By: Daniel Hughes
Artificial intelligence seems to be finding its way into just about every conversation these days. Increasingly, that includes conversations about cybersecurity and financial fraud.
We have heard from several clients recently who are concerned about whether advances in AI could make it possible for someone to gain access to their financial accounts and steal their assets. It is a reasonable question. AI is advancing quickly, and stories about increasingly sophisticated cyberattacks can make it difficult to understand what the actual risk is.
For our clients, Charles Schwab serves as the custodian for the investment accounts we manage. That means Schwab holds the assets and maintains the infrastructure through which those accounts are accessed and protected. As your advisor, we work with Schwab on your behalf, but your assets are held at Schwab.
So, when clients ask us about the security of their investment accounts, Schwab’s cybersecurity protections are an important part of the answer.
The short answer is that AI is changing the nature of fraud, but it has not fundamentally changed how someone gains unauthorized access to a financial account.
AI is making old threats better
For years, criminals have used phishing emails, fraudulent phone calls, stolen passwords, and other forms of social engineering to try to gain access to financial information. AI can make many of those techniques much more convincing.
A poorly written email with an obviously suspicious link is relatively easy to spot. A personalized email that sounds like someone you know is harder. The same is true of a phone call that imitates someone’s voice, or a text message that appears to come from a legitimate organization.
In other words, AI gives “bad actors” better tools. But it does not give them a master key to your Schwab account.
To steal money from your account, someone would still need to find a way into the account, get around Schwab’s security measures, or trick you into giving them access or approving a transaction.
That distinction is important.
Schwab is adapting too
The same technology that makes cybercrime more sophisticated is also being used to defend against it.
Schwab tells us that it continuously adapts its cybersecurity defenses as threats evolve, including threats involving advanced AI. Its approach includes multiple layers of security, identity verification, real-time monitoring, and anomaly detection. Schwab also uses AI-enabled tools to help identify and respond to suspicious activity.
Its systems are monitored around the clock by dedicated security teams, and Schwab works with regulators, law enforcement, and others in the financial industry to evaluate emerging threats.
No financial institution can credibly promise that cybercrime will disappear. The more important question is whether the institution continues to adapt as the threats change. That is what we expect from a custodian entrusted with our clients’ assets.
What if something does happen?
Even with strong security, it is reasonable to ask what happens if those protections fail.
Schwab maintains a Security Guarantee stating that it will cover losses in Schwab accounts resulting from unauthorized activity. As with most guarantees, clients have responsibilities as well: safeguarding their account credentials, reviewing their statements, and promptly reporting suspected unauthorized transactions. Activity carried out by someone you have shared your credentials with, or given remote access to your device, is generally not covered. You can learn more about Schwab’s Security Guarantee and client responsibilities at: https://www.schwab.com/schwabsafe/security-guarantee
Schwab has multiple protections in place to safeguard client assets, personal information, and account access. Protecting those assets and that information is a fundamental part of its role as custodian.
Those protections are important. But they don’t eliminate the role each of us plays in keeping our information secure.
A few things you can do
Technology can provide a lot of protection, but some of the most effective safeguards remain surprisingly simple.
Use two-step verification on your Schwab account, and on other financial accounts, whenever it is available. Set up security alerts so you know when important account activity occurs. Use unique passwords rather than reusing the same password across different websites.
Never provide passwords or security codes to someone who contacts you unexpectedly and be especially cautious with requests involving money movement.
If you receive an unexpected call, email, or text asking you to transfer money, provide account information, or verify a transaction, don’t rely on the contact information provided in that message. Contact the person or organization directly using a phone number you already know.
That advice has been around for a long time. AI just makes it more important.
When in doubt, call us
There will undoubtedly be new uses for artificial intelligence that we haven’t thought of yet. There will also be new attempts to use it for fraud. Schwab and other financial institutions will continue developing tools to defend against those threats.
The technology will change. The basic principles probably won’t.
Protect your credentials. Be skeptical of unexpected requests. Use the security tools available to you. And when something doesn’t seem right, slow down and verify it.
If you ever receive a questionable request involving your Schwab accounts, money movement, or personal information, call a member of our team.
We would much rather spend a few minutes confirming that something is legitimate than have you take a chance when it isn’t.
DISCLOSURES:
Live Oak Private Wealth is a subsidiary of Live Oak Bank. Investment advisory services are offered through LOPW, LLC, an Independent Registered Investment Advisor. Registration does not imply a certain level of skill or training. More information about Live Oak Private Wealth including our advisory services, fees, and objectives can be found in our ADV Part 2A and or Form CRS, which are available upon request.