I Never Knew How Screwed Up The Global Financial System Was Until I Started My Own Bank

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

By late 2014 I’d finally had enough.

After so many run-ins with the bitter incompetence and bureaucratic indignity of the banking system, I decided once and for all that I would start my own bank.

I probably should have had my head examined, but instead I called one of my attorneys to talk through the options.

Had I known then what I know now, I think I still would have made the same decision… but in total honesty I was completely unprepared for the torrential shit storm I was about to enter.

The deeper I went, the more overwhelming my discoveries of how shockingly inept, obsolete, and out of touch the industry is.

It’s one thing to read about it in the headlines. It’s quite another to experience it first hand as an insider.

Here’s a great example: you know how it seems commonplace these days to hear about banks getting hacked? Well, there’s a very good reason for that.

Every bank runs on something called “core banking software”, which is sort of a central financial database that keeps track of all accounts and transactions.

Anytime you deposit or withdraw funds, the core banking software updates its records.

And whenever you log in to your bank’s website to check your account balance, the server relies on the core banking software for that information.

Core banking software is the most critical component of any bank’s technological infrastructure.

Yet ironically, the software that many of the most established banks use was originally written in either Fortran or COBOL, both 60-year old programming languages that date back to the late 1950s.

Back then banks were very early adopters of technology and jumped on the chance to automate their core functions.

As technology improved, banks continually patched and updated their systems.

But they eventually ran into limitations in terms of how much they could modernize the software.

In the software industry, developers recognize this limitation.

That’s why from time to time they stop supporting obsolete versions of their applications and reengineer new versions with the latest technology.

But that didn’t happen across most of the banking sector. Instead, banks kept patching and upgrading outdated software.

Simply put, the most important functions in the banking system are powered by decades-old technology.

Perhaps nowhere is this more obvious than with domestic money transfers.

Within the domestic US banking system, most banks rely on the ACH payment network to send and receive financial transactions.

If your paycheck is direct deposited into your bank account, or mortgage payment automatically deducted, these typically use ACH.

What’s completely bewildering is that ACH payments typically take 48 hours to clear.

That’s completely insane given that any domestic bank transfer is simply an internal transfer from the sending bank’s account at the Federal Reserve to the receiving bank’s account at the Federal Reserve.

It’s utterly astonishing that in 2017 such a simple transaction actually takes two days, as if they have to send a satchel full of cash cross-country via the Pony Express.

But this is a reflection of the pitiful technology that underpins the banking system.

It doesn’t get any better internationally either.

If you’ve ever dealt with international financial transactions you may have heard of the SWIFT network.

SWIFT is a worldwide banking network that links allows financial institutions to send and receive messages about wire transfers and payments.

Anytime you send an international wire, it’s customary to enter the receiving bank’s “SWIFT code” as part of the wire details.

SWIFT is absolutely critical to global banking and handles billions of transactions and messages each year.

So you can imagine my surprise when I found out that SWIFT runs on Windows Vista an obsolete operating system that Microsoft no longer supports.

When my bank received its SWIFT code, we were told that we had to have a computer running Vista in the office in order to connect to SWIFT.

It was such an absurd exercise to find an obsolete computer running an obsolete operating system to connect to the supposedly most advanced and important international payment network in the world.

Unsurprisingly, SWIFT has been hacked numerous times, both by the NSA as well as private hackers who have stolen a great deal of money from their victims.

Last year a bunch of hackers famously penetrated the SWIFT network and stole over $100 million from the Bangladesh central bank.

And that was nowhere near an isolated incident.

This is the big hidden secret of banking: despite the shiny veneer of online banking, the institutions that literally control your money are run on outdated, inefficient, obsolete technology.

But this technology issue only scratches the surface of how pointless and anachronistic modern banking is. More on that tomorrow.

Do you have a Plan B?

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Youri Carma's picture

Ex-Illuminati Banker Exposes The Elite - In English Audio - Ronald Bernard
Apr 27, 2017 Vigilant Citizen
https://www.youtube.com/watch?v=cRuKmxQSPSw

BadDog's picture

This guy is the real deal.  It's astounding that this interview escaped into the wilds. But then again, maybe it's just time.

yogibear's picture

The best way to rob a bank is to own one.

Boris Badenov's picture

Bill Black wrote a book, based on the 1980's S&L scandal, by that name.

mkkby's picture

Stopped reading at "by simon black".

chubakka's picture

bad thing about chitcoin is you cant reverse any transaction or dispute either.  

takeaction's picture

I watched this the other night when one of you guys posted this.  INCREDIBLE.  And now it is gaining some serious traction.  My wife thought I was nuts when I told her about it...then after she watched the entire thing...she was like "Holy SHit".  I said...I have been telling you for years...

