Google plans today to begin warning Internet users if their computers show telltale signs of being infected with the DNSChanger Trojan. The company estimates that more than 500,000 systems remain infected with the malware, despite a looming deadline that threatens to quarantine the sick computers from the rest of the Internet.

Security experts won court approval last year to seize control of the infrastucture that powered the search-hijacking Trojan in a bid to help users clean up infections. But a court-imposed deadline to power down that infrastructure will sever Internet access for PCs that are not rid of the malware before July 9, 2012.

The company said the warning (pictured above) will appear only when a user with an infected system visits a Google search results property (google.com, google.co.uk, etc.), and will include the message, “Your computer appears to be infected.” Google security engineer Damian Menscher said the company expects to notify approximately a half-million users in the first week of the notices.

“In general we want to notify users [of malware infections] anytime we are capable of doing so, but the fact that we don’t do this more often is really just because it’s hard to come across cases where we can do it this accurately,” Menscher said.  “In many cases we only have maybe a 90 percent confidence that someone is infected, and the false positive rate of 10 percent is simply too high to be feasible. But in this case we can be essentially certain that someone is infected.”

The warning that infected users will see is nearly identical to a similar alert Google used last year in a campaign to rid the Web of another search hijacker that was trying to frighten users into purchasing bogus antivirus software — also known as “scareware.”

DNSChanger may no longer be hijacking search results, but the malware still carries secondary threats and risks. It was frequently bundled with other nasty software, and consequently machines sickened with DNSChanger also probably host other malware infestations. Additionally, DNSChanger disables antivirus protection on host machines, further exposing them to online threats.

To address these concerns, Google is steering users of infected systems to a set of instructions that include steps to eradicate DNSChanger and to third-party cleanup tools that may help scrub infections from other malware.

Menscher said Google will be displaying the warning in dozens of different languages.

“We think part of it is that all of the public press on this so far has been in English or a handful of other languages,” Menscher said. “It turns out that only half of these infected users speak English as their primary language.”

DNSChanger modifies settings on a host PC that tell the computer how to find Web sites on the Internet, hijacking victims’ search results and preventing them from visiting security sites that might help detect and scrub the infections. The Internet servers that were used to control infected PCs were located in the United States, and in coordination with the arrest last November of the Estonian men thought to be responsible for operating the Trojan network, a New York district court ordered a private U.S. company to assume control over those servers.

The government argued that the arrangement would give ISPs and companies time to identify and scrub infected PCs, systems that would otherwise be disconnected from the Internet if the control servers were shut down. The court agreed, and ordered that the surrogate control servers remain in operation until March 8. When the March 8 deadline approached and cleanup was discovered to be taking longer than expected, the court agreed to extend the cutoff date to July 9, 2012.

A rash of recent and ongoing targeted attacks involving compromises at high-profile Web sites should serve as a sobering reminder of the need to be vigilant about applying browser updates. Hackers have hit a number of prominent foreign policy and human rights group Web sites, configuring them to serve spyware by exploiting newly patched flaws in widely used software from Adobe and Oracle.

The latest reports of this apparent cyberspy activity come from security experts at Shadowserver.org, a nonprofit that tracks malware attacks typically associated with so-called “advanced persistent threat” (APT) actors. APT is a controversial term that means many things to different folks, but even detractors of the acronym’s overuse acknowledge that it has become a useful shorthand for “We’re pretty sure it came from China.”

A diagram depicting the (since-cleaned) attack on the Website of the Center for Defense Information.

One look at the list of the sites found to be currently serving an exploit to attack a newly-patched Adobe Flash Player vulnerability (CVE-2012-0779) shows how that shorthand is earned. Shadowserver uncovered Flash exploits waiting for visitors of the Web sites for Amnesty International Hong Kong and the Center for Defense Information, a Washington, D.C. think-tank. The home page for the International Institute for Counter-Terrorism was found to be serving up malware via a recent Oracle Java vulnerability (CVE-2012-0507), while the Cambodian Ministry of Foreign Affairs site was pointing to both Flash and Java exploits.

