ISO/TR 13569:2005

TECHNICAL ISO/TR
REPORT 13569
Third edition
2005-11-15
Financial services — Information security
guidelines
Services financiers — Lignes directrices pour la sécurité de l'information

Reference number
©
ISO 2005
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ii © ISO 2005 – All rights reserved

Contents Page
Foreword. iv
Introduction . v
1 Scope . 1
2 Normative references . 1
3 Terms and definitions. 2
4 Symbols and abbreviated terms . 10
5 Corporate information security policy. 11
6 Management of information security — Security programme. 18
7 Organization for information security . 20
8 Risk analysis and assessment. 24
9 Security controls implementation and selection. 25
10 IT systems controls . 29
11 Implementation of specific controls . 32
12 Miscellaneous . 36
13 Follow-up safeguards. 40
14 Incident handling . 41
Annex A (informative) Sample documents . 43
Annex B (informative) Web services security analysis example . 52
Annex C (informative) Risk assessment illustrated. 57
Annex D (informative) Technological controls. 66
Bibliography . 72

Foreword
ISO (the International Organization for Standardization) is a worldwide federation of national standards bodies
(ISO member bodies). The work of preparing International Standards is normally carried out through ISO
technical committees. Each member body interested in a subject for which a technical committee has been
established has the right to be represented on that committee. International organizations, governmental and
non-governmental, in liaison with ISO, also take part in the work. ISO collaborates closely with the
International Electrotechnical Commission (IEC) on all matters of electrotechnical standardization.
International Standards are drafted in accordance with the rules given in the ISO/IEC Directives, Part 2.
The main task of technical committees is to prepare International Standards. Draft International Standards
adopted by the technical committees are circulated to the member bodies for voting. Publication as an
International Standard requires approval by at least 75 % of the member bodies casting a vote.
In exceptional circumstances, when a technical committee has collected data of a different kind from that
which is normally published as an International Standard (“state of the art”, for example), it may decide by a
simple majority vote of its participating members to publish a Technical Report. A Technical Report is entirely
informative in nature and does not have to be reviewed until the data it provides are considered to be no
longer valid or useful.
Attention is drawn to the possibility that some of the elements of this document may be the subject of patent
rights. ISO shall not be held responsible for identifying any or all such patent rights.
ISO/TR 13569 was prepared by Technical Committee ISO/TC 68, Financial services, Subcommittee SC 2,
Security management and general banking operations.
This third edition cancels and replaces the second edition (ISO/TR 13569:1997), which has been technically
revised. It also incorporates ISO/TR 13569:1997/Amd 1:1998.
iv © ISO 2005 – All rights reserved

Introduction
Financial business practices have changed with the introduction of computer and network-based technologies.
Increased reliance on electronic transactions has heightened the need to manage the security of information
and communications technology. Huge amounts in funds and securities are transferred daily by electronic
communication mechanisms controlled by security practices based on business policies.
The high value and sheer volume of such transactions within an increasingly connected, open environment
exposes the financial industry to potentially severe consequences. Interconnected networks and the increased
number and sophistication of malicious adversaries compound this risk with the potential to impact banks and
their customers. And when financial transactions involve systemically important payment systems, these
consequences may adversely affect national and global financial markets.
The necessity to expand business operations into these environments and to manage risk, demands a strong
and effective enterprise information security programme. Financial institutions must manage these
programmes in a comprehensive manner, just as they manage risk through well-established business practice
and agreements, careful outsourcing of functions, insurance and the use of appropriate security controls. Also
they must architect their security programmes to address the changing risks and requirements imposed by an
expanding national and international legal and regulatory environment.
As the Basle accords warn us, operational, legal and regulatory risks can cause or exacerbate credit and
liquidity risks. The management of these risks has become central to the information security programme of a
financial institution. Each institution must interpret these risks in terms of its own business activities in order to
understand its exposure. Careful consideration must be given to operational risks, including fraud and criminal
activities, natural disasters and acts of terrorism. Low probability events, such as the tsunami that struck Asia
in December 2004 and the September the eleventh, 2001 terrorist attacks on the financial services in New
York City, do happen and must be planned for.
This Technical Report is intended for use by financial institutions of all sizes and types that need to employ a
prudent and commercially reasonable information security management programme. It also gives useful
guidance to providers of services to financial institutions, and may serve as a source document for educators
and publishers serving the financial industry.
