emp would hit banks 'at speed of light

7/29/2019 Emp Would Hit Banks 'at Speed of Light'

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EMP WOULD HIT BANKS 'AT SPEED OF LIGHT'

'Keep cash' recommended as records loss would make buying food, gas impossible

Published: 19 hours ago

byF. MICHAEL MALOOFEmail |Archive Subscribe to feedF. Michael Maloof, staff writer for WND and G2Bulletin, is a former senior security policy analyst in the

office of the secretary of defense.More

WASHINGTON Its happening with increasing regularity a giant sunspot that is at least six timesthe diameter of the Earth formed in less than a few hours and is spewing solar flares that can be upto six or seven times the size of the Earth.

These flares are becoming more frequent due to the sun approaching what scientists call a solarstorm maximum in its 11-year cycle, and the sunspot of immediate concern now is more in alignmentwith Earth.

This has raised new alarms over what effect a direct impact one of these flares, which produce amassive electromagnetic pulse, would have on Americas electric grid system and technology-basedsociety, much of which remains unprotected from any direct EMP event.

This is not some esoteric scientific theory. Try this: It could make your bank accounts no more than afile on a hard drive in a bank office, unreachable by you or your creditors, experts warn.

Read the documentation thats sparking the worry about the EMP threat, in A Nation Forsaken.

Just exactly what would happen should Earth be hit with such a massive solar flare, if theinformation technology and networks on which the nations financial system depends are crushed?

It is clear that under an electromagnetic pulse attack, there would be widespread damage to thegeneration, transmission and distribution infrastructures including control systems and equipment ofthe nations grid system.

This damage and destruction also extends to information technology and its networks and thefinancial services industry which depends on those systems.


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Banking actually is a network of organizations and systems that process our money transactionsfrom deposits, funds transfers, savings and loans to other financial services.

Virtually all economic activity in the United States and other developed countries depends on afunctioning financial services industry. In effect, the financial services industry is not only the mediumbut the record keeper for financial transactions and is the place where people, companies and

indeed countries keep their money and other financial instruments.

In effect, it is the core of information technology and networks, without which financial servicescannot operate. Its automation has spurred the growth of wealth increasing greatly the amount ofbusiness transacted on a daily basis.

In the early 1970s, the New York Stock Exchange would close on Wednesdays to clear backlogsfrom an average day of trading, amounting to some 11 million shares.

Today, its a different story. The Securities Industry Automation Corporation, or SIAC, has nointerruptions in routine operations and handles some three billion shares daily.

The SIACs Secure Financial Transaction Infrastructure is linked to the securities industry by morethan a thousand communications lines to provide data communications connectivity to permitcompanies to undertake their various financial transactions.

And this isnt limited just to major corporations. It also includes the individual consumer who wantson-demand money-dispensing from automated teller machines, or ATMs.

The trend in the U.S. financial infrastructure is toward ever more sophisticated and powerful

electronic systems capable of an ever increasing volume and velocity of business, the 2008 EMPcommission set up by Congress said. The increasing dependence of the United States on anelectronic economy, so beneficial to the management and creation of wealth, also increases U.S.vulnerability to an electromagnetic pulse attack.

Vulnerabilities

The terrorist attack on Sept. 11, 2001, on New York City and Washington, D.C., alone showed theserious vulnerabilities arising from the interdependencies of the nations critical infrastructures. The


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attacks disrupted all critical infrastructures in New York City including key financial markets,transportation, telecommunications and electric power.

Since December 2002, the Federal Reserve Board has in place a procedure for national securityand emergency preparedness of the telecommunications programs that are administered by theNational Communications System.

The FRB also has expanded the scope of services that would seriously affect continued financialoperations if there is a telecommunications disruption from a few minutes to one day. The variousfunctions and there are a number of them require same-day recovery.

