�Katherine Burton and Alan Katz
with U.S. sanctions rules. Five went through. The malware disabled a printer in Bangladesh that would have spit out a list of completed transfers, slowing detection.
The money moved to the Philippines accounts, where it was then cashed out or passed on to several local casinos, where the trail goes cold. The Sri Lankan transfer was eventually negated because of a typo. Megabanks have taken heed. Jpmorgan Chase has cut the number 27.5 of its employees with access to Swift, and the Bank of England has instructed institutions it oversees to beef up security. “If you don’t take this threat seriously, it will happen to you,” says Avivah Litan, a cybersecurity analyst at Gartner.
Banks in the developing world need to do even more. Many have flimsier firewalls than major banks and don’t follow the highest security measures recommended by Swift, say experts. That includes using a second piece of external verification, such as an eye or fingerprint scan, to sign in to a bank’s computers. Swift also recommends that multiple people be involved in the messaging process, such as one person to create the message and another to approve and authenticate it.
Swift is considering making such security measures mandatory. It may also introduce pattern recognition software to identify suspicious behavior, similar to what credit card companies use to detect fraud. Yet changes will take time, and the poorer banks using Swift will probably always lag on improvements needed to keep up with scammers.
In the meantime, the hacked banks have tried to lay blame on bigger, richer institutions. The Bangladeshi bank said the New York Fed should have caught the fraudulent transfers. The Ecuadorean bank, Banco del Austro, sued Wells Fargo, where it has an account, saying the U.S. bank is partly to blame for the theft. The New York Fed and Wells Fargo both say they followed instructions authenticated by Swift; Wells Fargo refunded almost $1 million. A congressional committee has opened an inquiry into the Bangladesh incident and the New York Fed’s response to the attack.
The breaches will likely spark interest in finding other ways to make international payments. “But it’s going to take years,” Mccune says. And when even the safest technology is used to link up vast numbers of fallible humans around the globe, hackers are likely to find an opening. “Whatever security barriers we have, they can eventually be penetrated,” says Hank Uberoi, head of Earthport, a Londonbased global payment firm that’s building an alternative network. “And if you can get inside, you can create havoc.”
million Peak daily number of Swift messages sent by financial institutions The bottom line Many banks around the world have vulnerable security. That could erode faith in the system of cross-border payments.
Yet these moves have had little discernible impact on overall foreign investment: Bloomberg calculations show the percentage of non-israeli shareholders in nine publicly traded Israeli companies targeted by activists for ties to occupation or Jewish settlements in those territories has risen steadily over the past three years.
Foreign investment in Israeli assets more broadly has also grown, hitting a record $285 billion, nearly triple the total in 2005, when the boycott, divestment, and sanctions movement, or BDS, was started by a group of Palestinians. Boycotters and divesters include those who reject the Jewish state’s existence, as well as those who specifically want to pressure it to change policies toward Palestinians in the West Bank and Gaza Strip. Some target Israel generally, while others focus on specific companies and groups they see as linked to occupation. The Methodist fund, for example, pointed out that it still invested in several Israeli companies.
Yoel Naveh, chief economist at Israel’s Ministry of Finance, acknowledges that some institutions are pulling their investments. But they’re more than offset by others that are funneling money in. “We don’t have a problem with foreign investment in Israel— on the contrary,” he says. Last year, non-israeli investors poured about $3.8 billion into Israeli startups, the highest level in a decade, according to IVC Research Center. And foreigners spent an additional $5.9 billion acquiring Israeli companies.
For some money managers, Israeli assets are attractive in a world of slow economic growth. The nation’s economy is expected to expand 2.8 percent this year, compared with 1.8 percent for the U. S. and the European Union. Still, calls to 30 fund managers who own shares in the nine targeted companies yielded two willing to speak, and they insisted on not being named. One says that while some investors in Europe may be considering divestment, others in China and elsewhere simply want to own well-managed companies with high dividend yields and healthy balance sheets. Both managers argue it’s not clear what constitutes business complicity in Israel’s occupation.
Among the institutional investors that have said they were avoiding some Israeli companies is Norway’s $862 billion sovereign wealth fund, which excluded Tel Aviv-based Africa Israel Investments from its portfolio in 2014. In the same year, Pensioenfonds Zorg & Welzijn, the second-largest Dutch pension fund, blacklisted several Israeli banks. New Zealand’s Government Superannuation Fund also removed Africa Israel Investments and construction company Shikun & Binui from its investment options.
Activists say they’re not worried that the investment impact has been small so far. A few European companies have withdrawn from the Israeli market following pressure campaigns, and Sodastream International relocated operations out of the West Bank, although it cited commercial reasons. Meanwhile, the BDS movement has scored victories on the cultural front. Singer Lauryn Hill last year canceled a Tel Aviv concert and appeared in a video with Palestinian activists. Some student groups have pushed to ban Israeli hummus from cafeterias.
“BDS isn’t just working,” said Omar Barghouti, a co-founder of the campaign, in an e-mail. “It’s working far better and spreading into the mainstream much faster than we’d anticipated.” Last month, Israeli authorities banned Barghouti, who lives in Israel, from traveling abroad. He argues that the movement’s strength is in its “indirect, palpable psychological impact on the mainstream Israeli psyche about the country becoming more ‘isolated’ from the world.”
What most worries Israel’s defenders is that foreigners will quietly choose to avoid engaging with the country simply to avoid controversy. Shlomo Maoz, chief economist at S.M. Tel Aviv Investments, says the movement may have an economic impact further down the road. “BDS now is not a big threat,” he says. “But when students go to college in America, the U.K., and see anti-israel BDS protests, and then go to be fund managers in five, seven years—then it could be a problem.” �Sangwon Yoon
Israeli assets have been attractive to investors, but a growing movement has some institutions pulling away.