May 9, 1997 U.S. To Ease Rules on Export Of Finance Encryption Technology By JOHN MARKOFF G iving ground on the Clinton administration's computer-data privacy policy, the Commerce Department said Thursday that it would begin in some cases to allow export of the most powerful data-scrambling technologies when used for securing financial transactions. The move departs from previous export policy, which had allowed export of the U.S. computer industry's most powerful privacy-protection software and hardware only if the technology enabled law-enforcement officials to obtain copies of the mathematical keys needed to break the codes. The revised policy would require no such code-breaking proviso in the case of certain types of financial transactions. Besides international funds transfers between banks, permissible applications under the new policy are expected to include privacy-protected home-banking software for banks to offer to customers worldwide. The new policy would also apply to a technology known as the Secure Electronic Transaction standard, which has been developed by Mastercard and Visa to permit consumers to send credit card information to merchants electronically. Computer-data scrambling, or cryptography, is widely seen as the most crucial technology underlying a wide range of new computerized communications and commerce applications. But the Clinton administration, as did the Bush administration, has limited export of the most powerful U.S. encryption technology, for fear it would enable foreign criminals or terrorists to conspire with electronic impunity. Privacy-rights advocates have opposed the government's policy, fearing Big Brother intrusiveness if law-enforcement officials could obtain code keys. And industry officials have argued that because data-scrambling technology is already widely available overseas, the export laws have forced U.S. companies to miss out on a thriving foreign market. Banks and other financial institutions, meanwhile, have complained that the policies made it difficult to insure the security of electronic-funds transfers between the United States and foreign countries. But word of the new rules drew concern from critics of the administration's data-scrambling policies, who said the banking industry would receive unfair business advantages. "There is a danger of creating a cartel-like environment that gives banks advantages over many of the current leaders in electronic commerce," said Laurie Fena, the executive director of the Electronic Frontier Foundation, a public policy group in San Francisco. Historically, U.S. banking and financial institutions have been given special exemptions to export data-scrambling equipment based on the 20-year-old Data Encryption Standard. But the big increase in computer processing power in recent years has made that standard appear increasingly vulnerable, and the government has been under pressure to permit the export of strong encryption technology for financial purposes. Administration officials said the new rules would be published soon. Until then, it is unclear whether the definition of financial institutions and transactions may now be broad enough to include software makers like Netscape Communications Corp., which produces the most popular software for navigating the Internet's World Wide Web. _________________________________________________________________ Related Articles IBM Announces New Encryption Formula (May 7,1997) U.S. Restrictions Give European Encryption a Boost (April 7,1997) _________________________________________________________________ Netscape's software has a component for insuring secure financial transactions; but under current export law, that ability must be weakened or disabled when its Web-navigating software is shipped overseas. "It's very heartening to see the administration finally admitting that there are products overseas that are cutting into our markets," said Peter Harter, the lawyer in charge of global public policy for Netscape. "It's unfortunate to have to watch this happening from the back of the bus." Home | Sections | Contents | Search | Forums | Help Copyright 1997 The New York Times Company _________________________________________________________________ IBM WWWDirectory