The objectives of this Technical Report are:
⎯ to define the information security management programme;
⎯ to present programme policy, organization and necessary structural components;
⎯ to present guidance on the selection of security controls that represent accepted prudent business
practice in financial applications;
⎯ to inform financial services management of the need to systematically address legal and regulatory risks
in their security information management programme.
This Technical Report is not intended to provide a single generic solution for all financial service institutions. A
risk analysis must be performed by each organization and appropriate actions selected. This Technical Report
provides guidance for conducting that process, not specific solutions.
TECHNICAL REPORT ISO/TR 13569:2005(E)

Financial services — Information security guidelines
1 Scope
This Technical Report provides guidelines on the development of an information security programme for
institutions in the financial services industry. It includes discussion of the policies, organization and the
structural, legal and regulatory components of such a programme. Considerations for the selection and
implementation of security controls, and the elements required to manage information security risk within a
modern financial services institution are discussed. Recommendations are given that are based on
consideration of the institutions' business environment, practices and procedures. Included in this guidance is
a discussion of legal and regulatory compliance issues, which should be considered in the design and
implementation of the programme.
2 Normative references
The following referenced documents are indispensable for the application of this document. For dated
references, only the edition cited applies. For undated references, the latest edition of the referenced
document (including any amendments) applies.
ISO 9564 (all parts), Banking — Personal Identification Number (PIN) management and security
ISO 10202 (all parts), Financial transaction cards — Security architecture of financial transaction systems
using integrated circuit cards
ISO 11568 (all parts), Banking — Key management (retail)
ISO/IEC 11770 (All parts), Information technology — Security techniques — Key management
ISO 15782 (all parts), Certificate management for financial services
ISO 16609:2004, Banking — Requirements for message authentication using symmetric techniques
ISO/IEC 17799, Information technology — Security techniques — Code of practice for Information security
management
ISO/IEC 18028 (All parts), Information technology — Security techniques — IT network security
ISO/IEC 18033 (All parts), Information technology — Security techniques — Encryption algorithms
ISO 21188, Public key infrastructure for financial services — Practices and policy framework
3 Terms and definitions
For the purposes of this document, the following terms and definitions apply.
3.1
access control
functions that limit access to information or information processing facilities, to those persons or applications
authorized such access, including physical access controls, which are based on placing physical barriers
between unauthorized persons and the information resources being protected, and logical access controls,
which employ other means
3.2
accountability
property that ensures that the actions of an entity may be traced uniquely to the entity
[ISO 7498-2; ISO/IEC 13335-1:2004, definition 2.1]
3.3
alarm
indication of a security violation, or unusual or dangerous condition, which may require immediate attention
3.4
asset
anything that has value to the organization
[ISO/IEC 13335-1:2004, definition 2.2]
3.5
audit
function that seeks to validate that controls are in place, adequate for their purposes, and that reports
inadequacies to appropriate levels of management
3.6
audit journal
chronological record of system activities which is sufficient to enable the reconstruction, review and
examination of the sequence of environments and activities surrounding or leading to each event in the path
of a transaction from its inception to the output of the final results
[ISO 15782-1:2003, definition 3.3]
3.7
authentication
provision of assurance of the claimed identity of an entity
[ISO/IEC 10181-2; ISO/IEC TR 13335-4:2000, definition 3.1]
3.8
authenticity
property, as applied to entities such as users, processes, systems and information, that ensures that the
identity of a subject or resource is the one claimed
3.9
availability
property of being accessible and usable upon demand by an authorized entity
[ISO 7498-2; ISO/IEC 13335-1:2004, definition 2.4]
2 © ISO 2005 – All rights reserved

3.10
back-up
saving of business information to assure business continuity in case of loss of information resources
3.11
biometric
measurable biological or behavioural characteristic that reliably distinguishes one person from another, used
to recognize the identity, or verify the claimed identity, of an individual
[ANSI X9.84:2003]
3.12
biometrics
automated methods used to recognize the identity, or verify the claimed identity, of an individual, based on
physiological or behavioural characteristics
3.13
card authentication method
CAM
concept that allows unique machine-readable identification of a financial transaction card, and that prevents
copying of cards
3.14
classification
scheme that separates information into categories, such as fraud potential, sensitivity or information criticality,
so that appropriate controls may be applied
3.15
confidentiality
property that information is not made available or disclosed to unauthorized individuals, entities, or processes
[ISO 7498-2; ISO/IEC 13335-1:2004, definition 2.6; ISO 15782-1:2003, definition 3.19]
3.16
contingency plan
procedure that, when followed, allows an organization to resume operations after natural or other disasters
3.17
control
see safeguard
3.18
corporate information security policy
Policy
general statement of the intentions and goals of establishing an information security programme
3.19
credit risk
risk that a party within the system will be unable to fully meet its financial obligations within the system either
when due or at any time in the future
[CPSS, Core Principles for Systemically Important Payment Systems]
3.20
criticality
requirements that certain information or information processing facilities be available to conduct business
3.21
cryptography
mathematical process used for encryption or authentication of information
3.22
cryptographic authentication
authentication based on a digital signature, message authentication code as generated under ISO 16609 with
a cryptographic key distributed under ISO 11568, or inferred through successful decryption of a message
encrypted under ISO 18033 (coupled with ISO/TR 19038 or ANSI X9.52) with a key distributed under
ISO/IEC 11770
3.23
cryptographic key
value that is used to control a cryptographic process, such as encryption or authentication
NOTE Knowledge of an appropriate key allows correct decryption or validation of the integrity of a message.
