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[] zur Verwundbarkeit der globalen Finanzsystem-IT,
29/2001 - Updated 08:47 AM ET

Electronic financial networks: How safe are they?

By Jim Hopkins, USA TODAY 

Tens of billions of dollars were bottled up at the Bank of New York for
3 days after World Trade Center telephone systems collapsed on Sept. 11.
The bank, a linchpin on Wall Street, electronically transfers money and
stock and bond trades among investment firms and more than 7,000 banks
worldwide over high-speed telephone lines. After those lines were cut,
it was hours before some Bank of New York customers could determine the
status of their accounts. Had bonds they sold been delivered to buyers?
Had buyers paid? The crisis threatened to saddle clients with millions
of dollars in extra finance charges. That day, the bank immediately
switched to emergency backup systems outside Manhattan. By week's end,
operations returned to near normal.

 Still, the incident underscores the U.S. financial system's dependence
on a handful of key electronic payment networks and those networks'
vulnerability to attack. After Sept. 11, the FBI put banking and finance
on a list of seven industries to be on highest alert to threats.
 Short of nuclear war, nothing could shut down the payment networks for
good, finance and computer experts say. But they could be hampered for
hours, or days, as the Bank of New York incident showed.
 About $3.5 trillion pours daily through three major payment networks
that dwarf the Bank of New York's. The networks, run by banks and the
government over high-speed phone lines, converge at just 10 secret
data-processing centers nationwide. They transmit everything from
direct-deposit paychecks to utility bill payments to huge corporate
transfers in the USA and abroad.

 Domino effect

 If terrorists simultaneously destroyed all 10 hubs - either severing
the phone lines running to them or mounting a massive cyberattack - they
could destabilize the U.S. economy until new systems were created,
experts say.
 Given enough delay, companies and consumers could default on loans.
Corporations could not access cash. And the liquidity crisis could
cascade through the global economy. "You would be bringing the financial
system to its knees," says Maureen Burton, a finance professor at
California State Polytechnic University.
 It is no secret that the financial system is vulnerable. A 1997
presidential commission on U.S. defense said electronic payment networks
are inviting targets for terrorists and other criminals. Together, they
"seem to present a serious physical vulnerability" to the financial
system because there are "few if any alternatives available to provide
those services in the event of a disabling catastrophe," the commission
said in its final report.
 To date, no one has succeeded in taking down the largest U.S.-based
payment networks, officials of the biggest say.
 Yet the commission noted that financial institutions are loath to
publicize "intrusions" of individual computer networks, doing so might
shake consumer confidence. Vivek Wadhwa, CEO of Relativity Technologies,
a bank computer consulting firm, says he is "sure there have been many
instances that have not been reported" involving bank computer systems.
 While the government, Wall Street and the electronic payments industry
maintain they have enough geographic diversity and backup systems, they
are studying ways to bolster security. The New York Clearing House,
which runs a major payment network, is reviewing its operations. For
several reasons, including a desire to disperse geographically,
investment banks are moving operations out of the concentrated financial
district of Manhattan. And industry officials such as Jill Considine,
CEO of the Depository Trust & Clearing Corp., are reconsidering the
wisdom of concentrating so many tech workers and telecommunications
systems in Lower Manhattan.

 Vulnerable networks

 Money has been transferred electronically since at least 1918 when the
Federal Reserve - which manages the nation's money supply - started
using a private telegraph system. Computer networks accelerated the
trend. Three major systems have become the U.S. economy's financial
 o Automated Clearing House Network. The cooperative run by banks, Visa
and the Federal Reserve transfers $20 trillion a year over leased phone
lines among U.S. consumers, banks and companies. Most of the 7 billion
annual transactions are small payments that occur regularly, such as
direct-deposit paychecks and Social Security checks. There are 10 main
and backup centers in New York City, Phoenix, New Jersey and other U.S.
locations kept secret for security reasons.
 o Fedwire. Run by the Federal Reserve, Fedwire moves more than $570
trillion a year between U.S. banks, mostly for big companies. Nearly 70%
passes through the district run by the New York Fed, based in Lower
Manhattan. Again, the network runs over leased phone lines converging at
three "geographically dispersed" data-processing centers, the Fed says.
Those centers also run the Fed's portion of the Automated Clearing House
 o CHIPS. The Clearing House Inter-Bank Payment System serves
international banking and handles almost $300 trillion annually. It is
run by the New York Clearing House, a cooperative owned by 59 banks.
CHIPS' phone lines converge at a main office in New York. There is a
backup center in New Jersey. The centers also run the cooperative's
portion of the Automated Clearing House Network.
 The three systems were not interrupted on Sept. 11, officials say.
Eight banks near the World Trade Center had to establish new data lines
to CHIPS after they relocated that day. That delayed payment transfers
for several hours. But the financial impact was minimal.

 Rebuilding: Hours or days?

 There is little consensus on the time needed to resurrect networks
after a catastrophe. The National Automated Clearing House Association,
a trade group that sets industry standards, says it could be done in a
few hours. Backup systems exist. Lost data could be recovered from
copies kept at multiple locations.
 If all 10 data centers were destroyed, a new network could be up within
hours, says William Nelson, executive vice president of the clearing
house trade group. He wouldn't be more specific.
 He says that is possible because big banks use similar systems to store
and transmit data and could resend data believed lost to a new network
housed at existing bank processing centers.
 But given the delays seen at the Bank of New York, computer and finance
experts say it could take many hours, or days, to reconstruct networks.
It could take 24 hours to resurrect the work done by just one of the 10
data centers, says computer security expert Michael Erbschloe of
Computer Economics.
 Nelson's time estimate "seems pretty fast to me," adds University of
Louisville finance professor Russ Ray, who has studied Fedwire and
 Nelson admits he has never considered a scenario under which all 10
centers are destroyed. "I think you're talking about something that
would be really, really hard to imagine," he says. Then, he adds, "I
guess the World Trade Center disaster was hard to imagine, too."

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