“In recent months we have continued to observe 0-day vulnerabilities emerging following discovery of their use in the wild to conduct cyber espionage attacks,” wrote Shadowserver volunteers Steven Adair and Ned Moran, in a blog post about the attacks, which they dubbed “strategic Web compromises.”

“Frequently by the time a patch is released for the vulnerabilities, the exploit has already been the wild for multiple weeks or months — giving the attackers a very large leg up,” they wrote. “The goal is not large-scale malware distribution through mass compromises. Instead the attackers place their exploit code on websites that cater towards a particular set of visitors that they might be interested in.”

The discoveries come just days after security vendor Websense found that the site for Amnesty International United Kingdom (AIUK)  was hosting the same Java exploit. According to Shadowserver, other sites that were compromised by remarkably similar attacks but since cleaned include those belonging to the American Research Center in Egypt, the Institute for National Security Studies, and the Center for European Policy Studies.

Shadowserver experts believe that many of the attacks above are likely the work of the same hacking group. For example, Adair and Moran said they found “a clear connection” between the hackers who compromised the AIUK site in this incident and a separate attack on the same site in December 2011, a break-in first reported by KrebsOnSecurity.com. Some of the common elements in the attacks include identical Internet addresses and files (down to the same internal metadata) used in different attacks.

Adair and Moran also called attention to targeted attacks that leverage the Flash flaw (CVE-2012-0779) via Microsoft Word documents, which have the built-in ability to invoke Flash objects. Mila Parkour, the author of the Contagiodump blog, on May 6 published an exhaustive look at just such an attack.

I hope it is obvious to readers that the exploits leveraged in these cyberspy attacks to steal national security and trade secrets are the same weapons that traditional computer crooks use to steal financial information (in fact, last week I blogged about other tantalilzing signs of overlap between these two seemingly disparate communities). It is almost certain that this Flash exploit will soon be bundled into automated exploit kits that are sold to miscreants on the cybercriminal underground, if it hasn’t already. If you use any of the above-mentioned software products and have fallen behind in patching them, please see the following posts:

May 8, 2012: Adobe, Microsoft Push Critical Security Fixes

May 4, 2012: Critical Flash Update Fixes Zero-Day Flaw

Mar 27, 2012: New Java Attack Being Rolled Into Exploit Packs

The Federal Bureau of Investigation is advising travelers to avoid updating software while using hotel or other public Internet connections, warning that malicious actors are targeting travelers abroad through pop-up windows while they are establishing an Internet connection in their hotel rooms.

From the FBI’s advisory:

“Recently, there have been instances of travelers’ laptops being infected with malicious software while using hotel Internet connections. In these instances, the traveler was attempting to set up the hotel room Internet connection and was presented with a pop-up window notifying the user to update a widely used software product. If the user clicked to accept and install the update, malicious software was installed on the laptop. The pop-up window appeared to be offering a routine update to a legitimate software product for which updates are frequently available.”

The warning is a good opportunity to revisit some wireless safety tips I’ve doled out over the years. Avoid updating software while you’re using networks that are untrusted and public, whether they are wired or wireless. This generally means Wi-Fi networks like those available in hotels and coffee shops, and even wired connections at hotels. The only exception I make to this rule is when I have a device that is tethered to the 3G connection on a mobile phone. But even this can be dicey, because many laptops and mobile devices will switch over to available Wi-Fi networks in the event that the 3G signal dies.

There are a number of free attack tools that can be used to spoof software update prompts, and these are especially effective against users on small local networks. Bear in mind that false update prompts don’t have to involve pop-ups. I’ve written at least two blog posts about EvilGrade, a toolkit that makes it simple for attackers to install malicious software by exploiting weaknesses in the auto-update feature of many popular software titles. The deviousness of this tool is that it can be used to hijack the legitimate updaters built into software already installed on your computer.

If you must update while on the road, make sure that you initiate the update process. Avoid clicking pop-up prompts or anything that looks like it was launched from an auto-updater. When in doubt, always update from the vendor’s Web site. Most importantly — and Rule #1 of Krebs’s 3 Basic Rules for Online Safety covers this nicely — “if you didn’t go looking for it, don’t install it!” Also, using an update tracker, such as Secunia‘s Personal Software Inspector or File Hippo‘s Update Checker, can help you stay on top of the latest security patches for widely-used software, and make it easier for you to plan your software updates ahead of time.

