Antivirus (Compare antivirus products) vendors and Internet security consultants around the world are reporting a staggering increase in new malicious code in circulation in just the past year. Russia-based Kaspersky Labs believes there will be a ten-fold increase in malware by the end of 2008. F-Secure is more conservative in its estimate, with “only” a doubling of the instances of malicious code in the wild. TrendLabs, Symantec, the IBM Internet Security Systems X-Force – all of them warn that malware is becoming more prevalent as well as much more sophisticated.

Internet security company Prevx estimates nearly 50% of all PCs are infected by malware today. Perhaps your PC is infected, and you don’t even know it. Maybe there’s a keystroke logger capturing everything you type and sending it to criminals half-way around the world right now. Still feel like going online to check your bank account balance and pay some bills? I sure don’t.

Security vendor Trusteer has studied this problem and come up with a unique solution to protect transactions between the desktop and a specific Web site. Forget fighting the malware; Trusteer assumes it’s already on the PC and instead creates a secure channel to transmit login credentials and transactions between the PC and select protected Web sites. In effect, the credentials and transactions are completely hidden from any malware or virus that exists on the user’s desktop.

The name of the product is Rapport. It establishes three protection layers on the desktop, and as a result, malware can’t read credentials and can’t read or interfere with the communication as it doesn’t even see the communication.

The API blocking layer controls operating system API calls that malware can use to access information or tamper with the session. For example, when the user is connected to a protected Web site, malware can’t use operating system APIs to read keystrokes or capture the screen. It can’t access the browser to read or write data. It can’t use commands to inject or alter transactions, and it can’t capture session cookies stored by the browser.

The data encryption layer is the second line of defense. If an attacker manages to bypass the API blocking layer, then the data encryption layer keeps the information secure. It does so by encrypting sensitive information that travels between the user and the browser. Keystrokes are encrypted as soon as they are generated by the keyboard driver all the way to the browser. Furthermore, the temporary information that the browser keeps is encrypted as well and all the information that travels from the browser is encrypted until it is being transmitted over SSL to the Web site.

Linda Musthaler is a principal analyst with Essential Solutions Corporation.