Modern financial services utilities have transformed the national economy from a paper system intoan electronic system, the EMP commission said. Examples of some key industry utilities includeFEDNET, Fedwire, ACH, Clearing House Interbank Payments System (CHIPS), the Society forWorldwide Interbank Financial Telecommunications (SWIFT), the National Association of SecuritiesDealers Automated Quotation System (NASDAQ), the NYSE (New York Stock Exchange), the NewYork Mercantile Exchange (NYMEX) and the Depository Trust and Clearing Corporation (DTCC).

The FEDNET is the communications system that connects all 123 Federal Reserve Banksnationwide and the financial services industry generally.

The FEDNET transfers funds in real time among the banks and other depository institutions,performs real-time sales and record keeping for the transfer of government securities and serves asACH.

Fedwire is the primary national network to transfer funds between banks, while ACH electronicallyclears checks, direct deposits of payrolls, pensions, benefits, dividends and direct bill payments.

On an annual basis, the Federal Reserve processes more than 37 billion ACH payments amountingto more than $40 trillion.

CHIPS is an electronic system for interbank transfer and settlement and acts as a clearing house forforeign exchange. The SWIFT provides secure international message payments for stockexchanges, banks, brokers and other institutions.

These messages are instructions between banks and other institutions regarding payments andtransfers, but not payments themselves. SWIFT carries more than eight million messages daily.

The NASDAQ and the NYSE are electronic communications networks that meet the needs of thelargest securities markets. They consolidate quotes of multiple dealers in real-time and allow forelectronic trading. They each transact some $4 trillion a year in trades.


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The NYMEX trades on futures contracts for gasoline, heating oil, crude oil, natural gas and othercommodities. It conducts crude oil transactions involving the total daily production of the entire world.

The DTCC settles securities trades for participant banks and is the largest securities depository inthe world. It keeps records on securities and conducts transactions electronically. On an annualbasis, participants electronically deliver securities valued at some $5 trillion to DTCC.

100 percent dependent

They all depend on communications lines, and electricity for power. Without question, all of thisshows that the banking and financial system is virtually 100 percent dependent on the nationselectronic system.

Virtually all records of financial transactions are stored electronically. The financial infrastructure is anetwork of electronic machinery ranging from telephones, mainframe computers, ATMs to vast datastorage systems.

Similarly, there are third-party processors which are technology companies that provide electronicprocessing services to financial institutions. These third-party processors work with the banks and

other financial institutions to cut overhead by contracting with these processors to undertake themechanics of the electronic transactions.

Because of this high dependency on electronic systems, experts agree that the financialinfrastructure on which the nation has an increasing dependence for its electronic economy ispotentially vulnerable to an electromagnetic pulse attack.

It also is vulnerable to an electromagnetic pulse indirectly through other critical infrastructures, suchas the electric power grid and telecommunications.

Technology-related outsourcing is especially appealing because of dynamic changes intechnology, the EMP commission said. The high cost and complexity of new technologies hasdriven many banks into partnerships with third-party specialists in the field of electronic finance.

Services typically offered by third-party processors include data center management, networkmanagement, applications development, check and statement processing, mutual fund accountprocess and electronic funds transfer.

Financial services industry experts have stated that the system is capable of withstanding a widerange of threats, referring to the system as highly robust. Even a presidential National SecurityTelecommunications Advisory Committee, or NSTAC, task force in 1997 expressed confidence inthe ability of the financial services industry to withstand attacks.

It has referred to numerous natural and man-made disasters (that) have forced financial institutionsto test and refine their disaster recovery capabilities.


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Read the documentation thats sparking the worry about the EMP threat, in A Nation Forsaken.

As the EMP commission points out, there have been a number of such natural and man-madedisasters to test those protective capabilities.

In 1988, for example, a fire in the Ameritech central office in Illinois disabled long-distance

telecommunications for the Chicago Board of Trade and other major institutions. In August 1990,Wall Street was blacked out for almost a week due to an electrical fire in a Consolidated Edisonoffice.

