Management of Federal Information Resources

SUMMARY: The Office of Management and Budget (OMB) requests public and

agency comment on proposed procedures and guidance to implement the

Government Paperwork Elimination Act (GPEA). Under the GPEA, agencies

must generally provide for the optional use and acceptance of

electronic documents and signatures, and electronic record keeping

where practicable, by October 2003.

DATES: Persons who wish to comment on the GPEA procedures and guidance

should submit their comments no later than July 5, 1999. Each

Department and Agency is asked to submit a single coordinated set of

comments.

ADDRESSES: Electronic comments will be included as part of the official

record. Please send comments electronically to: [email protected].

Alternatively, hardcopy comments may be addressed to: Information

Policy and Technology Branch, Office of Information and Regulatory

Affairs, Office of Management and Budget, Room 10236 New Executive

Office Building, Washington, D.C. 20503.

ELECTRONIC AVAILABILITY: This document is available on the Internet in

the OMB library of the ``Welcome to the White House'' home page, http:/

/www.whitehouse.gov/WH/EOP/OMB/, the CIO Council's home page, http://

cio.gov, and at the Government Information Technology Services Board's

security home page at http://gits-sec.treas.gov.

FOR FURTHER INFORMATION CONTACT: Peter Weiss, Information Policy and

Technology Branch, (202) 395-3630. Press inquiries should be addressed

to the OMB Communications Office, (202) 395-7254.

SUPPLEMENTARY INFORMATION: Public confidence in the security of the

government's electronic information and information technology is

essential in creating government services that are more accessible,

efficient, and easy to use. Electronic commerce, electronic mail, and

electronic benefits transfer sensitive information within government,

between the government and private industry or individuals, and among

governments. These electronic systems must protect the information's

confidentiality, assure that the information is not altered in an

unauthorized way, and be available when needed. A corresponding policy

and management structure must support these protections.

In a major step in this direction, the Congress recently enacted

legislation, supported by the Administration, intended to increase the

ability of citizens to interact with the Federal government

electronically. The Government Paperwork Elimination Act, Title XVII of

Pub. L. 105-277, provides for Federal agencies, by October 21, 2003, to

give persons who are required to maintain, submit, or disclose

information the option of doing so electronically when practicable as a

substitute for paper, and to use electronic authentication (electronic

signature) methods to verify the identity of the sender and the

integrity of electronic content. The Act specifically provides that

electronic records and their related electronic signatures are not to

be denied legal effect, validity, or enforceability merely because they

are in electronic form.

OMB's proposed implementation of the Act is in two parts. The first

part sets forth the policies and procedures for implementing the Act,

and requesting certain specific agencies to provide assistance in

particular areas. The second part is intended to provide Federal

managers with practical implementation guidance.

OMB requests comments on the proposed procedures and guidance.

Donald Arbuckle,

Deputy Administrator and Acting Administrator, Office of Information

and Regulatory Affairs.

Proposed OMB Procedures and Guidance on Implementing the Government

Paperwork Elimination Act

This provides Executive agencies with the guidance needed to

implement the Government Paperwork Elimination Act (GPEA), Pub. L. 105-

277, Title XVII, which took effect on October 21, 1998. The GPEA is an

important tool to fulfill the Administration's vision of improved

customer service and governmental efficiency through the use of

information technology. This vision, articulated in Vice President

Gore's 1997 report, Access America (http://gits.gov), involves

widespread use of the Internet, with Federal agencies transacting

business electronically, in the same way as commercial enterprises.

Those who wished to do business in this way could avoid traveling to

government offices, waiting in line, or mailing paper forms. Delivery

of government services in this way would normally save the government

time and money as well.

Access America recognized, however, that:

Public confidence in the security of the government's electronic

information and information technology is essential to creating

government services that are more accessible, efficient, and easy to

use. Electronic commerce, electronic mail, and electronic benefits

transfer sensitive information within government, between governments

and private industry or individuals, and among governments. These

electronic systems must protect the information's confidentiality,

assure that the information is not altered in an unauthorized way, and

be available when needed.

Part I. Policy and Procedures

Section 1. Policy

The GPEA charges the Office of Management and Budget, in

consultation with the Commerce Department and other appropriate

entities, with the development of procedures for Executive agencies to

follow in using and accepting electronic documents and signatures.

