Banks need to learn to keep their own data safe

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Quocirca's changing channels Every so often the mainstream press gets its teeth into a story and can’t let go. In the second half of 2007 and continuing into 2008 the UK press started to uncover a series of stories about data losses. There is always a degree of opportunism and scaremongering with news runs; a chance to bash a new government, an appeal to a reader’s sense of insecurity and so on. So does a more rational look allow the wood to be seen through the trees?

There is one overriding issue that will worry readers of such stories – is their money safe? Whether it is a government department, a retailer or a bank that has been careless with data, it is the prospect of financial fraud that is most scary (although potential recruits to the UK armed forces whose details were stolen in January may be pondering what a terrorist might do with these).

Ultimately fraudsters are after money so it is banks that have the most to lose whatever the source of the leak. It is not just the direct loss if a bank is duped into making a loan that will never be repaid or allows a thief access to customers’ accounts. There are also potential fines from regulators and business lost through loss of confidence. Brand damage is likely to be the most serious long term consequence.

Life is not made any easier for banks, given that they have to share data: governments demand financial information from banks to check they are maximising tax returns from citizens and businesses, retailers store details of customers credit cards – they could not operate otherwise and customers like having direct access to their accounts via internet banking. Opening up their systems to customers and third parties is the only pragmatic way for banks to operate today. So what can they do to minimise fraud?

First they need to get their IT infrastructure in order. This requires strict asset management and auditing of activities – understanding what equipment is in place and who is using it. Second, software development processes need to be watertight, making sure applications are secure and that rogue developers are not building back doors.

On top of this processes need to be well defined. Who is authorised to do what and how should it be done? Many of the recent data leaks have happened because of the sloppy way data has been transferred, sending CD ROMs rather than making network transfers. Some banks have been all too quick to blame junior employees for leaks that have occurred due to poor processes that senior managers have overseen.

At the end of the day consumers and businesses do not want their identities stolen and to become the victims of fraud. Nearly all are on the same side as the banks, so awareness campaigns need to be continuous and lucid. Most of all banks need to lead by example by demonstrating they at least are very careful with their customers’ data.

Many stories of data leaks turn out to be scaremongering by the press because there is little evidence that data has actually got in the wrong hands, but sometimes it does and there are plenty of examples of online financial fraud, however perpetrated.

However clever thieves are, however careless government departments, retailers or their own customers and employees are, it is banks that are responsible for the security of their IT systems and it is only banks that ultimately are responsible for what cash they dish out cash to whom.

Quocirca’s report Banks and data leak prevention is free to Reg readers here. ®

Copyright © 2008,

Bob Tarzey is a service director at Quocirca focused on the route to market for IT products and services in Europe. Quocirca (www.quocirca.com) is a UK-based perceptional research and analysis firm with expertise in the European and global IT markets.

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