Cyber Threats in Financial Transactions -- Addressing the Dual Challenge of AI and Quantum Computing

The financial sector faces escalating cyber threats amplified by artificial intelligence (AI) and the advent of quantum computing. AI is being weaponized for sophisticated attacks like deepfakes and AI-driven malware, while quantum computing threatens to render current encryption methods obsolete. This report analyzes these threats, relevant frameworks, and possible countermeasures like quantum cryptography. AI enhances social engineering and phishing attacks via personalized content, lowers entry barriers for cybercriminals, and introduces risks like data poisoning and adversarial AI. Quantum computing, particularly Shor's algorithm, poses a fundamental threat to current encryption standards (RSA and ECC), with estimates suggesting cryptographically relevant quantum computers could emerge within the next 5-30 years. The "harvest now, decrypt later" scenario highlights the urgency of transitioning to quantum-resistant cryptography. This is key. Existing legal frameworks are evolving to address AI in cybercrime, but quantum threats require new initiatives. International cooperation and harmonized regulations are crucial. Quantum Key Distribution (QKD) offers theoretical security but faces practical limitations. Post-quantum cryptography (PQC) is a promising alternative, with ongoing standardization efforts. Recommendations for international regulators include fostering collaboration and information sharing, establishing global standards, supporting research and development in quantum security, harmonizing legal frameworks, promoting cryptographic agility, and raising awareness and education. The financial industry must adopt a proactive and adaptive approach to cybersecurity, investing in research, developing migration plans for quantum-resistant cryptography, and embracing a multi-faceted, collaborative strategy to build a resilient, quantum-safe, and AI-resilient financial ecosystem