In April 1992, there was underground flooding in Chicago that affected telecommunications andpowers that led to serious outages for a period of time.

The NSTAC specifically referred to the February 1993 World Trade Center terrorist attack.

The World Trade Center bombing on February 26, 1993, struck at the industrys heart, affecting theNew York Mercantile Exchange and many securities dealers and otherwise disrupting activitiesthroughout Wall Street. Numerous problems with facilities, systems, procedures, and staffs wereencountered as firms scurried to recover, and some securities firms operations were shut down

temporarily. However, none of the most critical services were affected, and the effect on theeconomy as a whole was minimal.

Then there was the 2001 terrorist attack on the World Trade Center again that brought down the twotowers. However, the NSTAC said that even after this episode, combined with the previous attackhelped them to reinforce the financial services infrastructure even more.

The NSTACs claims were even backed by a 2002 report by the National Academy of Sciences, orNAS, in Making the Nation Safer: The role of Science and Technology in Countering Terrorism.

The NAS claimed that the financial infrastructure is highly secure because of the redundancy ofelectronic systems.

While no law of physics prevents the simultaneous destruction of all data backups and backupfacilities in all locations, such an attack would be highly complex and difficult to execute, and is thusimplausible.

Indeed, the NSTAC concluded that physical attacks remain the larger risk for the (financial services)industry.

However, the EMP commission experts thought otherwise.

EMP not taken into account

While the NSTAC and NAS studies centered on threats to the financial services industry from cyberterrorists using computer-based attacks and even efforts to physically blow up facilities, they didnt

take into account the effects from an electromagnetic pulse attack.

An EMP attack would pose the very kind of simultaneous and widespread threat postulated by theNAS that would be fatal to the financial infrastructure but judged by them to be too difficult to executeand implausible for cyberterrorists. EMP effects propagate at the speed of light and would cover abroad geographic area. Such an attack potentially could achieve the NAS criteria for financialinfrastructure catastrophe: simultaneous destruction of all data backups and backup facilities in alllocations. An EMP would probably not erase data stored on magnetic tape. However, by shutting


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down power grids and damaging or disrupting data retrieval systems, EMP could deny access toessential records stored on tapes and compact discs (CD).

Experts agree that the vast majority of electronic systems supporting the financial infrastructure havenever been tested. Since they havent been tested on a system-wide basis, the system never hasbeen hardened against the effects of an electromagnetic pulse event.

Yet the enormous volume, speed and accuracy required of the electronic infrastructure supportingthe financial services industry allow little or no room for error, the EMP commission said. Financialoperations could not tolerate the kind of disruptions or mass systemic destruction likely to follow anEMP attack.

As an illustration of what the widespread impact of an EMP event on the financial services industrywould be, the EMP commission looked at a one-day snapshot of just CHIPS interbank transactionswhich it said involves some $1.4 trillion of business a day, or some $182 billion every hour.

CHIPS and Fedwire routinely receive five to 10 funds transfer messages each second during peaktraffic period, the commission said. The Options Clearing Corporation manages $1.05 billion inaverage daily premium settlements. On Christmas Eve 2004, a single credit card association

processed over 5,000 transactions per second. Financial institutions also must store tremendousamounts of data.

Terabyte portfolios containing one trillion bytes are now common, and some databases exceed apetabyte, or 1,000 trillion bytes. Changes in these huge databases must be recorded at the end ofevery business day.

In looking at the effects of the 2001 terrorist attack on the United States, the Federal Reserve Boardpointed out that even that event had a temporary but serious impact on the very telecommunicationsinfrastructure on which the financial services industry depends.

It showed the concentration of key facilities as a serious weakness. It prompted the equity marketsto close for four days following the attack because of a lack of communications. The New York StockExchange could not reopen because key central offices were destroyed or damaged, leaving them

unable to support major operations for a few days.

Given this experience, an official at the Federal Reserve Board, or FSB, said that the Fedwire,CHIPS and SWIFT would have to cease operations if there was a major disruption incommunications, including ACH, ATMs, and credit and debit card transactions.