BIG TRACTION....

I saw it first on ZH a few days ago...

https://www.infowars.com/ex-banker-claims-he-was-invited-to-take-part-in...

Consuelo's picture

 

 

 I gots to give credit to good 'ole Uncle Jim Willie on this particular topic - and while he certainly isn't the first, in the sound money space he's been all over this for a few years now.

putaipan's picture

moving on from willie to bix wier ..... wier says that this ancient software was written by none other than alan greenspan. anyone out there that can confirm or deny this tid-bit?

Pickleton's picture

But the idiot left insisted that was deregulated.  How oh how could it be such a shit storm?

dasein211's picture

People are getting sick of this shit and will bypass most banks all together using cryptocurrencies. There's a reason Japan made them legal tender. Ripple wille be the new bank transfer protocol soon enough-own some of that, its only .06$ a coin right now. Dash has the new Evolution platform that will allow direct instant wallet transfers between wallet holders. Anyone who has a wallet whether it's a retailer or a customer, will be able to deal directly with each other bypassing a bank all together and if you chose to, convert back to fiat if you like. Most of you fucks aren't paying attention but watch how Dash at ~90$ a coin at a market cap of 750million with a supply of 7million coins moves up to a cap of about 10billion with next years supply maybe being 7.5milluon coins. Add to that a private transfer option that will scramble your transactions and you have some serious fucking tech. Now don't get me wrong, I hold gold and silver as well, but you have to be a stupid motherfucker to not see the potential here. You were stupid when Bitcoin was 200$ and will stay stupid until its 10000$. Wake up!

lew1024's picture

Do you think digital currencies will still buy things after the EMP?

dasein211's picture

Oh my god if there's and E MP then even gold will be useless. After the nuclear plants melt down en mass and mad max fucks every last one of us in the ass NOTHiNG-EVEN A BUNKER will save you. Fucking retarded to be betting on the end of the world. In an EMP event 99% FUCKING DIe!!! Every one of your backup plans would be useless bullshit!!!

mkkby's picture

Stop fucking lying, bitcoin fags.  With crypto currencies you STILL NEED A BANK. 

No other way to buy them, then convert back to cash.  No way merchants can get the cash they need to pay their bills.  When gov wants to shut them down, all they have to do is stop banks from trading with the exchanges.  Then you are stuck with worthless shit coins.  This happened in China. 

No EMP needed.

 

King of Ruperts Land's picture

EMP won't wreck everything. Have full set of spares wrapped in tin foil.

King of Ruperts Land's picture

crypto curriencies stop working if the internet breaks. Ie they are useless in a really big SHTF.

asierguti's picture

In mission critical systems, you don't touch anything unless it is really necessary. If a piece of software works fine, even if it's 30 years old, you leave it running, cause if you touch it you are likely to introduce bugs, which may bring down the system.

 

There is a reason why insurance and financial companies still buy 1 million dollar mainframes. Backward compatibility. The software that was running before can be migrated to a new hardware with 0 downtime.

 

What amazes me is how the author is suprissed by the vulnerability of transactions platfoms, and yet he proposes blockchain as an alternative.

 

http://www.zerohedge.com/news/2017-04-10/200-lines-code-will-disrupt-mul...

 

At the end of the day, what matters is who is liable for any loss. A bank's customer doesn't care if somebody stole his money from his account as far as the bank or somebody else is liable for those consequences and compensates the customer.

JRobby's picture

Banks don't give a fuck about you!

They don't give a fuck!

If they could get away with it, they would be open one day a week with robot tellers that piss oil on you. Then deduct the oil clean up costs from your account.

Golden Showers's picture

There is a benefit to having old codes like FORTRAN and COBOL and old OS like VISTA running bank software. If this is indeed factual. What benefits are there to having outdated junk code?

The wire transfers I use to buy silver and gold are are instant. I call my dealer and say I just wired the balance and they say, yeah, dude, we got it. We're sending your shit. I call as soon as I hit the double doors ouside.

When you order a couple grand in PMs you don't want to be a bitch and wait about. I call. I say hey, I want some fucking Austrian tubes. They're like yeah we finally have them. Send me an email. I print it. I go to the bank and wire the funds same hour on my bike. Drop cash on the bank bitch desk. Add 25 bucks and it goes thru.

I get my shit from the mail man in a few days. So, yeah.

Urban Redneck's picture

That Simon is blaming Windows Vista for Bangladeshi SWIFT hack only reinforces my perception of Simon as a fuckwit huckster who doesn't have any idea what is ranting about.

Simon is NO banker.  

