and details on bypassing security features. It also includes a thorough account of the actions performed within the system during the testing phase.
Additionally, the report may offer specific recommendations for vulnerability remediation. This valuable information equips the in-house security team with insights to reinforce defences against potential real-world attacks.
Choosing the right penetration testing provider
When it comes to commissioning a penetration test, it is crucial to select a provider with the necessary expertise to not only identify a wide range of vulnerabilities but also provide the support needed for efficient remediation.
At KMSS, we offer trusted penetration testing services that cater to your unique business requirements. Our team of experts specializes in conducting comprehensive testing across various industries, uncovering and addressing complex vulnerabilities in internal and external infrastructure, wireless networks, web and mobile applications, network configurations, and more.
Our pen test services go beyond testing and include comprehensive post-test care, actionable insights, prioritized remediation guidance, and strategic security advice. We are committed to assisting you in making long-term improvements to your cyber security posture. Contact us today to get started!
