Security and Integrity of our financial transactions
Banks, like us, utilize specialized server infrastructures to handle distinct operational domains. Based on architectural requirements and financial regulations, the primary server types include:
1. Core Banking Servers
These servers form the central operational backbone, managing customer accounts, transactions, and compliance:
- Transaction Processing Servers: Execute real-time payment authorization, fraud checks, and settlements (e.g., SWIFT, SEPA) .
- Account Management Servers: Handle account lifecycle events (opening/closing), interest calculations, and liquidity monitoring .
- Regulatory Compliance Servers: Automate AML (Anti-Money Laundering) checks, audit trails, and reporting (e.g., IFRS, GDPR) .
2. Ledger Servers
Responsible for maintaining immutable financial records:
- General Ledger Servers: Track double-entry bookkeeping across accounts, ensuring compliance with accounting standards like IFRS .
- Distributed Ledger Technology (DLT) Servers: Blockchain-based systems for cross-border payments, KYC verification, and tamper-proof transaction logs.
- Example: Synctera’s ledger-as-a-service integrates with traditional core systems for real-time reconciliation .
3. External Communication Servers
Enable secure interactions with external entities:
- EBICS Servers: Manage Electronic Banking Internet Communication Standard for SEPA payments, widely used in Germany, France, and Switzerland.
- Host-to-Host (H2H) Servers: Direct SFTP/FTPS connections for high-volume corporate transactions (e.g., bulk payroll processing).
- API Gateway Servers: Provide RESTful interfaces for real-time payment initiation and account aggregation (secured via OAuth2/mTLS).
- SWIFT/SCORE Servers: Facilitate SWIFTNet messaging for global interbank transactions.
4. Database Servers
Central repositories for structured financial data:
- Customer Data Servers: Store KYC documents, transaction histories, and behavioural analytics.
- Product Catalogue Servers: Manage offerings like loans, mortgages, and deposit rates.
5. Security and Infrastructure Servers
Ensure system integrity and regulatory adherence:
- Hardware Security Module (HSM) Servers: Safeguard cryptographic keys for digital signatures and SSL/TLS encryption.
- Firewall/VPN Servers: Enforce network segmentation and secure remote access for employees.
- Disaster Recovery Servers: Host backup systems for business continuity during outages.
Modern banks often deploy hybrid architectures, combining on-premises core servers with cloud-based DLT nodes for scalability. For example, a bank might use IBM’s on-premise core banking servers alongside AWS-hosted ledger servers for real-time reconciliation. This modular approach balances compliance, performance, and innovation.
Banks must balance server consolidation for efficiency with maintaining isolation for security and compliance. Here’s a breakdown of combinable vs. non-combinable servers based on technical constraints and industry practices:
Servers That Can Be Combined
1. Web/Application Servers
- Combination method: Virtualization (VMware, KVM) or containerization (Docker/Kubernetes)
- Example: Hosting multiple banking portals (retail, corporate, mobile) on a hypervisor cluster with load balancing.
2. Database Servers
- Combination method: Multi-tenant cloud databases (AWS RDS, Azure SQL)
- Oracle/MS SQL core banking databases can coexist with PostgreSQL/MongoDB analytics systems in hybrid cloud setups.
3. External Communication Gateways
- Combination method: Unified API gateways (Apigee, MuleSoft)
- EBICS, SWIFT, and SFTP services can run on shared infrastructure with protocol-specific microservices.
4. Disaster Recovery Servers
- Combination method: Active-active geo-redundancy
- Core banking replicas and backup ledger servers can share DR clusters.
5. Middleware Servers
- Combination method: Enterprise Service Bus (ESB)
- Payment routing, compliance checks, and currency conversion services consolidated on IBM Integration Bus/SAP PI.
Servers That Should Remain Isolated
1. Core Transaction Processing Servers
- Reason: Requires physical separation for PCI DSS/SOC 2 compliance
- Example: IBM zSystems running CICS transaction monitors cannot share hardware with other workloads.
2. Hardware Security Module (HSM) Servers
- Reason: FIPS 140-2 Level 3 mandates dedicated tamper-proof hardware
- Implementation: Thales/Gemalto HSMs handling digital signatures and encryption keys.