3.24
destruction of information
any condition which renders information unusable regardless of cause
3.25
digital signature
cryptographic transformation that, when associated with a data unit, provides the services of origin
authentication, data integrity and signer non-repudiation
[ANSI X9.79]
3.26
disclosure of information
unauthorized viewing or potential viewing of information
3.27
dual control
process of utilizing two or more separate entities (usually persons), who are operating in concert, to protect
sensitive functions or information
NOTE 1 Both entities are equally responsible for the physical protection of materials involved in vulnerable transactions.
No single person is able to access or to utilize the materials (e.g. cryptographic key).
NOTE 2 For manual key and certificate generation, conveyance, loading, storage and retrieval, dual control requires
split knowledge of key among the entities.
NOTE 3 Whenever dual control is required, care should be taken to assure that individuals are independent of each
other. See also split knowledge.
[ISO 15782-1:2003, definition 3.31]
3.28
encryption
process of converting information to render it as a form unintelligible to all except holders of a specific
cryptographic key
NOTE Use of encryption protects information between the encryption process and the decryption process (the
inverse of encryption) against unauthorized disclosure.
4 © ISO 2005 – All rights reserved

3.29
firewall
collection of components placed between two networks that collectively have the properties that
⎯ all network traffic from inside to outside, and vice-versa, must pass through the firewall;
⎯ only authorized network traffic, as defined by local security policy, is allowed to pass;
⎯ that it is itself immune to penetration
3.30
identification
process of uniquely determining the unique identity of an entity
[ISO/IEC TR 13335-4:2000, definition 3.2]
3.31
image
digital representation of a document for manipulation or storage within an information processing system
3.32
incident
any unexpected or unwanted event that might cause a compromise of business activities or information
security, such as
⎯ loss of service, equipment or facilities;
⎯ system malfunctions or overloads;
⎯ human errors;
⎯ non-compliances with policies or guidelines;
⎯ breaches of physical security arrangements;
⎯ uncontrolled system changes;
⎯ malfunctions of software or hardware;
⎯ access violations
[ISO/IEC 13335-1:2004, definition 2.10]
3.33
information processing facility
any information processing system, service or infrastructure, or the physical locations housing them
[ISO/IEC 13335-1:2004, definition 2.13]
3.34
information
any data, whether in an electronic form, written on paper, spoken at a meeting, or on any other medium which
is used by a financial organization to make decisions, move funds, set rates, make loans, process
transactions and the like, including software components of the processing system
3.35
information asset
information or information processing resources of an organization
3.36
information security
all aspects related to defining, achieving and maintaining confidentiality, integrity, availability, non-repudiation,
accountability, authenticity and reliability of information or information processing facilities
[ISO/IEC 13335-1:2004, definition 2.14]
3.37
information security officer
ISO
person responsible for implementing and maintaining the information security programme
3.38
information resource
equipment used to manipulate, communicate or store information, such as telephones, facsimiles, and
computers, whether these are inside or outside the organization
3.39
integrity
the property of safeguarding the accuracy and completeness of assets
[ISO/IEC 13335-1:2004, definition 2.15]
3.40
key
see cryptographic key
3.41
kiting
using a bad cheque to get credit or money
3.42
legal risk
risk of loss because of the unexpected application of a law or regulation or because a contract cannot be
enforced
[CPSS, Core Principles for Systemically Important Payment Systems]
3.43
letter of assurance
document setting forth the information security controls which are in place for the protection of information
held on behalf of the recipient of the letter
3.44
liquidity risk
risk that a party within the system will have insufficient funds to meet financial obligations within the system as
and when expected, although it may be able to do so at some time in the future
[CPSS, Core Principles for Systemically Important Payment Systems]
3.45
message authentication code
MAC
code appended to a message by the originator, which is the result of processing the message through a
cryptographic process
NOTE If the receiver can generate the same code, confidence is gained that the message was not modified and that
it originated with the holder of the appropriate cryptographic key.
