Police may get power to intercept e-mails

Fears are growing that proposed legislation could seriously dent customer confidence in e-mail banks

A leading UK internet bank warned this week proposed new police powers to intercept e-mails would dent customers' confidence in e-mail banks. In a week that saw Egg - Britain's second largest internet bank - float on the stock market, boasting one million customers, fears grew in the industry that new legislation could threaten one of the personal financial industry's fastest growing sectors.

A leading UK internet bank warned this week proposed new police powers to intercept e-mails would dent customers' confidence in e-mail banks. In a week that saw Egg - Britain's second largest internet bank - float on the stock market, boasting one million customers, fears grew in the industry that new legislation could threaten one of the personal financial industry's fastest growing sectors.

To blame is the Regulation of Investigatory Powers Bill, currently before a House of Lords select committee. It would give the police wide-ranging powers to insist companies intercept and surrender business and personal e-mails sent through their systems.

Richard Duvall, chief marketing officer at Egg, says: "Customers have an expectation their banking details, their transactions and their statements will be kept private and won't be shared with anyone else. My worry would be about how the Bill would affect people's perception and whether it would make them even more nervous about doing meaningful things on the internet."

Tim Sweeney, director general of the British Bankers' Association, says: "As far as the banks are concerned, confidentiality is crucial to the bank/customer relationship. We will break the customer's confidence only if we are served the appropriate warrant or notice. This part of the Bill just puts e-mail communication in the same league as telephone and postal communication."

A London School of Economics (LSE) report published this week says: "The Bill substantially increases the power of public authorities without correspondingly increasing the scope for oversight and accountability." But a Home Office spokesman replies: "For an interception warrant to be applied for, the relevant law enforcement agency has to satisfy the Home Secretary that it is necessary to protect the economic well-being of the UK, to protect national security or in pursuit of the most serious organised crime. The warrant has to be personally authorised by the Home Secretary against a named target. He reads and scrutinises each one. That is a fairly significant oversight, I would say."

Some critics think the Home Secretary's approval will come too easily. The Alliance for Electronic Business claims the inclusion of the economic well-being test could allow the Home Secretary to issue intercept requests "on spurious grounds". And business leaders claim the Bill's measures, as currently drafted, would drive many companies overseas to avoid the UK's harsh regime and higher compliance costs.

Tom Wills-Sandford, a spokesman for the Alliance for Electronic Business, says: "The Government's objective is to make the UK the best place to do e-commerce. Some of the measures in the Bill have been rather too widely-drawn, and could threaten that objective."

The LSE report puts the cost to internet service providers of implementing the Bill's provisions at £640m over the next five years. But Mr Sweeney is confident there will be no resulting hike in internet bank charges. He says: "If there is a cost, it will be to internet service providers, and it will not be to banks. One can never say never, but we do not foresee any extra cost to consumers as a result of this legislation."

The financial nature of most banking communications means they look likely to be one of the prime areas for investigation under the new Bill.

Mr Wills-Sandford says: "A banking transaction is no different from doing an e-mail. If a banking transaction could be something to do with terrorism or drug-running, that would be a pretty good reason to intercept that communication."