These procedures reflect and are to be executed with due consideration

of the following policies:

a. Maintaining compatibility with standards and technology for

electronic signatures generally used in commerce and industry and by

State governments;

b. not inappropriately favoring one industry or technology;

c. ensuring that electronic signatures are as reliable as is

appropriate for the purpose in question and that electronic record

keeping systems reliably preserve the information submitted;

d. providing wherever appropriate for the electronic acknowledgment

of electronic filings that are successfully submitted; and

e. providing, to the extent feasible and appropriate, for multiple

methods of electronic signatures or identifiers for the submission of

such forms where the agency anticipates receipt of 50,000 or more

electronic submittals of a particular form.

Section 2. Procedures

a. The GPEA recognizes that adoption of electronic systems should

be consistent with the need to ensure that investments in information

technology are economically prudent to accomplish the agency's mission

and give due regard to privacy and security.

[[Page 10897]]

Moreover, it is Administration policy that a decision to not allow the

option of electronic filing and record keeping should be supported by a

specific showing that, in the context of a particular application,

there is no reasonably cost-effective combination of technologies and

management controls that can minimize the risk of significant harm.

Accordingly, agencies should develop and implement plans to use and

accept documents in electronic form, and engage in electronic

transactions.

b. An agency's determination of which technology is appropriate for

a given transaction must include a risk assessment, and an evaluation

of targeted customer or user needs. Performing a risk assessment to

evaluate electronic signature alternatives should not be viewed as an

isolated activity or an end in itself. These agency risk assessments

should draw from and feed into the interrelated requirements of the

Paperwork Reduction Act, the Computer Security Act, the Government

Performance and Results Act, the Clinger-Cohen Act, the Federal

Managers Financial Integrity Act, and the Chief Financial Officers Act.

c. The initial use of the risk assessment is to identify and

mitigate risks in the context of available technologies and their

relative total costs and effects on the program being analyzed. The

assessment also should be used to develop baselines and verifiable

performance measures that track the agency's mission, strategic plans,

and tactical goals.

d. The analysis of costs and benefits should be designed so that it

can be used, not only as a guide to selecting among the technologies

under consideration, but also to generate a business case and

verifiable return on investment to support decisions regarding overall

programmatic direction, investment decisions, and budgetary priorities.

The effects on the public and its needs and readiness to move to an

electronic environment are important considerations.

Section 3. Agency Responsibilities

a. In order to ensure a smooth and cost-effective transition to a

more electronic government providing improved service to the public,

each agency shall:

1. Include in its strategic IT plans supporting program

responsibilities (required under OMB Circular A-11) a summary of the

agency's schedule to implement optional electronic maintenance,

submission, or disclosure of information when practicable as a

substitute for paper, including through the use of electronic

signatures when practicable, by the end of Fiscal Year 2003 (note:

agencies need not revise their reports on Federal purchasing and

payment already required by OMB M-99-02, but should include the

automation of purchasing and payment functions in their schedule);

2. consider whether an appropriate combination of information

security practices, authentication technologies and management controls

for each application will be practicable, and if so, which combination

will minimize risk and maximize benefits in a cost effective manner;

3. promulgate or amend regulations or policies as necessary and

appropriate to: (1) Implement optional electronic submission,

maintenance, or disclosure of information, and the use of any necessary

electronic signature alternatives; and (2) permit private employers who

have record keeping responsibilities imposed by the Federal government

to electronically store and file information pertaining to their

employees electronically;

4. maintain appropriate information system confidentiality and

security in accordance with the guidance contained OMB Circular A-130,

Appendices I and III, and use, to the maximum extent practicable,

technologies either prescribed in Federal Information Processing

Standards promulgated by the Secretary of Commerce or supported by

voluntary consensus standards as defined in OMB Circular A-119;

5. provide, to the extent feasible and appropriate, more than one

electronic signature option for public reporting forms which are

collected annually in electronic form from more than 50,000

respondents; and

6. report progress against the strategic plans developed in

response to 1. above through the annual agency reports submitted to OMB

under the Paperwork Reduction Act, including any determination that a

particular application is inappropriate for conversion to electronic

filing.

(b) Department of Commerce.

The Department of Commerce shall promulgate Federal Information

Processing Standards as appropriate to further the specific goals of

the GPEA. The Department should also develop best practices in the area

of authentication technologies and implementations, including

cryptographic digital signature technology, with assistance from the

Government Information Technology Services Board, the Chief Information

Officers Council and the President's Management Council.