6 © ISO 2005 – All rights reserved

3.46
modification of information
unauthorized or accidental change in information, whether detected or undetected
3.47
need to know
security concept that limits access to information and information processing resources to that which is
required to perform one's duties
3.48
network
collection of communication and information processing systems that may be shared among several users
3.49
non-repudiation
ability to prove an action or event has taken place, so that this event or action cannot be repudiated later
[ISO/IEC 13888-1; ISO 7498-2; ISO/IEC 13335-1:2004, definition 2.16]
3.50
operational risk
risk that operational factors such as technical malfunctions or operational mistakes will cause or exacerbate
credit or liquidity risks
[CPSS, Core Principles for Systemically Important Payment Systems]
3.51
owner of information
person or function responsible for the collection and maintenance of a given set of information
3.52
password
string of characters which serves as an authenticator of the user
3.53
prudent business practice
set of practices which have been generally accepted as necessary
3.54
reliability
property of consistent intended behaviour and results
[ISO/IEC 13335-1:2004, definition 2.17]
3.55
residual risk
risk that remains after risk treatment
[ISO/IEC 13335-1:2004, definition 2.18]
3.56
risk
potential that a given threat will exploit vulnerabilities of an asset or group of assets and thereby cause harm
to the organization
NOTE It is measured in terms of a combination of the probability of an event and its consequence.
[ISO/IEC 13335-1:2004, definition 3.19]
3.57
risk acceptance
approved risk associated with an exception to the Policy
3.58
risk analysis
systematic process of estimating the magnitude of risks
[ISO/IEC 13335-1:2004, definition 2.20]
3.59
risk assessment
process of combining risk identification, risk analysis and risk evaluation
[ISO/IEC 13335-1:2004, definition 2.21]
3.60
risk evaluation
process of comparing analysed levels of risk against pre-established criteria and identifying areas needing risk
treatment
3.61
risk identification
process of identifying risks considering business objectives, threats and vulnerabilities as the basis for further
analysis
3.62
risk management
total process of identifying, controlling, and eliminating or minimizing uncertain events that may affect
information and communications technology system resources
[ISO/IEC 13335-1:2004, definition 3.22]
3.63
risk treatment
process of selection and implementation of measures to modify risks
3.64
safeguard
practice, procedure or mechanism that treats risk
NOTE The term “safeguard" may be considered synonymous with the term “control".
[ISO/IEC 13335-1:2004, definition 2.24]
3.65
security
quality or state of being protected from unauthorized access or uncontrolled losses or effects
NOTE 1 Absolute security is impossible to achieve in practice, and the quality of a given security system is relative.
NOTE 2 Within a state-model security system, security is a specific “state" to be preserved under various operations.
3.66
server
computer that acts as a provider of some service to other computers, such as processing communications, file
storage interface or printing facility
8 © ISO 2005 – All rights reserved

3.67
sign-on
completion of identification and authentication of a user
3.68
split knowledge
division of critical information into multiple parts in such a way as to require a minimum number of parts to be
present before an action can take place
NOTE Split knowledge is often used to enforce dual control.
3.69
stored value card
token that is capable of storing and transferring electronic money
3.70
systemic risk
risk that the inability of one of the participants to meet its obligations, or a disruption of the system itself, could
result in the inability of other system participants or of other financial institutions in other parts of the financial
system to meet their obligations as they become due
NOTE Such a failure could cause widespread liquidity or credit problems and, as a result, could threaten the stability
of the system or of financial markets.
