Cybercrime in the Cul-de-Sac: What Your HOA Needs to Know

By Kevin Holloway

When community members think of emergencies, they typically picture a natural disaster, inclement weather, or a structural failure. Yet, in today’s digital world, there’s another growing threat that often goes unnoticed: cybercrime. While this threat is much quieter than the physical disasters we may encounter, this emergency is just as dangerous and growing fast!

Throughout the years, cybercrime has often been considered a problem for big businesses, but the reality is that more and more community associations are finding themselves facing this crisis. Why? Homeowners’ associations manage highly sensitive resident information, vendor accounts, and large reserve funds. That’s exactly the kind of data cybercriminals are after! And, the repercussions of a successful attack can be catastrophic! It can lead to an erosion of trust from residents, legal ramifications, operational disruptions, and significant financial losses.

Knowing how and why these attacks happen is the first real line of defense for your HOA.

UNDERSTANDING THE THREAT

It’s easy to forget, while managing the day-in and day-out tasks of running an HOA, that each community holds a bevy of important information on a large population of individuals. That data is exactly why associations are now finding themselves increasingly in cybercriminals’ crosshairs!

Here’s why:

• Financial Accounts– HOAs typically manage significant amounts of money, including assessment payments and reserve funds set aside for future projects. If cybercriminals get access, the financial payoff could be substantial.
• Personal Data– In order to run your HOA, resident information such as names, addresses, contact details, and payment information is necessary. This data is highly valuable on the dark web for identity theft or other malicious activities.
• Lack of IT Expertise– Unless your community is fortunate enough to have a cybersecurity expert on your board or hires a professional management company, chances are it’s lacking the high-level IT security used to thwart common threats.
• Use of Less Secure Platforms– Individuals running HOAs frequently opt for convenience over security. This means using common email services and cloud platforms for communication and record-keeping that they’re familiar with, but do not offer high security to restrict access.

COMMON CYBERATTACK METHODS

The movies may depict brilliant hackers utilizing high-level means to crack passwords and gain access to accounts. But the truth is that data breaches are often very simple schemes, cleverly hidden in places we should but don’t expect them.

Here are some of the most common ones:

• Phishing– The digital con artist. Fraudulent emails or texts trick recipients into revealing sensitive information or making fraudulent payments. It could be a fake vendor invoice or an urgent request from someone posing as a board member.
• Ransomware– Imagine suddenly losing access to all of your HOA’s crucial documents and financial records – then receiving a demand for money to get it back. This malicious software is used to encrypt information from the rightful owner in order to extort a payment.
• Data Breaches– Chances are you’ve been involved in a data breach before and received a notification that an unauthorized user gained access to your sensitive information, possibly including your name, address, and other critical data. For an HOA, this breach could create privacy violations for homeowners and significant legal fallout.
• Weak Passwords/Lack of Multifactor Authentication (MFA)– Even after everything we’ve learned over the years about passwords, easy-to-guess and reused passwords are still the most common ways for attackers to gain access to accounts and data. The dark web is full of them, and without a second verification step, such as a code sent to your phone, a stolen password is often all a criminal needs.

BUILDING YOUR DIGITAL DEFENSE

Did you know that 95% of data breaches involve human mistakes? That number should make it painfully clear that cyber threats, in many cases, come down to small mistakes individuals make. Yes, IT software can offer protection, but if individuals aren’t trained to avoid clicking the wrong link or trusting the wrong email, it won’t do any good! Understanding the threat is crucial, but it’s just the first step in protecting your HOA. In order to go beyond surface-level protection and create a fortified front, you need a powerful two-part strategy: strong preventative measures and a clear game plan of what to do in case a digital breach does occur.

FORTIFYING YOUR DIGITAL WALLS

The very best protection begins with the individuals running the day-to-day! HOAs need to implement proactive, smart practices and use the right systems to reduce their vulnerability to cyberattacks.

Start by building a culture of vigilance across your community:

• Board & Key Volunteers– These individuals should be trained on how to spot potential digital threats, how to communicate securely online, and the importance of passwords to avoid potential breaches.
• Homeowners & Tenants– Send out frequent tips to residents on how they can better protect their own accounts and remind them to report anything they receive that’s suspicious.
• Community– "Think before you click" should be your association’s motto! Encourage everyone to be skeptical about urgent or unusual digital requests and always double-check where the communication originated from independently!

