Cyber Fears On Fed's Web Plan

R. A. Hettinga rah at
Sun Aug 15 14:11:25 PDT 2004


The New York Post


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August 15, 2004 --  With little fanfare, the Federal Reserve will begin
transferring the nation's money supply over an Internet-based system this
month - a move critics say could open the U.S.'s banking system to cyber

 The Fed moves about $1.8 trillion a day on a closed, stand-alone computer
network. But soon it will switch to a system called FedLine Advantage, a
Web-based technology.

 Proponents say the system is more efficient and flexible. The current
system is outdated, using DOS - Microsoft's predecessor to the Windows
operating system.

 But security experts say the threat of outside access is too big a risk.

 "The Fed is now going to be vulnerable in two distinct ways. A hacker
could break in to the Fed's network and have full access to the system, or
a hacker might not have complete access but enough to cause a denial or
disruptions of service," said George Kurtz, co-author of "Hacking Exposed"
and CEO of Foundstone, an Internet security company.

 "If a security breach strikes the very heart of the financial world and
money stops moving around, then our financial system will literally start
to collapse and chaos will ensue."

 FedLine is expected to move massive amounts of money. Currently, Fedwire
transfers large-dollar payments averaging $3.5 million per transaction
among Federal Reserve offices, financial institutions and federal
government agencies.

 Patti Lorenzen, a spokeswoman for the Federal Reserve, said the agency is
taking every precaution.

 "Of course, we will not discuss the specifics of our security measures for
obvious reasons," she said. "We feel confident that this system adheres to
the highest standards of security. Without disclosing the specifics, it is
important to note that our security controls include authentication,
encryption, firewalls, intru sion detection and Federal Reserve conducted

 Ron Gula, president of Tenable Network Security and a specialist in
government cyber security, said he's sure the Fed is taking every
precaution. But no system is 100 percent foolproof.

 "If the motive was to manipulate the money transferring, there are Tom
Clancy scenarios where there are ways to subvert underlying technologies,"
Gula said. "For example, a malicious programmer can put something in the
Fed's network to cause the system to self-destruct or to wire them money."

 The biggest concern isn't the 13-year-old who hacks into the Fedwire and
sends himself some money - it's terrorism.

 On July 22, the Department of Homeland Security released an internal
report saying a cyber attack could result in "widespread disruption of
essential services ... damag(ing) our economy and put(ting) public safety
at risk."

 But the Fed's undertaking of this massive overhaul is considered a necessity.

 "Our strategy is to move to Web-based technology because there are
inherent limitations with DOS based technology and our goal is to provide
better and robust product offerings to meet our customers' needs," said
Laura Hughes, vice president of national marketing at the Chicago Fed,
which has spearheaded this program.

R. A. Hettinga <mailto: rah at>
The Internet Bearer Underwriting Corporation <>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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