Disruption of these systems would force consumers to revert to a cash economy, according to SteveMalphrus, staff director for management of the Federal Reserve Board.


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Catastrophic disruption

These observations suggest that, if an EMP attack were to disrupt the financial industry for days,weeks or months rather than hours, the economic impact would be catastrophic, the EMPcommission said, adding that the magnitude of an electromagnetic pulse event could be enormouson the nations financial services industry.

Despite the robustness of U.S. financial infrastructures against a wide range of threats, they werenot designed to withstand an EMP attack. Indeed, the highly sophisticated electronic technologiesthat make the modern U.S. financial infrastructure possible are the components most vulnerable toEMP.

An EMP attack that disrupts the financial services industry would, in effect, stop the operation of theU.S. economy. Business transactions that create wealth and jobs could not be performed. Loans forcorporate capitalization and for private purposes, such as buying homes and automobiles could notbe made. Wealth, recorded electronically in bank databases, could become inaccessible overnight.Credit, debit, and ATM cards would be useless. Even reversion to a cash economy might be difficultin the absence of electronic records that are the basis of cash withdrawals from banks. Most peoplekeep their wealth in banks and have little cash on hand at home. The alternative to a disrupted

electronic economy may not be reversion to a 19th century cash economy, but reversion to anearlier economy based on barter.

In the immediate aftermath of an EMP attack, banks would find it very difficult to operate andprovide the public with the liquidity they require to survive; that is, to buy food, water, gas, or otheressential supplies and services. Modern banking depends almost entirely on electronic data storageand retrieval systems for record keeping and to perform account transactions. An EMP attack thatdamages the power grid or electronic data retrieval systems would render banking transactionsvirtually impossible as a practical or legal matter.

Operating a banking system using paper and handwritten transactions would be difficult withoutaccess to the information contained in electronic records. If a makeshift paper banking system couldbe organized on an emergency basis, such a system would be fraught with the risk of fraud, theft,

and costly mistakes.

For insurance reasons to protect from legal liability, the banking and financial system would not beable to revert back to paper transactions. Their own insurance coverage to protect them from legalliability assumes that a modern electronic banking system is reliable, redundant and worksconsistently.

The effect of an electromagnetic pulse event, especially from an E1 attack from a nucleardetonation, would have a profound impact on the financial and banking system. In a 2003 reporttitled Paper on Sound Practices to Strengthen the Resilience of the US. Financial System, the U.S.Security Exchange Commission gave a hint of what such a widespread disruption would entail justfor a day and called on the industry to be prepared to resume operations within two hours.

In light of the large volume and value of transactions/payments that are cleared and settled on adaily basis, failure to complete the clearing and settlement of pending transactions within thebusiness day could create systemic liquidity dislocations, as well as exacerbate credit and marketrisk for critical markets. Therefore, core clearing and settlement organizations should develop thecapacity to recover and resume clearing and settlement activities within the business day on whichthe disruption occurs with the overall goal of achieving recovery and resumption within two hoursafter an event.


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Based on the accumulated evidence from experts on the ability of the financial services industry,which includes all of the nations banking and financial activities, to protect itself, such a recoveryinitiative is a pipedream, analysts said.

These experts, ranging from the EMP commission, the National Academy ofSciences and even those within the industry, agree that the damage from an electromagnetic pulse

attack would be catastrophic and irreversible.

Considering that there is no rush by the industry to ensure against such a catastrophic andirreversible event, it almost goes without saying to keep plenty of cash at home.

Read the documentation thats sparking the worry about the EMP threat, in A Nation Forsaken

Read more at http://www.wnd.com/2013/02/emp-would-hit-banks-at-speed-of-

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source: http://www.wnd.com/2013/02/emp-would-hit-banks-at-speed-of-light/ , 02/23/13

emp would hit banks 'at speed of light

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