NEXT, PUT SOLID DIGITAL PRACTICES INTO ACTION:

• Strong Passwords– Make sure everyone uses strong, unique passwords. The best bet is to use phrases they’ll remember, but are not easy to guess!
• Multifactor Authentication– This should also be mandated for all HOA accounts - banking, management software, and official emails. No exceptions.
• Regular Updates– Be sure to keep any operating systems, apps, and security software up to date to make them less vulnerable to hacking.
• Secure Networks– Remind people not to handle sensitive HOA business over unsecured public Wi-Fi ever!

SAFEGUARDING SENSITIVE DATA IS ESSENTIAL!

• Data Inventory– Protecting data begins with first identifying any sensitive information your HOA collects.
• Need-to-Know Policy– Sensitive data should only be given to individuals who need it for their specific role, and no one else.
• Secure Storage– Your community’s data is as valuable as cash, and the way you store it is just as important. Encrypted cloud platforms and HOA management software offer built-in security features that create a digital safe. Never, at any time, should HOA data be kept on personal devices or shared drives.
• Data Retention Policies– HOAs need to question how long they should store data and dispose of any that’s no longer needed.

STRENGTHEN YOUR FINANCIALS:

• Strict Verification– Implement strict multistep verification protocols for all financial transactions, especially wire transfers or changes to vendor payment details. And never rely on payment details provided in an email!
• Separate Duties– Ensure no single individual has sole control over an entire financial process. Those can include invoice approval, payment execution, and bank statement reconciliation.
• Regular Reconciliation– Stay up to date on your bank statements to quickly identify any unauthorized transactions or discrepancies.

FINALLY, CAREFULLY REVIEW YOUR THIRD-PARTY VENDORS:

• Cybersecurity Criteria– When choosing a management company, accountant, or any other service provider, make their cybersecurity measures a big part of your decision. Don’t be shy – ask about their data protection policies and what their game plan is if something goes wrong.
• Contractual Safeguards– Ensure your contracts include clear safeguards about data security, breach notifications, and who’s responsible if there’s an issue.

WHEN DISASTER STRIKES: RESPONDING TO A CYBER THREAT

Even with the best prevention in place, human errors can still create vulnerabilities that can lead to an unfortunate incident. That’s why having a plan in place for a breach is essential! It helps minimize damage and ensures a quicker recovery. HOAs should create their own cyber emergency response plan in advance so everyone is on the same page and knows what needs to be done and by whom. Having a plan in place means less scrambling and faster action when something goes wrong.

YOUR PLAN SHOULD CLEARLY OUTLINE:

• Key Contacts– Who to call immediately (board, legal counsel, law enforcement, etc.).
• Clear & Actionable Steps– For containment (stopping the spread), eradication (removing the threat), recovery (getting systems back online), communication (alerting those who need to know), and post-incident analysis.

IF AN INCIDENT OCCURS, IMMEDIATE ACTIONS ARE CRUCIAL:

• Isolate & Preserve– Quickly disconnect affected systems to prevent further compromise. Document everything, and do not delete or alter files. This evidence is vital for understanding the attack.
• Notify– Immediately inform your designated incident response team and legal counsel.

A CLEAR COMMUNICATION STRATEGY IS VITAL:

• Internal– Set up clear ways to keep Board members and any other essential people in the loop.
• External– If a data breach happens, understand your legal responsibility to notify residents. Be clear, honest, and timely in your messages.

FINALLY, FOCUS ON RECOVERY AND LEARNING:

• Restore– Have up-to-date backups available to get operations back online quickly.
• Analyze– Conduct a thorough review afterwards to decide: What happened? How? What can be done to prevent it from happening again?

The better prepared your team is, the faster you can recover – without unnecessary costs or confusion!

THE ADVANTAGE OF EXPERTISE

Learning to navigate the ins and outs of cybersecurity can sometimes feel overwhelming, especially for volunteer board members. Partnering with a professional HOA management company can bring a higher level of security, dedicated IT resources, and more experience in managing sensitive data and financial transactions. Additionally, their support can offer both proactive measures and an efficient emergency response.

A STRONG DIGITAL FUTURE FOR YOUR COMMUNITY

Securing your HOA’s digital future requires ongoing prevention and a solid plan for when things go wrong! The good news is, by understanding the risks, establishing smart strategies ahead of time, and knowing when to call in the experts, your HOA can build a strong digital fortress that keeps your assets and your residents’ trust safe and sound.

Kevin Holloway is an experienced operations leader with an expertise in people development and project management.