With smart cards, FMS moves $80 billion a month on its net

Treasury officials are trying to sort out their changing roles
in a nation that depends more and more on non-paper money.

Treasury Secretary Robert E. Rubin has appointed a task force to weigh the impact of
electronic cash and 'smart" payment cards on Treasury as the sole producer of

"Every Treasury bureau has an interest in smart cards," said George Munoz,
Treasury's chief financial officer. The credit card-size devices store data in protected
memory on microchips.

The Treasury's bureaus are "potential users, producers and regulators" of
smart cards and card readers for cash payments, Munoz said. However, unifying all the
bureaus' different interests and positions could prove difficult.

Within the department, the Financial Management Service has taken the lead in
electronic cash technology. For the past 10 months, FMS has been using smart cards to
handle all cash transfers among federal agencies. Those transfers, totaling $80 billion
each month, move between secure IBM Corp. mainframe systems over FMSNet, a Systems Network
Architecture backbone network.

The FMS smart cards, which took nearly 10 years to develop and test, store information
about payment amounts and accounting codes, all encrypted by the Digital Encryption
Standard algorithm.

The cards also store the encoded signature of an agency's chief financial officer or
certifying agent. Signatures are certified as authentic by the Digital Signature Standard

Calvin Kidd, an FMS computer specialist who has worked on the smart card program since
its inception, said that initially there were "a lot of kinks. We had to go out and
do a lot of handholding with the agencies. But it's working now, and agencies love
it," he added.

He said many more card standards are needed in the next six to eight months if smart
cards are to become viable for doing government business with citizens and industry.

Customs Service and Internal Revenue Service officials have a different take on the
subject of smart cards. They worry about widespread public use of the cards for anonymous
and possibly illegal cash transfers.

But the FMS and most other Treasury bureaus are bullish on the cards as a deterrent to
fraud and loss, making government financial transactions easier, safer and more efficient
than current cash methods, Munoz said.
"We're for anything that strengthens our economy and keeps it at the top," he
said. "To the extent there's something real positive here, we're not going to get in
the way. We're going to be supportive."

Treasury prints 17 billion currency notes a year, Munoz said, and pays out more than
$1.2 trillion annually. "Just imagine that you had to do that," he said.
"Wouldn't you be interested in smart cards?"

Public acceptance of the cards and readers is something over which Treasury has little
control. Munoz noted that 27 million people living in the United States do not use banks.

"These are honest, hard-working folks I'm referring to, not the underground, and
we have to keep that in mind," he said. "How do we transact financial business
with them?"

In a hearing on Capitol Hill this month, he said, Treasury officials will brief
Congress on the federal government's electronic cash initiatives.

Meanwhile, the Treasury task force, headed by Comptroller of the Currency Eugene
Ludwig, has begun sorting out the various bureaus' interests in smart cards. "Within
the next few months, we'll have a very clear picture of what our role is going to
be," Munoz said.

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