Authbridge

Many of the world’s leading private banks are reviewing computer software and hardware to prevent thefts of confidential client data by rogue information technology staff.

The move follows thefts in Liechtenstein and Switzerland amid the creation of a lucrative market for such information, after multimillion-euro payments by tax authorities in Germany and other countries.

“If there is a subject today that keeps a private bank chief executive awake at night, it’s not stock exchange volatility but the risk of data theft,” said Daniel Bardini of Sungard, a leading software provider.

For obvious reasons, banks have not revealed the measures to counter increased dangers. But bankers privately acknowledge significant spending to upgrade their systems.

“The high-profile cases of criminal data theft were certainly a wake-up call for Swiss banks to review and overhaul their IT security to rule out any possibility of data leakage,” said James Nason of the Swiss Bankers Association.

Hardware improvements have included packages restricting access, such as fingerprint and even retina recognition systems. Banks have also adapted hardware to limit data being copied, including buying specially-adapted computers without USB ports or disc drives.

But much of the focus has been on software to distinguish more effectively between data needed for everyday account operations, such as securities trading, and “core” information regarding a customer’s identity.

“In the old days, it was easier, because so much information was stored on punch cards and it was just physically difficult to remove it,” Mr Bardini said.

Problems in data security are often deeply embedded in computer systems, as they date back to the era when banks switched from physical to electronic storage, he explained.

“The driver was improving productivity and profitability. But often the switch opened the banks to greater risk. Sometimes the dangers were somewhat forgotten in the transition,” said Mr Bardini, whose software unit works for 55 private banks and independent wealth managers, including Wegelin, one of Switzerland’s top private banks.

Industry concerns about data theft have sparked big opportunities for software groups, such as Avaloq, the Swiss market leader in private banking, whose clients include Pictet and BSI.

Sungard has also been a beneficiary, as well as, to a lesser extent, Temenos, which focuses more on retail banking.

One trend has been to enhance data encryption to limit access. “This is relatively easy to implement, but has the disadvantage of leaving the ‘keys’ to client confidentiality with the IT people,” Mr Bardini said.

Sungard and others are pursuing the alternative of greater segregation by keeping the most sensitive data in a different location to the bank’s core IT platform, and heavily policing the links between them.

Other measures include restricting how much information can be accessed by an individual at one time, and monitoring users’ habits to track staff accessing unusually large amounts of data or using computers at unconventional times.

Source:http://www.ft.com/cms/s/0/b6259920-f65b-11df-846a-00144feab49a.html?ftcamp=crm/email/20101123/nbe/EuropeBusiness/product#ixzz16CFiUW9p