'Blip' leaves internet bank door wide open

A major investigation was ordered today after the accounts of hundreds of thousands of internet bank customers were left with no security.

Customers banking with the Cahoot on-line bank were told that their financial details could have been accessed without a password for nearly two weeks.

The bank, owned by Abbey, was forced to close down the internet operation for 10 hours after it was alerted to the loophole.

Cahoot today stressed that there had been no improper transfer of funds from the accounts of any of its 525,000 customers.

It was alerted to the problem after a tip-off to the BBC from a customer who found he could access the site with only a user name and no password.

The breach is the latest blow to an industry that has prided itself on ensuring that customers' private financial details are secure.

There are more than 12million online bank customers in Britain. The new internet banks such as Cahoot and Egg have proved highly popular because of their convenience and savings rates.

Tim Sawyer, head of Cahoot bank, said the problem had been caused by a system upgrade 12 days ago and had now been fixed.

He said: "We did not fail as an organisation because there was no risk of financial loss, but we do need to learn lessons from it."

Eddie Weatherill of the Independent Banking Advisory Service (IBAS) said: "This is a major blip and one that will really wake up the whole internet banking industry as to what can go wrong."

Recent months have seen an unprecedented assault from "phishers" who create fake internet sites into which they lure surfers into revealing passwords and other confidential information.