(c) Department of the Treasury.

The Department of the Treasury shall prescribe policies and

practices for the use of electronic authentication techniques in

Federal payments and collections, and ensure that they fulfill the the

goals of GPEA.

(d) Department of Justice.

The Department of Justice shall develop and publish practical

guidance on legal considerations related to agency use of electronic

filing and record keeping.

(e) General Services Administration.

The General Services Administration shall support agencies'

implementation of electronic signatures and related electronic service

delivery.

Part II. Paperwork Elimination Through the Use of Electronic

Signatures and Electronic Record Keeping

This part provides Federal managers with basic information to

assist in planning for an orderly and efficient transition to

electronic government. Agencies should begin their planning promptly to

ensure compliance with the timetable in the GPEA.

Section 1. Introduction and Background

a. As required by the Government Paperwork Elimination Act (GPEA),

this Part provides guidance for agencies to use in deciding whether to

use electronic signature technology for an application, which

electronic signature technology may be most appropriate, and how to

minimize the risk of fraud, error, or misuse when implementing an

electronic signature technology to authenticate electronic

transactions. These procedures are consistent with the requirement of

the Paperwork Reduction Act of 1995 (PRA) that agencies shall

``consistent with the Computer Security Act of 1987 (CSA)(40 U.S.C. 759

note), identify and afford security protections commensurate with the

risk and magnitude of the harm resulting from the loss, misuse, or

unauthorized access to or modification of information collected or

maintained by or on behalf of an agency.'' 44 U.S.C. 3506(g)(3).

b. As the GPEA, PRA, and CSA recognize, the goal of information

security is to protect the integrity of electronic records and

transactions. Different security approaches offer varying levels of

assurance in an electronic environment. Among these approaches (in an

ascending level of assurance) are (1) the so-called ``shared secrets''

methods, e.g., personal identification numbers or passwords, (2)

digitized signatures or biometric means of identification such as

fingerprints or retinal patterns and voice recognition,

[[Page 10898]]

and (3) digital signatures. Combinations of approaches (e.g., digital

signatures with biometrics) are also possible and may provide even

higher levels of assurance. Deciding which to use in an application

depends upon the risks associated with the loss, misuse or compromise

of the information compared to the cost and effort associated with

deploying and managing the increasingly secure methods to mitigate

those risks. Agencies must strike a balance, recognizing that achieving

absolute security is likely to be in most cases highly improbable and

prohibitively expensive.

Section 2. What Is an ``Electronic Signature?''

a. The GPEA defines ``electronic signature'' as follows:

A method of signing an electronic message that--

(A) Identifies and authenticates a particular person as the

source of the electronic message; and

(B) Indicates such person's approval of the information

contained in the electronic message. (GPEA, section 1709(1)).

This definition should be interpreted by reference to accepted

legal definitions of signatures. The term ``signature'' has long been

understood as including ``any symbol executed or adopted by a party

with present intention to authenticate a writing.'' (Uniform Commercial

Code, 1-201(39)(1970)). These flexible definitions permit the use of

different electronic signature technologies, such as digital

signatures, digitized signatures or biometrics, discussed below. For

this reason, while it is the case that, for historical reasons, the

Federal Rules of Evidence are tailored to the admissibility of paper-

based evidence, the Rules of Evidence have no bias against electronic

evidence.

b. In enacting the GPEA, Congress addressed the legal effect and

validity of electronic signatures or other electronic authentication:

Electronic records submitted or maintained in accordance with

procedures developed under this title, or electronic signatures or

other forms of electronic authentication used in accordance with

such procedures, shall not be denied legal effect, validity, or

enforceability because such records are in electronic form. (GPEA,

section 1707).

Section 3. Risk Factors To Consider In Planning and Implementing an

Electronic Signature or Record Keeping System

Electronic signature technologies can offer degrees of confidence

in authenticating identity greater even than the presence of a

handwritten signature. These digital tools should be used to control

risks in a cost-effective manner. In determining whether an electronic

signature is sufficiently reliable for a particular purpose, agencies

should consider the relationships between the parties, the value of the

transaction, and the likely need for accessible, persuasive information

regarding the transaction at some later date. Once these factors are

considered separately, an agency should consider them together to

evaluate its sensitivity to risk for a particular process.

a. The relationship between the parties. Agency transactions fall

into five general categories, each of which may be vulnerable to

different security risks:

(1) Intra-agency transactions (i.e., those which remain within the

same Federal agency).