And he might want to learn how to manage his OWN EMPLOYEES better, since that is how bank robberies that actually impact the bottom line are performed, before they rob him blind, or "manage" his assets into oblivion.

Once he actually learns the basics of banking itself, he should get his ass schooled on core banking software and banking technology.

The VAST MAJORITY of the core banking packages sold today (or any time in last 20 years) are relatively current (compared to both .gov & what Simon is describing) which ONLY applies to a disproportionately small share of institutions with a disproportionately large share of assets).

But since ACH transactions don't actually 48 to "clear"... unless you are the bank CUSTOMER, much less an even a lowly bank teller who should understand the difference between CLEARING and SETTLEMENT (as anyone who survived my bankster meat grinder did)... my perception of Simon is entirely justified.

Why does Tyler post this silly crap?  Is it a really slow day on Drudge or something?

lucyvp's picture

I have worked in both big-iron and modern networked pc systems.  for mission critical im going big iron.   A lot of moder software is built on  extreemley complex operating systems and pre-built libraries of code that is opaque.  In the big-iron world only the application was in question.  In the pc world everthing is suspect when something one day just stops running.  And actually stopping running is preferable to some weird calculation error that can perculate through entire accounts and systems before it is is discoverd.

mr. softy sends out security patches every month.  do i take the patch and find out if blows up my system? or do i skip the patch and expose myself to a security based attack???  I have tested these patches in a qa lab and they work, but when they go full scale oh-no.

datbedank's picture

Does this guy know anything?

If it ain't broke don't fix it. 

Let's rewrite hundreds of subsystems that work perfectly with new stuff that doesn't work.

And I bet he'd have a multi million dollar tech contract to sell to.

FrankieGoesToHollywood's picture

Amen.  Do you want flight control software developed in commercial airplanes scrapped and uploaded with brand new modern software?  I prefer the stuff that has successfully flown for at least 10 years.

lew1024's picture

Not if it is running on a buggy OS, no patches, and the system MUST BE ATTACHED TO THE NETWORK!

I assume they have exactly one TCP port open, and even then, the software has bugs.  Bugs mean exploits, and thus the losses.

Recall that the NSA's software had cracks for the banks' money transfers? I bet they bought it on the open market.

Running in a virtual machine might help wrt the total bank security, but it won't help attacks on the software itself.

GeezerGeek's picture

Windows (all versions, actually) isn't the only buggy OS. Linux systems get security patches frequently, and have their own foibles. Perhaps FreeBSD is less buggy, but I only use it on dedicated systems (NAS, firewall) and than hardly explores all the nooks and crannies of the OS.

Oh, and running in a VM isn't totally secure. There have been demonstrations of exploits getting outside of their address space under certain circumstances. Total security is elusive.

AGuy's picture

"If it ain't broke don't fix it. "

The problem is that old software usually "is broken". Fixing software that is decades old becomes a problem since it ends up like a patch quilt, with thousand of patches (mostly hacks). These patches become so bad that is very difficult to make a change without breaking something else. Programmers often leave old code in the updates in case they make a mistake and need to quickly revert back. Then newer programmers, not realizing they buggy functions/APIs, end up calling the old obsolete functions that is guaranteed to cause problems. At some point you have to replace it, or spend even more time trying to clean up the patchwork into something manageable and supportable.

Youri Carma's picture

And to make things even worse ...

Intel business processors have serious leak since 2008

Intel x86s hide another CPU that can take over your machine (you can't audit it)
http://boingboing.net/2016/06/15/intel-x86-processors-ship-with.html

Intel Active Management Technology, Intel Small Business Technology, and Intel Standard Manageability Escalation of Privilege
https://security-center.intel.com/advisory.aspx?intelid=INTEL-SA-00075&l...

INTEL-SA-00075 Detection Guide
https://downloadcenter.intel.com/download/26755

Intel® SCS – System Discovery Utility
https://downloadcenter.intel.com/download/26691/Intel-SCS-System-Discove...

INTEL-SA-00075 Mitigation Guide
https://downloadcenter.intel.com/download/26754

http://www.intel.com/content/www/us/en/architecture-and-technology/vpro/...

Protects against known and unknown attacks - First prevention solution made specifically for smart-device vendors
https://www.embedi.com/

AMD's revenue up 29 percent from CPUs and GPUs
http://ir.amd.com/phoenix.zhtml?c=74093&p=irol-newsArticle&ID=2268417

https://seekingalpha.com/article/4067646-advanced-micro-devices-amd-q1-2...

AMD’s new 32-core Naples CPU will attack Intel’s data center monopoly
https://www.extremetech.com/computing/245462-amds-new-32-core-naples-ser...

lakecity55's picture

And I bet they run Windows 10, too.

