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In the rapidly evolving digital era, the distinction between digital signatures and electronic signatures (e-signatures) is more than just semantic; it's fundamental to understanding the level of security and legality they offer. As businesses and individuals increasingly turn to electronic documentation and transactions, recognizing these differences is crucial for ensuring that digital interactions are not only efficient but also legally compliant and secure. This article aims to demystify the concepts of digital signatures and e-signatures by elucidating their key differences, applications, and the importance of each in the digital domain.

 

The Foundation of Digital Signatures

Digital signatures are based on Public Key Infrastructure (PKI), which utilizes private and public keys to ensure security. When a document is digitally signed, the private key of the signer is used to create a unique digital signature, which can be verified using the signer's public key. This process not only confirms the signer's identity but also ensures the document's integrity remains intact.  Digital signatures play a critical role in authenticating electronic documents, confirming the signer's identity, and safeguarding the document's content against alterations.

The security of digital signatures is enhanced through encryption and decryption using PKI.  These signatures are inherently tamper-evident, as any modification to the document renders the signature invalid, indicating tampering. Additionally, digital signatures offer non-repudiation, making it impossible for the signer to deny their signature's authenticity due to the unique link between the signature and their private key, accessible only to them.

 

E-Signatures Explained

Electronic signatures, often referred to as e-signatures, are a broad category of methods used to indicate consent or approval on electronic documents or forms. E-signatures are typically used to replicate the act of signing a physical document with a pen. They can take various forms, including:

Typed signatures: This is the simplest form of an e-signature, where the signatory types their name in a designated field.

Scanned signatures: A scanned image of a person's handwritten signature can be inserted into an electronic document.

Click-to-sign: This involves clicking on a pre-designed checkbox to indicate consent.

PINs, passwords, or biometric data: Some e-signature systems may use personal identification numbers (PINs), passwords, or biometric data (like fingerprints or facial recognition) to authenticate the signatory in order to sign.

E-signatures are commonly used for a wide range of documents, such as contracts, agreements, forms, and more. They are generally considered legally binding in many countries, provided that they meet certain criteria, such as ensuring the signer's identity can be verified.  

While both e-signatures and digital signatures are used for electronic document signing, e-signatures are a broader category encompassing various methods, and they may offer a lower level of security. Digital signatures represent a specific technology and rely on cryptographic techniques to provide a higher level of security and authentication, making them suitable for more critical documents.



The Hidden Digital Signature

To summarize what we’ve mentioned before, digital signatures make documents tamper-evident, but e-signatures are unable to accomplish the same.  E-signature platforms will often embed a single digital signature within a signed documents to make a copy tamper-evident when downloaded.  Industry leaders like DocuSign have adopted hidden digital signatures as part of their electronic signature solutions.

DocuSign's hidden digital signatures are designed to increase the integrity and authenticity of electronically signed documents. By incorporating these signatures into their platform, they provide a somewhat higher level of security and trust for their users.  The downside of hidden digital signatures is that although the document becomes tamper-evident, there are other benefits of digital signatures that are not included.  The biggest benefit being long-term validation of those signatures.

 

Guaranteed Long-Term Validity

When you’re deciding between using an e-signature and digital signature platform, it’s crucial to consider the future.  Digital signature platforms embed critical, comprehensive legal evidence that validates a document’s signatures directly from the document itself.  If any inconsistencies emerge a month, a year or 10 years down the road, you’ll have the evidence needed to prove the validity of your signatures and documents.  Independence from your vendor is crucial as the longevity of your vendor isn’t guaranteed.  However, if you opt for digital signatures over e-signatures, the longevity of your documents is guaranteed.  

 

Imagine someone has signed on your behalf.  How do you prove this wasn’t you?

E-Signature Limitations

Your initial task is to acquire the legal evidence supporting the signature and uncover any fraudulent activity. However, due to the use of an e-signature platform, this process is not as straightforward as it may initially appear.

E-signature service providers may store this crucial legal evidence themselves, making it less accessible to you. Therefore, you will need to establish contact with the provider and go through the challenging process of obtaining the necessary evidence.