[CPSS, Core Principles for Systemically Important Payment Systems]
3.71
threat
potential cause of an incident that may result in harm to a system or organization
[ISO/IEC 13335-1:2004, definition 2.25]
3.72
token
user-controlled device (e.g., disk, smart card, computer file) that contains information that can be used in
electronic commerce for authentication or for access control
3.73
user ID
character string that is used to uniquely identify each user of a system
3.74
vulnerability
weakness of an asset or group of assets that can be exploited by one or more threats
[ISO/IEC 13335-1:200, definition 2.26]
4 Symbols and abbreviated terms
ATM Automated Teller Machine
CEO Chief Executive Officer
CFO Chief Financial Officer
CIO Chief Information Officer
CISO Corporate Information Security Officer
COO Chief Operating Officer
CPSS Committee on Payment and Settlement Systems
CTO Chief Technology Officer
DMZ De-Militarized Zone
EFT Electronic Funds Transfer
FTP File Transfer Protocol
HTTP Hypertext Transfer Protocol
HTTPS Secure Hypertext Transfer Protocol
ICT Information and Communication Technology
IDS Intrusion Detection System
IP Internet Protocol
IPSEC IP Security Protocol
IT Information Technology
LAN Local Area Network
LEAP Lightweight Extensible Agent Platform
MAC Message Authentication Code
OS Operating System
PC Personal Computer
PDA Personal Digital Assistant
PEAP Protected Extensible Authentication Protocol
PIN Personal Identification Number
POTS Plain Old Telephone System
RF Radio Frequency
SMTP Simple Mail Transport Protocol
10 © ISO 2005 – All rights reserved

SSH Secure Shell
SSL Secure Socket Layer
USB Universal Serial Bus
VPN Virtual Private Network
VTAM Virtual Terminal Access Method
WAN Wide Area Network
Wi-Fi Wireless Fidelity
WS Web Services
XML Extensible Markup Language
5 Corporate information security policy
5.1 Purpose
All financial services institutions today rely heavily on the use of Information Technology (IT) and Information
and Communication Technology (ICT), and therefore, need to protect information and to manage the security
of their information assets. In order for management to fulfil their responsibilities, information security must be
provided, and the management of information security must become an important component of the
organization's management plan.
Development of an information security programme is a prudent business practice that will help a financial
services organization to identify and manage risk. This Technical Report recommends a general, policy-based
approach to information security management, and provides guidance that can be tailored to meet the
business objectives of the organization. Business objectives must be supported by policies and procedures for
protecting IT assets. A policy-based approach is applicable to different size institutions, different management
styles, and organizational environments.
This Technical Report is intended to provide guidance, not specific solutions, on the management aspects of
information security, and to assist financial services management in developing and maintaining an
information security programme. Other references, especially ISO/IEC 17799, provide important general
purpose detailed information that will be invaluable for implementation and maintenance. However, this
Technical Report addresses the specific legal and regulatory requirements that must be considered by
financial institutions when establishing a policy-based information management programme.
5.2 Legal and regulatory compliance
5.2.1 General
Regulatory authorities concern themselves principally with issues of safety, soundness and compliance with
laws and regulations. One element of safety and soundness is the organization's system of safeguards that
protects information from unavailability, and unauthorized modification, disclosure and destruction. Recent
national and international legislation, such as Basel II, the Sarbanes-Oxley Act (SOX), Gramm-Leach-Bliley
[22]
(GLB) and European Directive 95/46/EC, has created an environment of legal and regulatory risk for global
providers of financial services. The organization's security policy must address this risk.
Compliance officers should work with the CISO, CFO, business managers, risk managers and auditors to
ensure that information security requirements derived from national and international laws and regulations are
understood and addressed. Compliance officers should also remain current on new technologies or
methodologies that may become subject of regulation; e.g. compliance with predefined functionality classes
for Information Technology products.
5.2.2 Requirements for financial institutions
5.2.2.1 Overview
For Institutions in the financial sector there are some legal and regulatory requirements, which have an impact
on IT security and have to be followed. The inherent problem is that these requirements differ from country to
country. Although the European Union has led the way towards a legal alignment, there are still national
regulations which demand specific attention.