(2) Inter-agency transactions (i.e., those between Federal

agencies).

(3) Transactions between a Federal agency and state or local

government agencies.

(4) Transactions between a Federal agency and a private

organization--contractor, university, non-profit organization, or other

entity.

(5) Transactions between a Federal agency and a member of the

general public.

Inter- or intra-governmental transactions of a relatively routine

nature will generally entail little risk of a trading partner later

repudiating the transaction, and almost no risk of the trading partner

committing fraud. Similarly, transactions between a regulatory agency

and a publicly traded corporation or other known entity regulated by

that agency bear a relatively low risk of repudiation or fraud. Risk

also tends to be relatively low in cases where there is an ongoing

relationship between the parties. On the other hand, a one-time

transaction between a person and an agency, which has legal or

financial implications, bears the highest risk. In all cases, the

relative value of the transaction needs to be considered.

b. The value of the transaction. Agency transactions fall into five

general categories, each of which may be vulnerable to different

security risks:

(1) Transactions involving the transfer of funds.

(2) Transactions where the parties commit to actions or contracts

that may give rise to financial or legal liability.

(3) Transactions involving information protected under the Privacy

Act or other agency-specific statutes obliging that access to the

information be restricted.

(4) Transactions where the party is fulfilling a legal

responsibility which, if not performed, creates a legal liability

(criminal or civil).

(5) Transactions where no funds are transferred, no financial or

legal liability is involved and no privacy or confidentiality issues

are involved (electronic signatures are least necessary in these

transactions and should not be used unless specifically required by law

or regulation).

c. The likely need for accessible, persuasive information regarding

the transaction at a later point. Agency transactions fall into five

general categories:

(1) Transactions where the information generated will never be

needed again.

(2) Transactions where the information generated may later be

subject to audit.

(3) Transactions where the information generated may later be

subject to dispute by one of the parties (or alleged parties) to the

transaction.

(4) Transactions where the information generated may later be

subject to dispute by a non-party to the transaction.

(5) Transactions where the information generated may later be

needed as proof in court.

d. Synthesizing the Risk Factors.

(1) To evaluate the suitability of electronic signature

alternatives for a particular application, the agency needs to perform

a qualitative risk analysis and should then determine the particular

technologies and management controls best suited to minimizing the risk

to an acceptable level while maximizing the benefits to the parties

involved.

(2) Risk analyses must recognize that no signature alternative is

totally reliable and secure. Every method of signature, whether

electronic or paper, can be compromised to some degree with enough

technology or due to poor security procedures or practices. In

estimating the cost of any system, agencies should include costs

associated with hardware, software, administration and support of the

system, both short-term and long-term. If it would be extremely

expensive to set up a very secure system, but past experience with

fraud risks and a careful analysis of those risks shows that exposure

is low, a less expensive system that deters the majority of fraud is

probably warranted. However, in making this tradeoff, agencies should:

(a) Evaluate whether the security elements of a less expensive system

can be disproportionately exploited resulting in greater exposure to

fraud than would be expected in

[[Page 10899]]

comparable non-automated systems; and (b) consider management and other

non-technical process controls which could reduce those risks.

(3) A qualitative risk analysis also should recognize that all

risks and benefits are not quantifiable. While some transactions can be

assigned a definite monetary value that may be placed at risk, many

cannot. For example, the value of deterring fraud cannot generally be

quantified. Should an agency conclude that a new automated system is

less secure than an old, paper-based system, attempts to commit fraud

or to repudiate transactions may increase. On the benefit side, it is

not always possible to assign a dollar value to the increased

efficiency that an agency experiences when it automates a labor-

intensive process, although agencies should attempt to make this

estimation whenever feasible. Usually, it is not possible to quantify

in monetary terms attitudes such as increased customer satisfaction and

willingness to cooperate with an agency, which are engendered by the

transition from onerous paper processes to user-friendly electronic

processes.