3. Real-Time Ledger Systems
- Reason: Double-entry bookkeeping requires atomicity
- Example: Oracle Financial Services ledger servers with direct-attached NVMe storage.
4. Regulatory Reporting Servers
- Reason: GDPR/AML laws prohibit commingling audit logs with operational data
- Setup: Isolated SQL Server instances for MiFID II/FATCA reports.
5. ATM/POS Authorization Systems
- Reason: 99.999% uptime SLA and network segmentation requirements
- Architecture: IBM Power Systems with redundant Fibre Channel SANs.
Technical constraints:
- Core banking systems average 1,200 TPS require dedicated 25Gbps NICs
- PCI DSS prohibits shared storage for PAN data
- SWIFT CSP mandates air-gapped SCORE servers
We have successfully consolidated 80% of non-critical servers (web/app/middleware) while keeping core/HSM/ledger systems totally isolated.
Securing ledger servers in the cloud requires multi-layered protections tailored to financial data’s sensitivity. Based on AWS security best practices and banking-specific implementations, here’s a structured approach:
1. Immutable Ledger Technology
Use purpose-built ledger databases like Amazon QLDB to ensure cryptographic verification of transactions:
- Cryptographic chaining: Each transaction is hashed and linked to the previous entry, creating an immutable audit trail .
- Built-in integrity checks: QLDB automatically verifies data history, preventing tampering .
- SQL-like querying: Maintains compatibility with existing financial systems while adding blockchain-like security .
2. Network Isolation
- VPC architecture: Deploy ledger servers in private subnets with no public internet access .
- Security groups: Restrict inbound traffic to specific ports (e.g., PostgreSQL/Aurora) from pre-approved IP ranges .
- VPC endpoints: Use AWS PrivateLink for secure communication between ledger servers and services like S3/KMS without exposing data to the public web .
3. Encryption
- At rest: AWS KMS-managed keys encrypt ledger data in Amazon Aurora/QLDB, with automatic key rotation .
- In transit: Enforce TLS 1.3 for all client-server and inter-service communications .
- Client-side encryption: Pre-encrypt sensitive fields (e.g., account balances) before storage using AWS Encryption SDK .
4. Access Control
- IAM roles: Assign granular permissions (e.g., `QLDB:PartiQLInsertOnly`) to prevent accidental/malicious data deletion .
- Temporary credentials: Use AWS STS for time-bound access during maintenance .
- MFA enforcement: Require hardware tokens (YubiKey) for root/admin accounts .
5. Monitoring & Auditing
- Real-time alerts: Configure AWS CloudWatch to trigger alerts for unusual transaction patterns (e.g., >€1M transfers) .
- Activity logs: Track all ledger modifications via AWS CloudTrail integrated with SIEM tools .
- Automated audits: Run weekly AWS Config rules to verify encryption status and network policies .
6. Compliance & Governance
- Zone-based segmentation: Separate DEV/TEST/PROD ledger environments using AWS Organizations .
- Automated reports: Generate PCI DSS/GDPR compliance reports via AWS Audit Manager .
- Third-party audits: Schedule annual penetration tests using AWS-approved partners .
7. Disaster Recovery
- Cross-region replication: Maintain encrypted ledger replicas in Frankfurt and Stockholm AWS regions .
- Point-in-time recovery: Enable Aurora backtracking to restore data to any second in the past 35 days .
- Air-gapped backups: Store quarterly ledger snapshots in AWS Backup Vault with 7-year retention .
To prevent malicious entries from propagating to disaster recovery (DR) servers, banks implement layered security strategies that isolate backups, enforce strict access controls, and validate data integrity. Below is a technical breakdown of key measures:
1. Immutable Backups with Write-Once-Read-Many (WORM) Configurations
- Purpose: Block ransomware from altering or encrypting backup data.
Implementation: Use AWS S3 Object Lock or Azure Blob Immutable Storage to prevent deletion/modification for a defined retention period. Apply cryptographic hashing (SHA-256) to back up files; any tampering invalidates the hash, triggering alerts .
