Federal Rules May Not Fully Secure Online Banking Sites

Federal Rules May Not Fully Secure Online Banking Sites
Federal Rules May Not Fully Secure Online Banking Sites 

By Jaikumar Vijayan
November 27, 2006 

Financial institutions that truly want to bolster their online security 
need to look beyond the federal guidelines on end-user authentication 
that go into effect Jan. 1, IT managers and analysts said last week.

The guidelines, issued last year by the Federal Financial Institutions 
Examination Council (FFIEC), call on banks and credit unions to adopt 
so-called strong authentication measures for protecting online customers 
against identity theft and other types of fraud.

The FFIECs requirements have gotten the financial services industry to 
turn its attention to the issue of online security, said Gartner Inc. 
analyst Avivah Litan.

No Silver Bullet

But strong authentication certainly isnt a silver bullet, said Melissa 
Auchter, CIO at Parda Federal Credit Union in Rochester, Mich. It just 
protects one doorway. Its one more measure in a comprehensive approach 
to protecting the assets of our members.

Early this month, Parda finished rolling out a multifactor 
authentication tool from BioPassword Inc. that uses a combination of 
standard log-in credentials and information about the keyboard typing 
rhythms of users to control access to their accounts. But Auchter said 
Parda has also invested in a layered set of defenses, including 
transaction-level fraud monitoring.

For the past year, the University of Wisconsin Credit Union in Madison 
has been using software from Corillian Corp. to authenticate its online 
users during log-in and, to a limited extent, in the transaction stage. 
Eric Bangerter, the credit unions director of Internet services, said 
the software lets the financial institution profile users systems and 
online behavior and then challenge them to provide extra proof of their 
identity if any changes from the norm are detected.

The credit union also plans to add a stronger out-of-band process, in 
which automated phone calls will be made to account holders if theres 
still reason to doubt their identity, Bangerter said.

That is necessary because phishers have already begun to find ways to 
compromise most challenge-and-response forms of strong authentication, 
he noted. Eventually, Bangerter said, I would like to eliminate the 
challenge questions completely because they dont add much to security.

Under the FFIECs guidelines, banks and credit unions are supposed to 
augment single-factor authentication processes typically based on a 
username and password with a second form of authentication by years end.

The guidelines arent a formal mandate, but the FFIEC plans to start 
auditing financial institutions for compliance with them next year.

Don Phan, an analyst at Javelin Strategy & Research in Pleasanton, 
Calif., said online fraudsters have already found a way to break the 
one-time passwords that some banks have begun using as a second form of 

Because banks are being asked to focus largely on front-end access 
controls, we dont consider the FFIEC guidance alone to be strong enough 
to make the consumer safer, Phan said. Financial institutions must set 
their goals higher. He recommended the use of risk assessment and 
alerting measures at log-in and for real-time monitoring of an account 
holders activities online.

Chad Graves, vice president of IT at Ent Federal Credit Union in 
Colorado Springs, said the FFIECs guidelines should be adequate for 
dealing with current threats such as phishing. But he said that Ent 
Federal may have to add transaction-level controls if it decides to 
support electronic clearinghouse or wire-transfer transactions.

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