(4) One advantage of electronic authentication is that an agency

may strengthen the signature validation by incorporating electronic

links between the user and preexisting data about that user in the

agency's records. The IRS has successfully adopted this approach in its

TeleFile program, which enables selected taxpayers to file 1040EZs with

a touch-tone phone. Taxpayers get Customer Service Numbers (CSNs, i.e.,

PINs) that they then use to sign their returns and which help to

validate their identities to the agency. Even though a CSN is not

unique to an individual taxpayer (since it is only five digits long),

the IRS authenticates the filer by using other identifying factors,

such as the taxpayer's date of birth, taxpayer identification number,

and by using additional procedures. This approach is not used over the

Internet. Rather, it occurs in short-term connections over telephone

lines, an environment where it is comparatively difficult for

malefactors to eavesdrop and to steal information or to substitute

false information for fraudulent purposes.

(5) The Computer Security Act places on agency managers the

responsibility to select an appropriate combination of technologies and

practices to minimize risk cost-effectively while maximizing benefits

to the agency and to its customers. These decisions, however

qualitative, should be documented for later review and adjustment.

Section 4. Privacy and Disclosure

Section 1708 of the GPEA limits the use of information collected in

electronic signature services for communications with a Federal agency.

It directs agencies and their staff and contractor personnel not to

such use information for any purpose other than for facilitating the

communication. Exceptions exist if the person (or entity) who is the

subject of the information provides affirmative consent to the

additional use of the information, or if such additional use is

otherwise provided by law. Accordingly, agencies should follow several

privacy tenets:

a. Electronic authentication should only be required where needed.

Many transactions do not need, and should not require, detailed

information about the individual.

b. When electronic authentication is required for a transaction, do

not collect more information from the user than is required for the

application.

c. Users should be able to decide the scope of their electronic

means of authentication. In other words, if a user wants a certain

mechanism for authentication to work only with a single agency or for a

single type of transaction, the user's desires should be honored if

practicable. Conversely, if the user wishes to have the authentication

work with multiple agencies or for multiple types of transactions, that

should also be permitted consistent with how the agency employs such

means of authentication and with relevant statute and regulation.

d. Agencies should ensure, and users should be informed, that

information collected for the purpose of issuing or using electronic

means of authentication will be managed and protected in accordance

with applicable requirements under the Privacy Act, the Computer

Security Act, and any agency-specific statutes mandating the protection

of such information.

Section 5. Overview of Current Electronic Signature Technologies

This section addresses two categories of security: (1) Non-

cryptographic methods of authenticating identity; and (2) cryptographic

control methods. The non-cryptographic approach relies solely on an

identification and authentication mechanism linked to a specific

software application. Cryptographic controls can be used for multiple

applications, if properly managed, and encompass authentication and

encryption services. A highly secure implementation may combine both

categories of technologies. The spectrum of electronic signature

technologies currently available is described below.

a. Non-Cryptographic Methods of Authenticating Identity

(1) Personal Identification Number (PIN) or password: A user

accessing an agency's electronic application is requested to enter a

``shared secret'' (called ``shared'' because it is known both to the

user and to the system), such as a password or PIN. When the user of a

system enters her name, she also enters a password or PIN. The system

checks that password or PIN as a shared secret to ``authenticate'' the

user. If the authentication process is performed over an open network

such as the Internet, it is usually essential that at least the shared

secret be encrypted; this can be accomplished through the technology

called ``Secure Sockets Layer'' currently built into almost all popular

Web browsers, in a fashion that is transparent to the end user.

(2) Smart Card: A smart card is a plastic card the size of a credit

card which contains an embedded chip that can generate, store, and/or

process data. It can be used to facilitate various authentication

technologies. A user inserts the smart card into a card reader device

attached to a microcomputer or network input device. In the computer,

information from the card's chip is read by security software only when

the user enters a PIN, password, or biometric identifier. This method

provides greater security than use of a PIN alone, because a user must

have both (a) physical possession of the smart card and (b) knowledge

of the PIN. Good security requires that the smart card and the PIN

never be kept together. Note that the PIN, password or biometric

identifier in this case is a secret shared between the user and the

smart card, not between the user and a local or remote computer.

(3) Digitized Signature: A digitized signature is a graphical image

of a handwritten signature. Some applications require a user to create

his or her hand-written signature using a special computer input

device, such as a digital pen and pad. The digitized representation of

the entered signature is compared with a stored copy of the graphical

image of the handwritten signature. If special software considers both

images comparable, the signature is considered valid. This application

of technology shares the same security issues as those using the PIN or

password approach, because the digitized signature is another form of

shared secret known both to the user and to the system. The digitized

signature is more reliable for

[[Page 10900]]

authentication than a password or PIN because there is a biometric

component to the creation of the image of the handwritten signature.