In the following, each subclause will describe the most important laws from a perspective of a financial
services provider operating in a global environment. A description of the legislative environment will be divided
into three sectors: corporate governance, data protection (privacy) and financial sector legislation specific to
financial services providers (e.g., money laundering legislation). The description of the regulatory environment
will concentrate on financial reporting requirements and the Basel II recommendations, which are freely
[19]
available from the Bank for International Settlement in Basle, Switzerland at:
http://www.bis.org/bcbs/publ.htm.
5.2.2.2 Legal requirements
5.2.2.2.1 Corporate governance
In recent years, many national and regional legislative bodies have brought forth laws that address corporate
governance. Notable among these are the Sarbanes-Oxley (SOX) Act in the United States (U.S.), the
Kontrolle- und Transparenz Gesetz (KonTraG) in Germany, and the European Union Draft Directive on
Corporate Governance. All three have altered the landscape of legal risks faced by providers of financial
services.
The Sarbanes-Oxley Act requires all companies publicly traded on U.S. stock exchanges to provide evidence
that they have adequate controls in place for financial reporting. In detail, SOX obliges the CEO and CFO of
any such company to assess the effectiveness of their internal control framework and explicitly sign and
accept responsibility for the annual financial reports of the organization. With regards to IT, this requires that
the operation of critical business applications and their associated risks must be assessed and controlled. In
summary, the entire life cycle of these applications must be assessed and controlled, ranging from initial
development to business continuity to ensure that adequate measures are in place. Though national in origin,
this legislation is applicable to any company whose stocks are publicly traded within the U.S.
The German Kontrolle- und Transparenz Gesetz (KonTraG) legislation requires corporations to implement an
internal monitoring process identifying internal developments and decisions that may pose a high risk to this
corporation. Implicitly, this means that management has to implement a corporate-wide internal risk
management system. It also obliges management to report any identified major risk in their reporting system
(bi-annual and annual). With regards to IT, this covers a similar aspect as the Sarbanes-Oxley Act. However,
since German publicly traded companies have a two-tier management board, this enforces stronger reporting
from the management board to the supervisory board. Non-compliance act may lead to a reduction in the
banking rating of the corporation and may therefore influence interest rates for credits.
The European Union (EU) is drafting a directive which will influence EU national legislation: all publicly listed
companies are required to publish a corporate governance report. This report will provide details on the Board
of Directors, its decisions, its financial situation and its compliance with national law. This report will also
include the results of independent audits. This directive has similar implications to the Sarbanes-Oxley Act
and Kontrolle- und Transparenz Gesetz (KonTraG) legislation for IT. There are other national laws in place
covering this topic but none is so stringent that it would have the influence of an EU Directive.
12 © ISO 2005 – All rights reserved

5.2.2.2.2 Data protection (privacy)
Data protection is gaining more and more attention caused by various laws on the regional, national and state
level. This legislation is triggered by the fact that the Internet and its use pose additional risks on misuse in
that area and those individuals using this medium need appropriate protection.
The Gramm-Leach-Bliley (GLB) Act is intended to protect consumer information held by financial institutions.
It requires these institutions to provide their customers with privacy notices explaining the institutions’
information sharing practice. In turn, consumers have the right to limit some – but not all – sharing of their
information. The law requires also that financial institutions protect information collected about individuals; it
does not apply to information collected in business or commercial activities. The Federal Trade Commission
(FTC) has published a set of standards which should be applied to achieve compliance with GLB.
The European Directive 95/46/EC is a joint effort to achieve privacy for all member states at a high level. It
protects information of individuals during the whole processing life cycle. Simply spoken, it requires an
institution to ask for permission if information is used other than for the officially intended (and stated) use. It
also limits the transfer of personal data to those countries where adequate data protection is provided. In
general, individuals have to grant permission explicitly (opt-in) to allow further processing. This is contrary to
the procedure in the U.S. where individuals are asked to opt out, to prohibit further processing. This directive
is implemented into national law within all member states.
The Swiss data protection law is similar to the laws existent in other European countries. It is mentioned here
for two reasons: Switzerland is not part of the European Union and therefore it should be mentioned. On the
other hand, the Swiss law prohibits the transfer of personal data into other states, if there is no adequate
protection and requires the transmitting entity to inform the legal authority on the transfer. Another important
law relating to financial institutions is the Swiss Bank Customer Secret (Schweizer Bankkundengeheimnis),
which explicitly protects the customer information maintained by banks.
