Approximately 750 member institutions are connected to the regional centers via national communication lines, which are either public or private. Each of the 26 member countries has at least one regional center that acts as data concentrator for data flowing to and from the primary centers. The system is in operation 24 hours per day, 7 days per week. All members are required to be connected at least 7 hours per day during normal business hours in their locality to ensure that transactions reach their expected destination within a reasonable time period. Transaction volume now exceeds 150 thousand items per day.

Authentication of messages is based on an algorithm provided by SWIFT and "keys" used by sending and receiving institutions. These features are used to compute both the value and position of each character in the message text deriving a unique coded "authenticator" or "test key" for each. After the message is transmitted, the

Security and

Control of Funds Transfers

receiving institution uses the same method to decode the message and derive the "authenticator." If both "authenticators" do not agree, the receiving institution must contact the sender for resolution of the discrepancy. Other security features include log on/off controls, message sequence controls, and a highly structured format for text messages.

Funds are electronically exchanged everday among finan-
cial institutions, private companies and government agen-
cies. The exchange of these messages entails certain
risks. The major risks associated with funds transfer
messages are errors and omissions in preparation, errors
introduced during transmission of
transmission of the message where
data is lost or modified, and fraud.

Customers issue funds transfer instructions to financial institutuions in a number of ways. This can be accomplished through a computer-to-computer link, telegraph, telephone, and in rare instances by mail. The content of the messages transmitted via electronic networks usually include the senders identity, name and address of the receiver, and instructions concerning the transfer. Federal Reserve System Regulation J provides that once a funds transfer request is accepted by the receiving bank ownership of the funds is automatically transferred. Therefore, errors and omissions made in this process can result in losses by all parties to the transaction. Such losses include the cost of availability of funds, interest charges, and the cost of recovering missent funds and correcting problems. The risk from fraud is more obvious and more difficult to detect. A perpetrator can alter the amount and account number in which the funds will be deposited and withdraw the funds the same day. By the time the customer is notified, the funds are gone and almost impossible to trace. Data encryption is probably the best technique available at present to prevent passive and active wiretapping and ensure the integrity of data during transmission. Although, the National Bureau of Standards has developed a Data Encryption Standard (DES) which has been adopted by some organizations, widespread usage of data encryption techniques has not yet taken place in the financial industry.

The ABA's testing standard also includes a method to test the accuracy of key data items within the message. The key items are the date, month, nonzero numbers in the amount to be transferrred, and in some case the sequence number. A number of institutions have enhanced the ABA testing format over the years and their particular methods may vary somewhat. Financial institutions participating in the system must exchange "secret bank numbers" and coding books to allow for the coding/decoding of key data items. Access to these coding books must be strictly controlled. An example of the testing method is as follows: