Runninghead:ONLINEBANKINGANDITSEFFECTSONGOVERNMENT

Online Banking and its Effects on Government

Alyce Tolman
University Foundations 300

ONLINEBANKINGANDITSEFFECTSONGOVERNMENT

Online Banking and its Effects on Government

Online banking has grown rapidly with the age of the internet. The days of brick and
mortar banks are far from over, but online banking provides both banks and customers with
enormous benefits. For customers, online banking is not only convenient, but practical as well.
Banking over the web saves time and money since most banks provide services at lower costs
online than at an actual branch. For banks, they can cut costs and streamline transactions by
offering online services. However, with the benefits of online banking come some serious
security risks. The risks and resultant crimes that are committed in the virtual banking world
dont just affect customers and financial institutions; they also cause complex problems for
national governments.
One of the problems facing national governments in the rise of online banking is how to
combat cybercrime. Cybercrime has recently been generalized into three main categories:
1. Online fraud and forgery, facilitated through phishing and malicious spyware.
2. Attacks against information systems via denial of service and hacking.
3. Publication of illicit illegal content.
(Anderson, Barton, Bohme, Clayton, van Eeten, Levi and Savage, 2013 pg 3).
Banks and customers are susceptible to both online fraud and forgery (identity theft) and denial
of service. Denial of service attacks happen when cyber criminals use mass amounts of traffic
on a banks website to shut down its server capabilities (War on Terabytes, 2013).
Law enforcement agencies and governments face the challenge of how to arrest and
prosecute cyber criminals since they can use a global system to facilitate their attacks. For
example, a criminal in China can use an IP address from Russia to steal someones bank
information from the United States. Not only is it hard to find the actual location of the criminal,

ONLINEBANKINGANDITSEFFECTSONGOVERNMENT

but determining the jurisdiction of laws that criminal falls under is also a challenge. How and
where does a cyber criminal get brought to justice if they are committing crimes on a global
network? Currently, there is no global standard for cyber laws, and predominately they are
country specific (Enbody, Sood, 2013). Unless there are agreements in place between countries,
cyber laws cant cross borders.
Cyber frauds, on average, dont make much profit from their phishing and spam mail
scams when compared to how much money is spent trying to prevent these crimes from
happening (Anderson et al., 2013 pg 25). The direct costs include preventative costs (i.e.
antivirus and insurance), losses from the victims and institutions, and compensation payments to
the victims in response to the crime. Indirect costs can include loss of reputation and confidence
in online banking and e-commerce (Anderson et al., 2013 pg 4). Since cybercrime is changing
as rapidly as the technology it attacks, these costs are predicted to only increase over the coming
years.
Along with trying to prevent and prosecute cybercrime, governments also have to
regulate online banking that can easily cross borders. Regulation and lawmaking for e-banking
is difficult due to the fact that research into the area has been limited. Security risks and factors
that contribute to e-banking fraud have mainly been studied on a limited basis, and policy makers
have historically only had fragmented data and biased reports to work from (Anderson et al.,
2013 pg 4). In order to create effective legislation for protecting customers of online banking,
countries must be well informed of the advanced technological nature of the industry.
Another problem with trying to pass legislation and policies is the borderless nature of
the internet. Regulations and policies are mainly country specific and banks typically only have
a limited number of international regulations they need to adhere to. The difficulty lies in

ONLINEBANKINGANDITSEFFECTSONGOVERNMENT

cooperation between all nations to find a global standard with which to base regulation for online
banking. There have been several attempts at adopting global regulations in developed
countries, but a limited amount of cooperation between countries has been a big barrier to
passing legislation.
When considering regulation to protect customers and banks from cyber crime, the
question of who bears the liability gives rise to yet another problem. Governments must decide
whether financial institutions must bear the cost and resources of protecting themselves and their
customers from eminent attacks, or if the certainty of cyber attacks is worthy of government
protection? Should national governments place liability on the banks and force them to provide
up-to-date cyber-security systems, or is it governments responsibility to protect financial
institutions from enemy attacks much in the same way it would protect from any sort of land
attack (War on Terabytes, 2013)? This question of liability is very difficult to resolve and will
continue to be as online banking and cybercrime evolve with technology.
The online banking industry has grown rapidly in the internet age, and will continue to do
so as technology evolves and societies become more interconnected. Online banking and ecommerce provide opportunities for global growth that were not possible before the creation of
the internet. With the growth and expansion of the internet and its capabilities for banking
online, come security problems for banks, customers and governments. The problems that
governments face around the world are complex and require creative and progressive solutions.
Combating cybercrime and cyber fraud, creating regulation and legislation on a global standard,
and defining liability in a borderless industry, are just some of the problems facing policy makers
today.

ONLINEBANKINGANDITSEFFECTSONGOVERNMENT

References
Anderson, R., Barton, C., Bhme, R., Clayton, R., van Eeten, M. J., Levi, M., & Savage, S.
(2013). Measuring the Cost of Cybercrime. The Economics of Information Security and
Privacy (pp. 265-300). Springer Berlin Heidelberg.
de la Mata Munoz, A. "The Future Of Cross-Border Banking After The Crisis: Facing The
Challenges Through Regulation And Supervision." European Business Organization Law
Review 11.4 (2010): 575-607. Academic Search Premier. Web. 2 Nov. 2014.
Giles, J. (2010). The Problem with Online Banking. New Scientist, 205(2745), 18-19.
Enbody, R.J, Sood, A. K. "The Art of Cyber Bank Robbery." Crosstalk: The Journal Of Defense
Software Engineering 26.5 (2013): 9-16. Academic Search Premier. Web. 2 Nov. 2014.
Sullins, Lauren L. "Phishing" For A Solution: Domestic And International Approaches To
Decreasing Online Identity Theft." Emory International Law Review 20.1 (2006): 397433. Academic Search Premier. Web. 2 Nov. 2014.
"War on Terabytes." Economist 406.8821 (2013): 63. Academic Search Premier. Web. 2 Nov.
2014.