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

Internet Banking News

July 15, 2001

FYI - Specially Designated Nationals and Blocked Persons - On June 27, 2001, the Department of the Treasury's Office of Foreign Assets Control (OFAC) amended its listing of specially designated nationals and blocked persons by adding names of persons who threaten international stabilization efforts in the Western Balkans.
www.fdic.gov/news/news/financial/2001/fil0162.html

INTERNET COMPLIANCE
- The Role Of Consumer Compliance In Developing And Implementing Electronic Services from FDIC:

When violations of the consumer protection laws regarding a financial institution's electronic services have been cited, generally the compliance officer has not been involved in the development and implementation of the electronic services. Therefore, it is suggested that management and system designers consult with the compliance officer during the development and implementation stages in order to minimize compliance risk. The compliance officer should ensure that the proper controls are incorporated into the system so that all relevant compliance issues are fully addressed. This level of involvement will help decrease an institution's compliance risk and may prevent the need to delay deployment or redesign programs that do not meet regulatory requirements.

The compliance officer should develop a compliance risk profile as a component of the institution's online banking business and/or technology plan. This profile will establish a framework from which the compliance officer and technology staff can discuss specific technical elements that should be incorporated into the system to ensure that the online system meets regulatory requirements. For example, the compliance officer may communicate with the technology staff about whether compliance disclosures/notices on a web site should be indicated or delivered by the use of "pointers" or "hotlinks" to ensure that required disclosures are presented to the consumer. The compliance officer can also be an ongoing resource to test the system for regulatory compliance.

INTERNET SECURITY
- We continue the series from the FDIC "Security Risks Associated with the Internet" about the primary technical and procedural security measures necessary to properly govern access control and system security.

Firewalls
- Data Transmission and Types of Firewalls

Data traverses the Internet in units referred to as packets. Each packet has headers which contain information for delivery, such as where the packet is from, where it is going, and what application it contains. The varying firewall techniques examine the headers and either permit or deny access to the system based on the firewall's rule configuration.

There are different types of firewalls that provide various levels of security. For instance, packet filters, sometimes implemented as screening routers, permit or deny access based solely on the stated source and/or destination IP address and the application (e.g., FTP). However, addresses and applications can be easily falsified, allowing attackers to enter systems. Other types of firewalls, such as circuit-level gateways and application gateways, actually have separate interfaces with the internal and external (Internet) networks, meaning no direct connection is established between the two networks. A relay program copies all data from one interface to another, in each direction. An even stronger firewall, a stateful inspection gateway, not only examines data packets for IP addresses, applications, and specific commands, but also provides security logging and alarm capabilities, in addition to historical comparisons with previous transmissions for deviations from normal context.

Implementation

When evaluating the need for firewall technology, the potential costs of system or data compromise, including system failure due to attack, should be considered. For most financial institution applications, a strong firewall system is a necessity. All information into and out of the institution should pass through the firewall. The firewall should also be able to change IP addresses to the firewall IP address, so no inside addresses are passed to the outside. The possibility always exists that security might be circumvented, so there must be procedures in place to detect attacks or system intrusions. Careful consideration should also be given to any data that is stored or placed on the server, especially sensitive or critically important data.

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