U.S. Easing Curbs on Exports Of State-of-the-Art Encryption

The Commerce Department on Tuesday announced it will eliminate cumbersome licensing requirements for financial firms seeking to use sophisticated encryption technology abroad.

The new policy will let U.S. manufactured encryption products, regardless of how difficult they are to decode, be exported for use by banks, credit card companies, and securities firms in 45 countries.

To be eligible to use or export the technology abroad, however, the software must be given a one-time review by the Commerce Department. In addition, products cleared under the policy may only be used in the 45 countries that are members of international anti-money-laundering accords or have enacted anti-money-laundering laws of their own.

"This action gives our nation's financial institutions the flexibility they need to remain globally competitive," Commerce Secretary William M. Daley said before a gathering of U.S. exporters. "It balances those needs with law enforcement, national security, and foreign policy concerns."

Under the new guidelines, financial firms will be able to implement the state-of-the-art, 128-bit encryption codes without obtaining a Commerce Department license for each location where the products are used. The government will examine the technology and verify that the exporter has policies in place to make sure its encryption products do not fall into the hands of uncertified countries or terrorists.

The Commerce Department has also dropped a requirement that software makers develop "key recovery" technology that can be used to decode encrypted information.

Previously, only shorter 40-bit codes were exempt from the licensing and key-recovery requirements. "This allows us to have a more efficient way of bringing state-of-the-art cryptographic technology to the banking community," said Stephen R. Katz, chief information security officer for Citicorp.

But Mr. Katz, who is also chairman of the American Bankers Association's information security infrastructure working group, stressed that it is too early to tell whether the agency's one-time review process will approve export requests fast enough.

The new policy will allow exports to the world's top 100 banks and 70% of its financial institutions, according to Commerce.

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