From the May 2011 issue of Treasury & Risk magazine

Layering on Security

Banking regulators are expected to push for stronger forms of authentication as electronic transaction fraud proliferates.

RSA’s March announcement that hackers breached its electronic authentication system, used by thousands of financial firms and their customers, put renewed emphasis on the shape of upcoming regulatory guidance from the Federal Financial Institutions Examination Council. The FFIEC’s 2005 recommendations on authenticating banking transactions focused on multi-factor authentication, which requires account holders to provide a user name and password, plus an additional identifier, such as information known only to the account holder or a code generated by a token, to access accounts. Given the rise in electronic transaction fraud, the FFIEC is expected to push for additional layers of security.

Whoever hacked into RSA’s system extracted information related to its SecurID two-factor authentication product, which generates such token codes.

“While at this time we are confident that the information extracted does not enable a successful direct attack on any of our RSA SecurID customers, this information could potentially be used to reduce the effectiveness of a current two-factor authentication implementation as part of a broader attack,” Art Coviello, executive chairman of RSA, a division of EMC, said in a March 17 letter to customers.

Electronic transaction fraud is becoming pervasive. A recent survey of 533 businesses by the Ponemon Institute and Guardian Analytics found 75% had experienced online fraud or had accounts taken over by so-called malware. That suggests existing controls are insufficient, says Terry Austin, CEO of Guardian, which provides predictive anti-fraud software. Austin says the RSA breach is “another indicator.”

An FDIC spokesman says the FFIEC guidance should be released soon. An unofficial draft that circulated late last year calls for banks to adopt layered security controls, which improve on multi-factor authentication by adding security measures.

RSA’s SecurID token represents the base, multi-factor credential layer. Requiring users to supply a shared secret and confirming transactions through alternate channels, such as a text message to a mobile phone, are two more. Monitoring for transactions outside a business’ normal pattern is another potential layer.

Shortly after the news of the RSA hack, IDC Financial Insights issued security recommendations to customers that emphasized the importance of using layers. With respect to the FFIEC, IDC analyst Michael Versace says, “I hope they reinforce the importance of prior guidance and the use of multiple security layers in all financial systems, including those categorized as high risk.”

 

For a look at what banks are doing to guard companies’ online transactions, see Beware Online Banking Thieves.

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