Electronic Signatures Laws
Introduction
Most businesses these days use electronic signatures for obtaining users consent or approval of documents online. Some of them still have questions like, are these signatures legally binding, secure, acceptable by court as evidence. There are different laws and regulation which insist on the use of electronic documents and electronic signatures.
General requirements for electronic signatures are:
o The signer must intend the signature to have the same force and effect as a signature affixed by hand.
o The signature must be unique to the person using it. o The signature must be verifiable as belonging to the user.
o The signature must be under the sole control of the person using it.
o The signature must be attached or linked to the document in a way that authenticates the integrity of the electronic signature and document contents.
A signature captures a person’s intent to approve, authenticate or agree to the contents of a document. It must be able to demonstrate that the intent was captured. Signed documents can be used as evidence in the court of laws.
Authenticity of a document is a concern to ensure the accuracy of a signed document after it has been signed.
General requirements for electronic documents are:
o The electronic document, with or without an electronic signature, must remain accurate and unchanged over time.
o The electronic document, with or without an electronic signature, must remain accessible over time.
Let us first understand what an Electronic Signature is and what is an electronic record.
According to Electronic Signatures in Global and National Commerce Act [ESIGN]
The term 'electronic record' means a contract or other record created, generated, sent, communicated, received, or stored by electronic means.
The term 'electronic signature' means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.
The ESIGN act was first enhanced on June 30, 2000 to facilitate the use of electronic records and signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically.
ESIGN
According to Uniform Electronic Transactions Act [UETA]
Electronic record means a record created, generated, sent, communicated, received, or stored by electronic means.
Electronic signature means an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.
The UETA was proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and since then 48 States and provinces have adopted it into their own laws. It supports the validity of electronic contracts as a viable medium of agreement and gives electronic records and signatures a legally binding status.
The ESIGN Act also:
o Enables use of electronic records and signatures where laws require documents and signatures and parties to agree to use electronic versions.
o Enables electronic transmission of government mandated disclosures subject to appropriate consent from recipient.
o Any record may be retained electronically as long as it remains accurate and accessible to all entitled parties for as long as the record is required.
o Allows for the use of an electronic signature for notarization.
o Enables use of electronic promissory note for the purpose of a real estate loan.
FFIEC
According to FFIEC financial institutions should periodically
o Ensure that their information security program:
– Identifies and assesses the risks associated with Internet-based products and services,
– Identifies risk mitigation actions, including appropriate authentication strength, and
– Measures and evaluates customer awareness efforts;
o Adjust, as appropriate, their information security program in light of any relevant changes in technology, the sensitivity of its customer information, and internal or external threats to information; and
o Implement appropriate risk mitigation strategies. to safeguard customer information.
The Federal Financial Institutions Examination Council (FFIEC) was established on March 10, 1979. The Council is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS) and to make recommendations to promote uniformity in the supervision of financial institutions.
MISO
The Mortgage Industry Standards Maintenance Organization [MISMO] was established in 1999 by the Mortgage Bankers Association of America. It develops technology standards for residential and commercial standards, eMortgage specifications, and Information Security guidelines in USA market. MISMO aims to reduce costs and increase transparency while promoting confidence in mortgages as an asset class for investors.
MISMO follows a democratic approach to the development and maintenance of a comprehensive set of standards and data points for all stages of the mortgage
loan life cycle. MISMO constructs a standard approach whereby two business-related firms can streamline shared data contained in forms or reports.
MISMO has identified two deliverables that will enable the mortgage industry to share data among trading partners.
o An XML architecture that encompasses data origination, secondary market and servicing data
o A data dictionary to provide business definitions and corresponding architecture data element tag names
References
1. ESIGN Act
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_cong_public_laws&docid=f:publ229.106.pdf
2. UETA Act http://www.law.upenn.edu/bll/archives/ulc/ecom/ueta_final.pdf
3. Authentication in an Internet Banking Environment FFIEC
http://www.ffiec.gov/pdf/authentication_guidance.pdf 4. http://www.mismo.org/mxcompliance.html
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