Speedier loans draw small UK firms to online financing - report

By Kylie MacLellan

LONDON (Reuters) - Small British businesses have turned to seeking funding from members of the public online because of the slow speed at which banks process loan applications, a report showed on Friday.

Peer-to-peer lending, which allows small investors to earn interest from loaning money to individuals or businesses, is one of several alternative sources of finance that have grown up as banks ration credit in response to tougher capital rules and the economic slowdown.

This week the British government gave banks greater incentives to lend to small firms in a bid to inject new life into the country's stagnant economy.

The report, produced by innovation charity Nesta using data from Britain's largest peer-to-peer business lending website Funding Circle, found the length of time it takes to secure a bank loan, rather than the availability of loans, was the most common reason given by firms for choosing the online route.

More than 75 percent of the 89 companies surveyed also said they would go to Funding Circle first for future funding.

"Coupled with the recession, it's the explosion of social media and the use of (the) Internet that has made it easier and cheaper to connect those who want to invest with the businesses that need finance," said Stian Westlake, executive director of policy and research at Nesta.

British and U.S. authorities are working out how best to regulate the wider crowd funding industry, which also includes sites that enable individuals to buy small equity stakes in companies or fund creative projects in return for non-financial rewards, such as a copy of an album.

Crowd funding websites helped companies and individuals worldwide raise $2.7 billion (1.7 billion pounds) from members of the public in 2012, an 81 percent increase on the previous year, data showed earlier this month.

Regulators are keen to make sure investors are aware of the risks and ensure the sites vet firms adequately to avoid scams.

Nesta said 88 percent of the 630 lenders surveyed had other investments such as stocks or bonds, while 38 percent had more than 10 years experience working with small- and medium-sized firms.

On average, Funding Circle lenders had invested a total of 7,983 pounds and 75 percent said they expected to increase the amount of money they put in over the coming year.

(Editing by David Holmes)

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Cyberwar manual lays down rules for online attacks

LONDON (AP) — Even cyberwar has rules, and one group of experts is putting out a manual to prove it.

Their handbook, due to be published later this week, applies the venerable practice of international law to the world of electronic warfare in an effort to show how hospitals, civilians and neutral nations can be protected in an information age fight.

"Everyone was seeing the Internet as the 'Wild, Wild, West,'" U.S. Naval War College Professor Michael Schmidt, the manual's editor, said in an interview before its official release. "What they had forgotten is that international law applies to cyberweapons like it applies to any other weapons."

The Tallinn Manual — named for the Estonian capital where it was compiled — was created at the behest of the NATO Cooperative Cyber Defense Center of Excellence, a NATO think tank. It takes existing rules on battlefield behavior, such as the 1868 St. Petersburg Declaration or the 1949 Geneva Convention, to the Internet, occasionally in creative or unexpected ways.

Marco Roscini, who teaches international law at London's University of Westminster, described the manual as a first-of-its-kind attempt to show that the laws of war — some of which date back to the 19th century — were flexible enough to accommodate the new realities of online conflict.

The 282-page handbook has no official standing, but Roscini predicted that it would be an important reference as military lawyers across the world increasingly grapple with what to do about electronic attacks.

"I'm sure it will be quite influential," he said.

The manual's central premise is that war doesn't stop being war just because it happens online. Hacking a dam's controls to release its reservoir into a river valley can have the same effect as breaching it with explosives, its authors argue. Legally speaking, a cyberattack which sparks a fire at a military base is indistinguishable from an attack that uses an incendiary shell.

The humanitarian protections don't disappear online either. Medical computers get the same protection that brick-and-mortar hospitals do. The personal data related to prisoners of war have to be kept safe in the same way that the prisoners themselves are — for example by having the information stored separately from military servers which might be subject to attack.

Cyberwar can lead to cyberwar crimes, the manual warned. Launching an attack from a neutral nation's computer network is forbidden in much the same way that hostile armies aren't allowed to march through a neutral country's territory. Shutting down the Internet in an occupied area in retaliation against a rebel cyberattack could fall afoul of international prohibitions on collective punishment.

The experts behind the manual — two dozen officers, academics, and researchers drawn mainly from NATO member states — didn't always agree on how traditional rules applied in the context of a cyberwar.

Self-defense was a thorny issue. International law generally allows nations to strike first if they spot enemy soldiers about to pour across the border, but how could that be applied to a world in which attacks can happen at the click of a mouse?

Other aspects of international law seemed obsolete — or at least in need of an upgrade — in the electronic context.

Soldiers are generally supposed to wear uniforms and carry their arms openly, for example, but what meaning could such a requirement have when they are hacking into distant targets from air conditioned office buildings?

The law also forbids attacks on "civilian objects," but the authors were divided as to whether the word "object" could be interpreted to mean "data." Did that leave a legal loophole for a military attack that erased valuable civilian data, such as a nation's voter registration records?

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Online:

The Tallinn Manual: http://www.ccdcoe.org/249.html

Raphael Satter can be reached at: http://raphae.li/twitter

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