Calum Macleod, European director for Cyber-Ark, says that the Bank of Scotland potential ID theft case - involving 62,000 of the bank's mortgage customers - could have been avoided if it they had employed encryption for their sensitive data.

 In the HBOS subsidiary case, a disk containing personal information on customers, including their names, addresses, date of birth and account details, went missing in the post whilst en-route to a credit reference agency.

As a result of the high profile data loss incident, the bank is writing to all the affected customers warning them they could be victims of identity theft, and offering them free credit reference checks.

"This case dramatically highlights the need for encryption of sensitive information by companies, especially where customer data is involved. Considering the fact that the bank's sister organisation, also had a similar incident last March, you'd think they would have reviewed their data security policies by now." said Macleod.

"Today many financial institutions have eliminated the risks associated with moving sensitive data via unsecured channels, using digital vaulting. If HBOS had deployed such technology they would have no need to move sensitive data in the way that they did." he noted.