2. Air-Gapped and Offline Replication
- Network Isolation: Store DR servers in a separate VPC/VLAN with no inbound internet access. Use unidirectional replication (primary → DR) via tools like AWS Storage Gateway or Azure Site Recovery, blocking reverse synchronization.
- Physical Air-Gapping: For critical systems, maintain tape backups or offline storage that only connect during scheduled replication windows .
3. Zero-Trust Access Controls
- Authentication: Enforce MFA for all DR management interfaces (e.g., AWS SSO, Azure AD Conditional Access). Assign IAM roles with least-privilege permissions (e.g., `s3:GetObject` only).
- Network Security: Restrict replication traffic to IPsec VPN tunnels or AWS Direct Connect/Azure ExpressRoute. Deploy intrusion detection systems (IDS) like Snort or Suricata to monitor replication channels .
4. Data Integrity Validation
- Pre-Replication Checks: Scan source data for malware using tools like ClamAV or CrowdStrike Falcon before replication. Compare checksums pre/post-transfer to detect tampering .
- Post-Replication Audits: Use AWS Config or Azure Policy to enforce encryption and access policies on DR servers. Schedule daily integrity checks via scripts (e.g., `sha256sum` validation).
5. Logically Segmented Environments
6. Automated Failover Testing
- Simulated Attacks: Use tools like Chaos Monkey to simulate ransomware infections and validate DR server resilience. Measure recovery time objectives (RTO) and recovery point objectives (RPO) during drills .
- Forensic Analysis: Retain 90 days of VPC Flow Logs and CloudTrail events to trace replication anomalies .
Implementing immutable backups is critical for safeguarding data against ransomware, accidental deletions, and compliance violations. Based on industry standards and tools like AWS, Veeam, and Azure, here are the best practices:
1. Enforce Immutability at the Storage Layer
- Use WORM (Write-Once-Read-Many) configurations via object storage with S3 Object Lock (AWS), Azure Immutable Blob Storage, or Veeam Hardened Repositories.
- Enable retention locks to prevent premature deletion or modification, even by administrators .
2. Adopt a 3-2-1-1 Backup Strategy
- 3 copies of data (primary + two backups)
- 2 storage media types (e.g., disk + cloud)
- 1 off-site copy (geographically isolated)
- 1 immutable copy (air-gapped or WORM-enabled) .
3. Implement Strict Access Controls
- Role-based access (RBAC): Restrict permissions using IAM roles (e.g., AWS Backup Vault access policies) .
- Multi-factor authentication (MFA): Enforce for backup management interfaces (e.g., Azure AD Conditional Access) .
- Network isolation: Store backups in private subnets/VPCs with no public internet access .
4. Encrypt Data End-to-End
- At rest: Use AES-256 or KMS-managed keys (AWS, Azure) .
- In transit: TLS 1.3 for replication channels .
- Client-side encryption: Pre-encrypt sensitive fields before backup (e.g., Veeam’s AES-256 with user-managed keys) .
5. Automate Retention and Validation
- Retention policies: Define RPO/RTO and automate lifecycle rules (e.g., AWS Backup Vault’s 7-year retention) .
- Checksum validation: Verify pre/post-replication integrity (e.g., SHA-256 hashing) .
- Regular audits: Use tools like AWS Config or Veeam SureBackup to test restores .
6. Layer Security for Hybrid Environments
7. Ensure Compliance and Irreversibility
- Lock immutability settings post-testing (e.g., Azure’s “Enabled and locked” state) .
- Meet regulations: Align with GDPR, HIPAA, or SOX using tools like AWS Audit Manager .
- Third-party audits: Schedule annual penetration tests (e.g., using AWS-approved partners) .
Example Workflow with AWS and Veeam
1. Primary backup: Veeam Backup & Replication to an S3 bucket with Object Lock .
2. Replication: AWS DataSync to a secondary region (Frankfurt → Stockholm) .
3. Validation: Daily CloudTrail logs + quarterly restore drills .
4. Retention: 90-day immutable period with KMS encryption .
By combining immutability features, access controls, and hybrid redundancy, organizations can achieve ransomware-resistant backups while meeting compliance demands .