Now, fast forward a decade, and you become aware of this situation, deciding to take action. Unfortunately, the e-signature provider you had engaged back then has essentially ceased to exist.

This raises an urgent question: how can you obtain the evidence necessary to challenge the fraudulent activity?

 

Digital Signature Confidence

Given your use of a digital signature platform, the process of acquiring your legal evidence becomes notably more straightforward.

When you opt for digital signatures, the extensive legal evidence confirming the legitimacy of each signature is embedded directly into the document. Any alterations to the document are immediately detectable.

Rather than depending on your vendor to furnish this evidence, you possess it conveniently at your fingertips with a simple click. Digital signatures provide you with absolute ownership and control over your documents, eliminating the need for reliance on a vendor. Even if you switch to a different digital signature vendor, you retain complete access to your documents, signatures, and the legal proof essential for supporting your documents.

 

Evolving Landscape of Digital Signatures

The landscape of digital signatures is continuously evolving, with a noticeable shift in industry standards and best practices. This evolution is driven by the need for greater security, interoperability, and legal recognition of electronically signed documents.

Industry Standards:

Several significant developments in the realm of digital signatures have been made in recent years.  In August 2022, FINRA released Regulatory Notice 22-18, which sought to bring attention to e-signature fraud and forgery within broker-dealer firms.  FINRA made it clear that broker-dealers will be held to enhanced scrutiny regarding their e-signature use, and it’s vital that firms are prepared to support their signatures.  As we discussed above, firms who have historically utilized e-signatures will be in a more precarious position than those who have implemented digital signatures.  Due to the accessibility of legal evidence in documents signed with digital signatures, firms will have a much easier time proving the validity of their digital signatures over e-signatures.  Other highly regulated industries, such as healthcare, are beginning to understand the difference between digital signatures and e-signatures.  Most notably, HHS recently proposed standards requiring digital signatures instead of e-signatures.

 

Best Practices for Long-term Validity

Ensuring the long-term validity of your signatures is essential for maintaining document integrity and legal enforceability. Here are practical tips and best practices for both users and organizations to enhance the long-term validity of their signatures:

Use Trusted Third-Party Timestamps:

Incorporate trusted third-party timestamp services to add timestamps to your electronically signed documents. These timestamps create an immutable record of when the document was signed, helping prove its authenticity over time.  Ensure the timestamp provider complies with recognized standards and regulations, such as RFC 3161 for timestamping PDF documents.

Reduce Vendor Dependence:

Select a reputable digital signature provider over an e-signature vendor.  If you’re currently using an e-signature platform, maintain comprehensive documentation about your e-signature processes to facilitate smooth transitions if switching vendors becomes necessary.

Establish Audit Trails:

Maintain comprehensive audit trails for all signature transactions, including details about who signed the document, when it was signed, and all relevant metadata.

Stay Informed About Regulatory Changes:

Stay updated with evolving legal and regulatory requirements related to electronic signatures in your industry. Regularly review and adapt your signature practices to ensure compliance with changing standards.

Legal Consultation:

Seek legal counsel to ensure your electronic signature practices align with current and evolving legal requirements.

 

The digital era has brought significant changes to the way we conduct business and sign documents. Understanding the differences between digital signatures and electronic signatures (e-signatures) is essential for navigating this evolving landscape successfully.

Digital signatures, based on Public Key Infrastructure (PKI), offer a high level of security and document integrity. They play a vital role in authenticating electronic documents, especially in highly-regulated sectors like legal, financial, and government transactions.  On the other hand, e-signatures encompass a broader range of methods, offering the same convenience as digital signatures but lower security.

The importance of ensuring long-term validity cannot be overstated. To achieve this, users and organizations should adopt digital signatures over e-signatures, or consider making a switch.  As the digital signature landscape continues to evolve, it's crucial to stay updated with industry standards, regulatory requirements, and emerging trends. By doing so, you can confidently navigate the digital world, ensuring the security, legality, and long-term validity of your signatures and documents. 

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