EBA Relaxes Requirements for Strong Authentication

"The European Banking Authority (EBA) has issued a new Opinion that provides the European payments industry with an EU-wide additional 15 months to comply with strong customer authentication (SCA) requirements for online ecommerce transactions."

Since there are banks that are already in compliance, the solution for consumers is to do business only with those banks.  

While there is no international law on this, there is good banking practice that is universal.  All banks have an obligation to "know their customers," and to ensure that "transactions are properly authorized."  Passwords that are vulnerable to fraudulent reuse do not meet these standards of good practice.  

In an era when most customers have e-mail, mobile computers, or both, strong authentication is not sufficiently difficult to implement to justify an extension.  This is an example of "regulatory capture."  The authority is derelict.  It is serving banks rather than customers.  Shame.  

Lessons From the J P Morgan Chase Breach

A recent report suggested that the J P Morgan Chase breach teaches us the importance of encryption.

We know that information was recovered in the clear. What we do not know is whether encryption would have been effective in protecting it or even whether it was used but was not effective.

What we do know is that the credentials of authorized users were compromised and used to access the data. Authorization to the data includes the ability to see it in clear text even though it might be stored in encrypted form.

Encryption is not magic. It is a tool. Government propaganda to the contrary not withstanding, it is no more perfect security for the bank, than it is for the criminal.

Encryption is used to restrict access to data at rest, for example on file servers, from those who do not have credentials to access the server. It is used to protect data in transit, for example user credentials, as they cross networks. Properly used, it is very powerful. It is not effective against those with the credentials, the authorization, whether legitimate or otherwise, to access the data.

Are there many banks that are storing information in the clear that should be encrypted? Yes. Was JPMorganChase one of these? We do not know; that information has not been disclosed. Should all banks take to heart the lesson that they should be using encryption to protect data at rest? Yes. Does that lesson flow from the "breach" of JPMorganChase? No, but it does flow from the "attacks."

What we do know is that of the thousands of applications and servers at JPMorganChase, fewer than a hundred were compromised and none of those were using strong authentication. So, the first lesson that I want banks to take from the JPMorganChase breach is to use strong authentication, particularly for privileged users of applications, databases, and servers. Without this, encryption is not likely to be effective.

Strong authentication is policy at JPMorganChase and appears to have been effective where used.