NZ banks demand a peek at customer PCs in fraud cases

Computerworld New Zealand - Banks in New Zealand are seeking access to customer PCs used for online banking transactions to verify whether they have enough security protection.

Under the terms of a new banking Code of Practice, banks may request access in the event of a disputed transaction to see if security protection in is place and up to date.

The code, issued by the Bankers' Association last week after lengthy drafting and consultation, now has a new section dealing with Internet banking.

Liability for any loss resulting from unauthorized Internet banking transactions rests with the customer if they have "used a computer or device that does not have appropriate protective software and operating system installed and up-to-date, [or] failed to take reasonable steps to ensure that the protective systems, such as virus scanning, firewall, antispyware, operating system and antispam software on [the] computer, are up-to-date."

The code also adds: "We reserve the right to request access to your computer or device in order to verify that you have taken all reasonable steps to protect your computer or device and safeguard your secure information in accordance with this code.

"If you refuse our request for access then we may refuse your claim."

InternetNZ was still reviewing the new code, last week, executive director Keith Davidson told Computerworld.

"In general terms, InternetNZ has been encouraging all Internet users to be more security conscious, especially ... to use up-to-date virus checkers, spyware deletion tools and a robust firewall," Davidson says.

"The new code now places a clear obligation on users to comply with some pragmatic security requirements, which does seem appropriate. If fraud continues unabated, then undoubtedly banks would need to increase fees to cover the costs of fraud," he says, so increasing security awareness and compliance in advance is probably the better tactic for both banks and their customers.

"Bank customers who are unhappy with the new rules may choose to dispense with electronic banking altogether, and return to dealing with tellers at the bank. But it seems that electronic banking and in particular Internet banking has become the convenient choice for consumers," Davidson says.

The code also warns users that they could be liable for any loss if they have chosen an obvious PIN or password, such as a consecutive sequence of numbers, a birth date or a pet's name; disclosed a PIN or password to a third party or kept a "written or electronic record" of it. Similar warnings are already included in the section that deals with ATM and PINs for Eftpos that was issued in 2002.

There is nothing in this clause allowing an electronic record to be held in a password-protected cache -- a facility provided by some commercial security applications.

For their part, the banks undertake to provide information on their websites about appropriate tools and services for ensuring security, and to tell customers where they can find this information when they sign up for Internet banking.

"One issue we have raised with the Bankers Association in the past is that banks should not initiate email contact with their customers," Davidson says.

The code allows banks to use unsolicited email among other media to advise of changes in their arrangements with the customer, but Davidson says they should only utilize their web-based mail systems.

"It is hardly surprising that some people fall victim to phishing email scams when banks use email as a normal method of communication, and therefore email can be perceived as a valid communication by end users," he says.