Authentication in an Internet Banking Environment

Short Description
This guidance applies to both retail and commercial customers and does not endorse any particular technology. Financial institutions should use this guidance when evaluating and implementing authentication systems and practices whether they are provided internally or by a service provider. Although this guidance is focused on the risks and risk management techniques associated with the Internet delivery channel, the principles are applicable to all forms of electronic banking activities.

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Content
The agencies consider single-factor authentication, as the only control mechanism, to be inadequate for high-risk transactions involving access to customer information or the movement of funds to other parties. Financial institutions offering Internet-based products and services to their customers should use effective methods to authenticate the identity of customers using those products and services. The authentication techniques employed by the financial institution should be appropriate to the risks associated with those products and services. Account fraud and identity theft are frequently the result of single-factor (e.g., ID/password) authentication exploitation. Where risk assessments indicate that the use of single-factor authentication is inadequate, financial institutions should implement multifactor authentication, layered security, or other controls reasonably calculated to mitigate those risks.
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Financial institutions engaging in any form of Internet banking should have effective and reliable methods to authenticate customers. An effective authentication system is necessary for compliance with requirements to safeguard customer information,3 to prevent money laundering and terrorist financing,4 to reduce fraud, to inhibit identity theft, and to promote the legal enforceability of their electronic agreements and transactions. The risks of doing business with unauthorized or incorrectly identified persons in an Internet banking environment can result in financial loss and reputation damage through fraud, disclosure of customer information, corruption of data, or unenforceable agreements.
There are a variety of technologies and methodologies financial institutions can use to authenticate customers. These methods include the use of customer passwords, personal identification numbers (PINs), digital certificates using a public key infrastructure (PKI), physical devices such as smart cards, one-time passwords (OTPs), USB plug-ins or other types of “tokens”, transaction profile scripts, biometric identification, and others. (The appendix to this guidance contains a more detailed discussion of authentication techniques.) The level of risk protection afforded by each of these techniques varies. The selection and use of authentication technologies and methods should depend upon the results of the financial institution’s risk assessment process.
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