FFIEC Updates Electronic Banking Guidance

July 5, 2011

The Federal Financial Institutions Examination Council (FFIEC) recently issued a supplement to the Authentication in an Internet Banking Environment guidance, originally released in October 2005. The consortium of regulatory agencies said the purpose of the supplement is to reinforce the risk-management framework described in the original guidance and update the FFIEC member agencies’ supervisory expectations regarding customer authentication, layered security, and other controls in the increasingly hostile online environment. “The continued growth of electronic banking and greater sophistication of the associated threats have increased risks for financial institutions and their customers,” the FFIEC said. “Effective security is essential for financial institutions to safeguard customer information, reduce fraud stemming from the theft of sensitive customer information, and promote the legal enforceability of financial institutions’ electronic agreements and transactions.” The supplement urges regular risk assessments, implementation of effective strategies for mitigating identified risks, and raising customer awareness of potential risks, but does not endorse any specific technology for doing so. The FFIEC member agencies have directed examiners to formally assess financial institutions under the enhanced expectations outlined in the supplement beginning in January 2012.