Forging a digitized signature can be more difficult than forging a

paper signature to the extent that the technology digitally compares

the submitted signature image with the known signature image, and is

better than the human eye. Another element in a digitized signature

which helps make it unique is measuring how each stroke is made--its

duration or pen pressure, for example. This information can also be

compared to a reference value. As with all shared secret techniques,

compromise of a digitized signature image file could pose a security

risk to users.

(4) Biometrics: Individuals have unique physical characteristics

that can be converted into digital form and then interpreted by a

computer. Among these are voice patterns (where an individual's spoken

words are converted into a special electronic representation),

fingerprints, and the blood vessel patterns present on the retina (or

rear) of one or both eyes. In this technology, the physical

characteristic is measured (by a microphone, optical reader, or some

other device), converted into digital form, and then compared with a

copy of that characteristic stored in the computer and authenticated

beforehand as belonging to a particular person. If the test pattern and

the previously stored patterns are sufficiently close (to a degree

which is usually selectable by the authenticating application), the

authentication will be accepted by the software, and the transaction

allowed to proceed. Biometric applications can provide very high levels

of authentication especially when the identifier is obtained in the

presence of a third party (making spoofing difficult), but as with any

shared secret, if the digital form is compromised, impersonation

becomes a serious risk. Thus, just like PINs, such information should

not be sent over open networks unless it is encrypted. Moreover,

measurement and recording of a physical characteristic can raise

privacy concerns.

b. Cryptographic Control

Creating electronic signatures may involve the use of cryptography

in two ways: symmetric (or shared private key) cryptography, or

asymmetric (public key/private key) cryptography. The latter is used in

producing digital signatures, discussed further below.

(1) Shared Private Key Cryptography. In shared private key

(symmetric) approaches, the user signs a document and verifies the

signature using a single key (consisting of a long string of zeros and

ones) that is not publicly known, or is secret. Since the same key does

these two functions, it must be transferred from the signer to the

recipient of the message. This situation can undermine confidence in

the authentication of the user's identity because the private key is

shared between sender and recipient and therefore is no longer unique

to one person. Since the private key is shared between the sender and

possibly many recipients, it is really not ``private'' to the sender

and hence has lesser value as an authentication mechanism. This

approach offers no additional cryptographic strength over digital

signatures (see below). Further, digital signatures avoid the need for

the shared secret.

(2) Public/Private Key (Asymmetric) Cryptography--Digital

Signatures. (a) To produce a digital signature, a user has his or her

computer generate two mathematically linked keys--a private signing key

that is kept private, and a public validation key that is available to

the public. The private key cannot be deduced from the public key. In

practice, the public key is made part of a ``digital certificate,''

which is a specialized electronic document digitally signed by the

issuer of the certificate, binding the identity of the individual to

his or her private key in an unalterable fashion.

(b) A ``digital signature'' is created when the owner of a private

signing key uses that key to create a unique mark (called a ``signed

hash'') on an electronic document or file. The recipient employs the

owner's public key to validate the authenticity of the attached private

key. This process also verifies that the document was not altered.

Since the two keys are mathematically linked, they are unique: only one

public key will validate signatures made using its corresponding

private key. Moreover, if the private key has been properly protected

from compromise or loss, the signature is unique to the individual who

owns it, that is, the owner is bound by the signature. One concern in

relatively high-risk transactions is that the private key owner could

feign loss to repudiate a transaction. This concern can be mitigated by

encoding the private key onto a smart card or an equivalent device, and

by using a biometric mechanism (rather than a PIN or password) as the

shared secret between the user and the smart card for unlocking the

private key to effect a signature. It can also be addressed by agencies

establishing clear procedures for a particular implementation, so that

all parties know what the obligations, risks and consequences are.

