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Wednesday, 09 July 2008 06:30

Oh Lord, make the banks pay for cybercrime

By
The House of Lords Science and Technology Committee is urging the Government to introduce legislation to make banks pay for cybercrime coupled with a data security breach disclosure law for the UK.

There is a common perception amongst the British public and beyond, that members of the House of Lords can pretty much be summed up as a bunch of old duffers. Anyone who has watched the Parliament TV channel and seen their Lordships sleeping through debates and generally doing a good impression of Mr Burns and Grandpa Simpson will not disagree.

So when it decides to tackle an issue such as crime on the Internet, you might expect to be in for a roller coaster ride of technological misunderstanding and cultural misapprehension. Yet the House of Lords Science and Technology Committee has actually managed to sit down, stay awake, and produce some reasonable recommendations in its report published Tuesday.

The follow-up report on Personal Internet Security calls on the Government to do more to protect the citizen from cybercrime.

One of the more controversial recommendations being that there should be legislation "to establish the principle that banks be held responsible for losses incurred by electronic fraud."

The Committee argues that it's just not satisfied with the official Government position, which says the existing Banking Code offers sufficient consumer protection. "The Committee received evidence that where a pin or password is used in an online fraud banks often refuse to refund customers claiming they must have been negligent or complicit in the fraud" their Lordships report. They also suggest that the Financial Services Ombudsman and the courts do not offer an adequate method of redress for customers whose banks refuse to cover their losses. "If banks were forced to accept liability for online fraud this would provide an incentive for them to improve the security of their online banking operations."

Hey, the old duffers might just have a point you know!

In fact, they have two more points. Read on to find out what they might be...

CONTINUED


The Committee also called for reporting procedures when it comes to online fraud to be re-worked, pointing out that currently victims of such fraud have to report the crime to their banks and not the police in the first instance. Amazing, but true. When you consider that banks may have a commercial incentive not to pass a report to the police, you can see that the old duffers have hit upon another good point. After all, the police may refuse to investigate an alleged fraud if the bank does not support the claim in the first place.

And finally, following on from the HMRC data disk scandal last year when the Government 'lost' the personal and financial information of some 25 million people when the storage medium went missing (after it was sent from one department to another using a standard internal mail system against all existing codes and regulations) the committee has called once more for a data security breach disclosure law to be established.
 
This would require organisations to inform the public about the loss of their personal data as soon as they become aware of that loss, providing an incentive to increase procedures to make sure it doesn't happen in the first place. Currently, with no such legal requirement, companies and public bodies can attempt to cover up these breaches in order to 'protect' their reputation.

Unfortunately, the old duffers made exactly the same recommendations last year and they were pretty much either summarily dismissed or ignored. I am not sure why they should think that Gordon Brown is going to take any more notice now.

Find out what Lord Sutherland of Houndwood, Chairman of the Lords Science and Technology Committee says about the report...

CONTINUED


Lord Sutherland of Houndwood, Chairman of the Lords Science and Technology Committee, said "we are disappointed that they still will not accept that there should be legislation to establish the principle that banks should be liable for refunding the victims of online fraud. The Banking Code does not offer enough protection. We believe that legislation would have the added advantage of encouraging the banks to be more proactive about improving the security of their online banking operations."

On the matter of police reporting, Lord Sutherland commented "It is also vital that the victims of e-crime can report crime directly to the police. If you were robbed in the street you would expect the police to recognise it as a crime and try to catch the person responsible. If you are a victim of online fraud, you should be entitled to the same protection."

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