5.2.2.2.3 Money laundering
Almost all countries have some kind of money laundering legislation which usually means that money
transfers exceeding a certain amount have to be examined to verify its sources and destination. As recently as
the 1990s such legislation would have had no explicit security relevance for it could be implemented
independently of any security issues.
The terrorist attacks of September 11th, 2001 in the United States vividly illuminated the importance of anti-
money laundering laws and controls. The attacks fostered an even greater recognition of the importance of
anti-money laundering cooperation around the world. This recognition galvanized international cooperation
and led to significant modifications to anti-money laundering laws that have paid dividends in the world
community's ability to trace the funds of those who finance international terrorism.
Since 2001, the United States has continued its vigorous inter-agency international anti-money laundering
training programme to improve worldwide efforts to combat money laundering and financial crime. Other
governments and international organizations have also strengthened anti-money laundering programmes. The
European Union broadened its anti-money laundering directive and imposed anti-money laundering
obligations on “gatekeepers", professionals such as lawyers and accountants who help place dirty money in
the financial system. Regional anti-money laundering bodies in Europe, Asia and the Caribbean continued
working effectively, and nascent anti-money laundering regional organizations in South America and Africa
became operational.
A major money laundering focus of the year was the work of the Financial Action Task Force (FATF), the
world's pre-eminent multilateral anti-money laundering body, which continued its non-cooperative countries
and territories exercise. FATF moved quickly after 11/9/01 to convene an extraordinary plenary on the
financing of terrorism, which decided to expand its mission beyond money laundering, and to focus its energy
and expertise on the worldwide effort to combat terrorist financing. The FATF has since adopted eight special
recommendations regarding terrorist financing.
The terrorist attacks gave strong impetus to many countries to amend and strengthen their money laundering
laws. In the United States, the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (“USA PATRIOT") Act of 2001 made major changes to the U.S. anti-money
laundering regime. The broad new authorities provided in the USA PATRIOT Act will have significant influence
on the relationships between U.S. financial institutions and their individual and institutional customers
An information security management programme can help financial institutions to thwart money laundering
schemes. More importantly, these programmes can be used to demonstrate to law enforcement organizations
that the institution is compliant with relevant legislation and provide documentation that it is systematically and
actively taking measures to comply.
5.2.2.2.4 Financial market legislation
Most of the laws regulating the financial sector primarily define the responsibilities of a financial institution.
This includes the obligation to provide qualified services. Some national authorities interpret this in such a way
that it covers integrity of IT services used. The following national laws will point out specific IT security issues.
Under the Argentina central banking legislation, a financial institution has to incorporate an Information
Security Officer (ISO) who provides an annual report to the Central Bank of Argentina. This report must reflect
how the internal controls of the institution are established and maintained to ensure proper services.
European Union Directive 82/121/EEC regulates the reporting of financial institutions. It was recently updated
to achieve more regular reporting throughout the European Union. European Union Directive 2000/31/EC
(Electronic Commerce) requests a legal framework for electronic commerce, which must include customer
privacy issues, spam handling, taxation, electronic contracts and their treatment, confidentiality of
communications among others. It also defines a Code of Conduct as a medium to communicate the rights of
involved entities.
The German Kreditwesengesetz (KWG) law regulates almost everything specific to financial institutions in
Germany. It defines the way banks have to operate, who is allowed to lead a financial institution, what is to be
reported, etc. Of special interest are three paragraphs. The first one deals with automated access to customer
data by the financial authorities (§ 24c) which requires additional security measures in place. The second one
(§ 25a) defines the specific obligations a financial institution has to fulfil which covers issues like internal risk
management, security measures and internal audit and its cooperation with the overseeing authorities. Finally,
there are regulations for if a financial institution or its management do not fulfil their obligations possibly
leading to that management loosing its right to conduct business in the financial sector.
5.2.2.3 Regulatory requirements
There are two financial institution regulatory requirement topics of high relevance. The first concerns the
obligations of the institution for financial reporting (usually overseen by national financial authorities). The
second is the financial soundness obligation which is described in the Bank for International Settlement (BIS -
see http://www.bis.org/bcbs/index.htm) Basel II accords. These requirements include the need for the
institution to consider operational risks.
The Basel Committee on Banking Supervision formulates broad supervisory standards, guidelines and best
practice recommendations. The committee expects individual national financial authorities to take steps to
implement these recommendations through detailed arrangements – statutory or otherwise – in a manner that
best suits their own national systems. Regulatory requirements lea
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