The reliability of the digital signature is directly proportional

to the degree of confidence one has in the link between the owner's

identity and the digital certificate, how well the owner has protected

the private key from compromise or loss, and to the cryptographic

strength of the methodology used to generate the key pair. Further

information on digital signatures can be found in Access with Trust

(http://gits-sec.treas.gov), a report published by OMB and NPR.

c. Technical Considerations of the Various Technologies

(1) While generally the most certain method for assuring identity

electronically, use of digital signatures requires agencies to develop

a series of policies and documents which provide the important

underlying framework of trust and which facilitate the evaluation of

risk. The framework identifies how well the signer's identity is bound

to his or her public key in a digital certificate (identity proofing);

whether the private key is placed on a highly secure hardware token or

is encapsulated in software only; and how difficult it is for a

malefactor to deduce using cryptographic methods the private key (the

cryptographic strength of the key-generating algorithm).

(2) By themselves, digitized (not digital) signatures, PINs and

biometric identifiers do not directly bind identity to the contents of

a document. For them to do so, they must be used in conjunction with

some other mechanism. Biometric identifiers such as retinal patterns

used in conjunction with digital signatures can offer far greater proof

of identify than pen and ink signatures.

(3) While not as robust as biometric identifiers and digital

signatures, PINs have the decided advantage of proven customer and

citizen acceptance, as evidenced by the universal use of PINs for

automated teller machine transactions. Such transactions, however,

typically occur over proprietary networks rather than open networks

like the Internet, where eavesdropping on transactions is much easier,

unless the messages are encrypted.

(4) It is important to remember that technical factors are but one

aspect to be considered when an agency plans to implement electronic

signature-based applications. Other important aspects are considered in

the following sections.

[[Page 10901]]

Section 6. Agency Implementation of Electronic Signature and

Authentication

After the agency has conducted the risk analysis and identified an

appropriate electronic signature or other electronic authentication,

the agency will then proceed to implement this decision. In doing so,

agencies should consider the following:

a. Develop a regulatory or policy scheme. Agencies should consider

whether their programmatic regulations or policies support the use and

enforceability of electronic signature alternatives to handwritten

signatures. By clearly informing the regulated community that

electronic signatures and records will be acceptable and used for

enforcement purposes, their legal standing is enhanced. Several

agencies have already promulgated policies and regulations making this

clear, and a number are developing them:

Securities and Exchange Commission (17 CFR Part 232), electronic

regulatory filings; Environmental Protection Agency (55 FR 31,030

(1990)), policy on electronic reporting;

Food and Drug Administration (21 CFR Part 11), electronic

signatures and records; Internal Revenue Service (Treasury Reg.

301.6061-1), signature alternatives for tax filings;

Federal Acquisition Regulation (41 CFR Parts 2 and 4), electronic

contracts; General Services Acquisition Regulation (48 CFR Part

552.216-73), electronic orders; Federal Property Management Regulations

(41 CFR Part 101-41), electronic bills of lading.

When specifying the requirements for using electronic record

keeping by regulated entities (particularly the maintenance of

electronic forms pertaining to employees by employers), agencies should

consider the ``Performance Guideline for the Legal Acceptance of

Records Produced by Information Technology Systems,'' developed by the

Association for Information and Image Management (ANSI AIIM TR31). This

document provides suggestions for maximizing the likelihood that

electronically filed and stored documents will be accorded full legal

recognition. If an agency chooses to use digital signatures, a

regulation may specify that each individual will be issued a unique

digital signature certificate to use, agree to keep the private key

confidential, and agree to accept responsibility for anything that is

submitted using that key, or other conditions under which the agency

will accept electronic submissions using it.

b. Use a mutually-understood, signed agreement between the person

or entity submitting the electronically-signed information and the

receiving Federal agency.

(1) As a matter of efficiency, contractual arrangements with large

numbers of trading partners would be best accomplished by setting forth

an agency's terms and conditions in a regulation. Arrangements with

smaller numbers of trading partners may lend themselves to one or more

agreements, using a document referred to as a ``terms and conditions''

agreement. These agreements can ensure that all conditions of

submission and receipt of data electronically are known and understood

by the submitting parties. This is particularly the case where terms

and conditions are not spelled out in agency programmatic regulations.

