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Financial institutions urged to look beyond FFIEC rules

November 21, 2006 12:00 PM ET

The University of Wisconsin Credit Union in Madison has for the past year used technology from Corillian Corp. to authenticate users during log-in and, to a limited extent, at the transaction stage. Corillian's technology lets the credit union profile users' systems and their online behavior and then challenges them to provide extra proof of identity if there is a change from the norm. Looking ahead, the credit union plans to complement those measures with a stronger out-of-band process, where automated phone calls will be made to account holders to authenticate their identity if there's reason to doubt it, said Eric Bangerter, the credit union's director of Internet services.

The move is necessary because phishers have begun to figure out how to compromise most challenge/response forms of strong authentication, he said. "Eventually, I would like to eliminate the challenge questions completely because they don't add much to security" beyond what is offered by passwords, Bangerter said.

FFIEC's guidance is mostly aimed at dealing with current threats such as phishing, said Chad Graves, vice president of IT at the Ent Federal Credit Union in Colorado Springs. Since Oct. 1, the credit union has required its 18,000 members to use a multifactor authentication process based on technology from Hillsboro, Ore.-based Corillian.

Based on a risk assessment, there appears to be no immediate need to extend that sort of authentication to the transaction level, Graves said. "Right now, our highest risk at the transaction level is an outbound bill pay," he said. But in the future, if the credit union decides to implement electronic clearinghouse or wire transfer transactions, it will consider transaction controls.

Financial institutions will also need to pay close attention to securing their phone-based transactions said Gwenn Bezard, research director at the Aite Group, a Boston-based consultancy focused on technology issues in the financial industry. "The way banks authenticate customers through the phone is weak," Bezard said. "Fraudsters will soon start finding it more difficult to compromise online channels, so they will migrate to the phone channel where the defenses are weaker and the opportunities for social engineering are greater," he said.

Such threats have not become a big issue yet in the financial industry, so there may be a tendency to see FFIEC's guidelines as adequate, Bezard said. "But is it going to be adequate in 12 months, or 18 months? Fraudsters adapt pretty quickly, so they will find new ways to attack. So sooner rather than later, these measures are going to become obsolete."

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