Electronicbanking

Provisions and Guidelines for Safe and Sound Electronic Banking

Willemstad, December 2007

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Provisions and Guidelines for Safe and Sound Electronic Banking
I. II. III. IV. V. VI. VII. VIII. XI. X. Introduction ............................................................................................................................3 Legal base andscope..............................................................................................................4 Implementation.......................................................................................................................5 Supervisory approach.............................................................................................................6 Risk Management...................................................................................................................7 E-banking related risks ..........................................................................................................8 Risk mitigating counter measures.......................................................................................10 Internal Control....................................................................................................................14 Cross Border e-banking activities.......................................................................................16 Customer security, education and transparency...............................................................16

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I.

Introduction

In its continuous effort to promote and ensure safe and soundbanking practices in the Netherlands Antilles, the Bank van de Nederlandse Antillen (“the Bank”) hereby issues the “Provisions and Guidelines for Safe and Sound Electronic Banking”(hereafter “Provisions and Guidelines”). Ongoing innovations in information technology and competition among banking institutions, new market entrants, and mergers and acquisitions have contributed worldwide to a wider arrayof electronic banking (“hereinafter e-banking”) products and services. The Netherlands Antilles has also experienced this development amongst its credit institutions, and the acceptance of e-banking services has grown rapidly. E-banking carries benefits as well as risks to credit institutions. Because the characteristics of e-banking increase and modify banking risks and thereby influence theoverall risk profile of banking, the Bank finds it important that these risks be recognized, addressed, and managed by the relevant credit institutions in a prudent manner. Worldwide fraud, identity theft, money laundering, and terrorist financing also frequently are incline to move to countries where credit institutions provide e-banking products and services and which have inadequate riskmanagement regarding e-banking. Therefore, the Bank recommends that credit institutions adopt relevant policies and stronger risk management including internal control to prevent these kinds of immoral activities. These Provisions and Guidelines provide credit institutions, which are subject to the Bank’s supervision, with guidance on the general principles for risk management of e-banking1 and outlinesuggestions for consumer security and education. The Provisions and Guidelines should help credit institutions to expand their risk oversight policies and processes to cover their e-banking activities. The “Provisions and Guidelines” are particularly derived from the principles and recommendations for e-banking outlined by the Basel Committee on Banking Supervisions (“The Basel Committee”), in thepapers: “Risk Management Principles for E-banking” 2 and “Management and Supervision of Cross-Border E-banking Activities”2 issued in July 2003. The Bank encourages credit institutions to read and understand the principles set forth in the abovementioned documents and to continuously monitor updated publications related to e-banking activities posted on among other places on The Basel Committee’s...