Banksters are cheapskates. Why would they use modern, hi-end software when the Elbonians can write code for them?

 

cheech_wizard's picture

Back in the day, most of the major banks were running SUN Microsystems E10K servers for their core routines, not to mention most of the major stock exchanges.

Windows was the front end interface only.

Standard Disclaimer: Only once did I actually see our complete E10K customer service list. All banks and exchanges... (then they all decided to go cheap, which explains a lot on the hacking end.)

Laughing.Man's picture

So, money under the mattress and continue stacking PMs?  Got it.

grunk's picture

I go to the nearby ATM and play Pong.

bornlastnight's picture

"I Never Knew How Screwed Up The Global Financial System Was Until I Started My Own Bank"

It sucks to be a banker.  I really fucking pity you.  So what's the bottom line?  Are you going to be a gazillionaire or just another run of the mill billionaire.  My heart bleeds over your misfortune.

Hannibal's picture

How do you think ISIS etc get funded?....  SWIFT AND ITS BANKERS

https://www.youtube.com/watch?v=f7RbqBxDPxQ

sinbad2's picture

When the Europeans were developing SWIFT, the US demanded that the hack proof security of SWIFT be downgraded, so the NSA could hack SWIFT.

To get the US onboard, the Europeans agreed, and of course if the NSA can hack it, any Russian geek can hack it.

Hannibal's picture
Trump Campaign Chair Arrested For Child Sex Trafficking

https://www.youtube.com/watch?v=KuU1luqCJGw

fingulas's picture

Heh..this is only the tip of the iceberg.  When I was hired to review P.O.S. software at a major (5+ billion a year in revenue) fast food chain they had ALL of their catering data stored at the stores and in a table with totally of un-encrypted data:  i.e.: CreditCardNumber, Owner's name and address, security code, etc..  ALL UNENCRYPTED AND UNSECURED.

The tool to dump / edit this data was in an open user account on a windows 95 machine in an unsecured side-office.  Written in a really obsolete programming language.  Click-click and it's printed out for anyone to walk away with.  No need to even hack anything or even log into the machine!

This company, at the time, as considered "cutting edge" and a source of "best practices" in the I.T. industry. 

Companies concentrate on what makes them money and anything else is an expense line item.  Nothing you find in any older organization should shock me, but they manage to do it constantly.

 

 

smallbedbug's picture

Ethereum Technology

Secret Weapon's picture

If I remember correctly, nuclear missles are launched using floppy discs.  Then again, both are government run institutions. 

http://www.npr.org/sections/thetwo-way/2016/05/26/479588478/report-u-s-n...

Angry White Guy's picture

In the case of these floppy disks, they are the 5 and one quarter inch variety which adds iit's own level of security bc maybe one or two companies in the world have the ability to manufacture them at this point.

Anopheles's picture

The guy is clueless about how difficult it is to migrate an old, LIVE system to a new LIVE system.   And make sure EVERYTHING WORKS PERFECTLY.  

Imagine you are flying an aircraft that's fly-by-wire, and have to install completely new hardware and software while the plane is still flying.   That's the difficulty the banks have in trying to switch systems. 

They would have to have a second, duplicate system up an running simultaneously, make sure there are no bugs in it, and then switch over.  But not only them, but EVERY bank that interconnects to their system. 

It's not like you buy a new cell phone with new software and stick the old SIM card into the new phone. 

TimeIsTheFire's picture

An apt analogy. It is indeed very difficult to pull off. And yet, some of the biggest banks have actually managed this feat and completely replaced their core banking systems with more "modern" technology (i.e., a 35yr old rather than 60yr old programming language).

GeezerGeek's picture

I strongly suspect that a bank would have separate systems for production (live banking applications, that is), testing and development. Your analogy to replacing an airplane's flight systems while in flight is deeply flawed. Even minor changes can create problems, which is why every minor software or hardware change is, or should be, exhaustively tested on an independent test system. You indicate as much in your post that that's how it should be. Why throw in the part about the aircraft?

Actually, no matter how exhaustive the testing, nothing will ever work perfectly. (Tha's God's department, not mankind's.) Even keeping the same software and upgrading hardware can introduce errors. Remember Intel's division problem on early Pentiums? Or TLB problems with one of their rival's CPUs?

But yes, Black sounds clueless.

 

Anopheles's picture

Yes, and that's exactly how it's done.  They have a parallel, offline system for testing and then switch it over. 

And in my airline analoy, I didn't state the assumption that the new system would have already been tested, but never before fully operational in a live environment.  

withglee's picture

And he found all that out and I guarantee you ... he still doesn't know what money is.

Baron von Bud's picture

Vista? Oh, my. I programmed professionally for many years. Hard to believe this hasn't been upgraded.