When the final version of Adobe Flash Player 10.1 hits desktops later this year, it will bring with it new functionality designed to allow users to automatically clear Flash cookies after a Web session. But while the feature may be lauded in the name of privacy, it may also force online banks to change how they fight fraud.
Flash cookies, also known as LSO (local shared objects), are used by many banks and e-commerce sites to identify legitimate users and block unauthorized or fraudulent access. In a report entitled, "Privacy Collides With Fraud Detection and Crumbles Flash Cookies," Gartner analyst Avivah Litan writes that the practice of using HTTP browser cookies for authentication gained steam roughly three years ago due to guidelines imposed by the Federal Financial Institutions Examination Council.
"Most banks responded by implementing stronger authentication that depended in large part on knowing that their online banking customer was logging in from a known PC," Litan wrote. "Upon entering a user ID to log into an online banking session, the bank Web server would check for the presence of this cookie...If the bank software could not find the cookie - for example because the user was logging in from a different PC - then the bank software would generally challenge the user with a series of questions that only the legitimate user could presumably answer."
But a growing desire for privacy led users to delete their browser cookies more often, meaning banks had to find something else to rely on, the report noted. Enter Flash LSOs, which are "basically hidden from casual users who aren't aware of them and don't know how to delete them."
Now that approach could be threatened as well, Litan told eWEEK. Flash Player 10.1 will respect the privacy settings configured in the user's browser so that LSO behavior automatically follows the browser's lead without any additional user interaction. All the major Web browsers, including Internet Explorer and Firefox, already have a private browsing mode where cookies are not stored by the browser.
"In my opinion, this is a big deal in the fraud world," she said. "Many banks, card issuers and online retailers rely in part on device identification to successfully detect fraud. And in many of these cases, the device identification they use is based on Flash local storage."