(2) It is also important to establish that the user of the digital

signature or PIN/password is fully aware of what he or she is signing

at the time of signature. This can be ensured by programming

appropriate ceremonial banners that alert the individual of the gravity

of the action into the software application. The presence of such

banners can later be used to demonstrate to a court that the user was

fully informed of and aware of what he or she was signing.

c. Minimize the likelihood of repudiation. Agencies should develop

well-documented and established mechanisms and procedures to tie

transaction in a legally binding way to an individual. The integrity of

even the most secure digital signature rests on the continuing

confidentiality of the private key, for example. Similarly, in the case

of electronic signatures based on the use of PINs, the integrity of the

transaction depends on the user not disclosing the PIN. If a defendant

is later charged with a crime based on an electronically signed

document, he or she would have every incentive to show a lack of

control over (or loss of) the private key or PIN. Indeed, if that

defendant plans to commit fraud, he or she may intentionally compromise

the secrecy of the key or PIN, so that the government would later be

unable to link him or her to the electronic transaction.

Thus, transactions which appear to be at high risk for fraud, e.g.,

one-time high-value transactions with persons not previously known to

an agency, may require extra safeguards or may not be appropriate for

electronic transactions. One way to mitigate this risk is to require

that private keys be encoded on hardware tokens, making possession of

the token a critical requirement. Another way to guard against fraud is

to include other identifying data in the transaction that links the key

or PIN to the individual, preferably something not readily available to

others.

d. Access to the electronic data, after receipt, needs to be

carefully controlled yet available in a meaningful and timely fashion.

Security measures should be in place that ensure that no one is able to

alter a transaction, or substitute something in its place, once it has

been received by the agency. Thus, the receiving agency needs to take

prudent steps to control access to the electronic transaction through

such methods as limiting access to the computer database containing the

transaction, and performing processing with the data using copies of

the transaction rather than the original. Moreover, the information may

be needed for audits, disputes, or court cases many years after the

transaction itself took place. Agencies should make plans for storing

data, and providing meaningful and timely access to it for as long as

such access will be necessary.

e. Ensure the ``Chain of Custody.'' Electronic audit trails must

provide a chain of custody for the secure electronic transaction that

identifies sending location, sending entity, date and time stamp of

receipt, and other measures used to ensure the integrity of the

document. These trails must be sufficiently complete and reliable to

validate the integrity of the transaction and to prove that, (a) the

connection between the submitter and the receiving agency has not been

tampered with, and (b) how the document was controlled upon receipt.

f. Provide an acknowledgment of receipt. The agency's system for

receiving electronic transactions may be required by statute to have a

mechanism for acknowledging receipt of transactions received, and

acknowledging confirmation of transactions sent, with specific

indication of the party with whom the agency is dealing.

g. Obtain legal counsel during the design of the system. Collection

and use of electronic data may raise legal issues, particularly if it

is information that bears on the legality of the process or that may

eventually be needed for proof in court.

Section 7. Summary of the Procedures and Checklist

To summarize the process which agencies should employ to evaluate

authentication mechanisms (electronic signatures) for electronic

transactions and documents, the following steps apply:

1. Examine the current business process that is being converted to

employ electronic documents or

[[Page 10902]]

transactions, identifying the existing risks associated with fraud,

error or misuse, as well as customer needs and demands.

2. Consider what risks may arise from the use of electronic

transactions or documents. This evaluation should take into account the

relationships of the parties, the value of the transactions or

documents, and the later need for the documents.

3. Identify the benefits that accrue from the use of electronic

transactions or documents.

4. Consult with counsel about any specific legal implications about

the use of electronic transactions or documents in the particular

application.

5. Evaluate how each electronic signature alternative may minimize

risk compared to the costs incurred in adopting an alternative.

6. Determine whether any electronic signature alternative in

conjunction with appropriate process controls represents a practicable

trade-off between cost and risk on the one hand, and benefits on the

other. If so, determine, to the extent possible at the time, which

signature alternative is the best one. Document this determination to

allow later evaluation and audit.

7. Develop plans for retaining and disposing of information,

ensuring that it can be made continuously available to those who will

need it, for managerial control of sensitive data and accommodating

changes in staffing, and for ensuring adherence to these plans.

8. Determine if regulations or policies are adequate to support

electronic transactions and record keeping, or if ``terms and

conditions'' agreements are appropriate for the particular application.

9. Develop plans for seeking the continuing input of technology

experts for updates on the changing state of technology and the

continuing advice of legal counsel for updates on the changing state of

the law in these areas.

10. Integrate these plans into the agency's strategic IT planning

and regular reporting to OMB.

11. Perform periodic review and re-evaluation, as appropriate.

[FR Doc. 99-5409 Filed 3-4-99; 8:45 am]

BILLING CODE 3110-01-U