R. Kinney Williams & Associates
R. Kinney Williams
& Associates

Internet Banking News

May 6, 2001

FYI - From CNET News - The single biggest cause of network security breaches is not software bugs and unknown network vulnerabilities but dumb moves by PC users, according to a survey published by computer consultant @Stake. http://www.internetbankingaudits.com/article050201.htm 

FYI - Basel Committee Report Outlines Risk Management Principles for Electronic Banking that sets forth fourteen risk management principles on electronic banking for financial institutions in a report issued today. Press release http://www.occ.treas.gov/ftp/release/2001-42.txt E-banking paper http://www.occ.treas.gov/idtheft.pdf 

INTERNET COMPLIANCE - This is the last of two comments regarding Electronic Fund Transfer Act (Regulation E.)

The Federal Reserve Board Official Staff Commentary (OSC) also clarifies that terminal receipts are unnecessary for transfers initiated on-line. Specifically, OSC regulations provides that, because the term "electronic terminal" excludes a telephone operated by a consumer, financial institutions need not provide a terminal receipt when a consumer initiates a transfer by a means analogous in function to a telephone, such as by a personal computer or a facsimile machine.

Additionally, the regulations clarifies that a written authorization for preauthorized transfers from a consumer's account includes an electronic authorization that is not signed, but similarly authenticated by the consumer, such as through the use of a security code. According to the OSC, an example of a consumer's authorization that is not in the form of a signed writing but is, instead, "similarly authenticated" is a consumer's authorization via a home banking system. To satisfy the regulatory requirements, the institution must have some means to identify the consumer (such as a security code) and make a paper copy of the authorization available (automatically or upon request). The text of the electronic authorization must be displayed on a computer screen or other visual display that enables the consumer to read the communication from the institution.

Only the consumer may authorize the transfer and not, for example, a third-party merchant on behalf of the consumer.

Pursuant to the regulations, timing in reporting an unauthorized transaction, loss, or theft of an access device determines a consumer's liability. A financial institution may receive correspondence through an electronic medium concerning an unauthorized transaction, loss, or theft of an access device. Therefore, the institution should ensure that controls are in place to review these notifications and also to ensure that an investigation is initiated as required.

INTERNET SECURITY - We continue the series from the FDIC "Security Risks Associated with the Internet." While this Financial Institution Letter was published in December 1997, the issues still are relevant.

Data Integrity

Potentially, the open architecture of the Internet can allow those with specific knowledge and tools to alter or modify data during a transmission. Data integrity could also be compromised within the data storage system itself, both intentionally and unintentionally, if proper access controls are not maintained. Steps must be taken to ensure that all data is maintained in its original or intended form.

Authentication

Essential in electronic commerce is the need to verify that a particular communication, transaction, or access request is legitimate. To illustrate, computer systems on the Internet are identified by an Internet protocol (IP) address, much like a telephone is identified by a phone number. Through a variety of techniques, generally known as "IP spoofing" (i.e., impersonating), one computer can actually claim to be another. Likewise, user identity can be misrepresented as well. In fact, it is relatively simple to send e-mail which appears to have come from someone else, or even send it anonymously. Therefore, authentication controls are necessary to establish the identities of all parties to a communication.

 

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