Adobe and Microsoft today each issued updates to address critical security flaws in their software. Adobe’s patch plugs at least five holes in its Shockwave Player, while Microsoft has released a bundle of seven updates to correct 23 vulnerabilities in Windows and other products.

Microsoft’s May patch batch includes fixes for vulnerabilities that could be exploited via Web browsing, file-sharing, or email. Eight of the 23 flaws earned Microsoft’s “critical” rating, meaning no user interaction is required for vulnerable systems to be hacked. At least three of the flaws were publicly disclosed before today.

According to Microsoft, the two updates are the most dire: The first is one related to a critical flaw in Microsoft Word (MS12-029); the second is an unusually ambitious update that addresses flaws present in Microsoft Office, Windows, .NET Framework and Silverlight. In a blog post published today, Microsoft explained why it chose to patch all of these seemingly disparate products all in one go. But the short version is that Microsoft is addressing the ghost of Duqu, a sophisticated malware family discovered last year that was designed to attack industrial control systems and is thought to be related to the infamous Stuxnet worm. A patch Microsoft issued last year addressed the underlying Windows vulnerability exploited by Duqu, but the company found that the same vulnerable code resided in a slew of other Microsoft applications.

Separately, Adobe has issued an update for its Shockwave Player. Adobe recommends that users of Adobe Shockwave Player 11.6.4.634 and earlier for Windows and Macintosh update to Adobe Shockwave Player 11.6.5.635. Fixes are available for Windows and Mac systems, from this link. Windows users can tell if they have Shockwave installed by checking for an entry for the program in the Add/Remove Programs listing from the Windows Control Panel. If you don’t already have this program, I’d recommend keeping it that way. I seem to have gotten along fine without it for several years now, and going without it just means one less buggy application to patch.

As always, if you experience any issues installing these updates, please leave a note in the comments section below.

Lost in the annals of campy commercials from the 1980s is a series of ads that featured improbable scenes between two young people (usually of the opposite sex) who always somehow caused the inadvertent collision of peanut butter and chocolate. After the mishap, one would complain, “Hey you got your chocolate in my peanut butter!,” and the other would shout, “You got your peanut butter in my chocolate!” The youngsters would then sample the product of their happy accident and be amazed to find someone had already combined the two flavors into a sweet and salty treat that is commercially available.

It may be that the Internet security industry is long overdue for its own “Reese’s moment.” Many security experts who got their start analyzing malware and tracking traditional cybercrime recently have transitioned to investigating malware and attacks associated with so-called advanced persistent threat (APT) incidents. The former centers on the theft of financial data that can be used to quickly extract cash from victims; the latter refers to often prolonged attacks involving a hunt for more strategic information, such as intellectual property, trade secrets and data related to national security and defense.

Experts steeped in both areas seem to agree that there is little overlap between the two realms, neither in the tools the two sets of attackers use, their methods, nor in their motivations or rewards. Nevertheless, I’ve heard some of these same experts remark that traditional cyber thieves could dramatically increase their fortunes if they only took the time to better understand the full value of the PCs that get ensnared in their botnets.

In such a future, Chinese nationalistic hackers, for example, could avoid spending weeks or months trying to break into Fortune 500 companies using carefully targeted emails or zero-day software vulnerabilities; instead, they could just purchase access to PCs at these companies that are already under control of traditional hacker groups.

Every now and then, evidence surfaces to suggest that bridges between these two disparate worlds are under construction. Last month, I had the opportunity to peer into a botnet of more than 3,400 PCs — most of them in the United States. The systems were infected with a new variant of the Citadel Trojan, an offshoot of the ZeuS Trojan whose chief distinguishing feature is a community of users who interact with one another in a kind of online social network. This botnet was used to conduct cyberheists against several victims, but it was a curious set of scripts designed to run on each infected PC that caught my eye.

Computers infected with ZeuS variants typically relay not only password data, but also basic information about the victim PC, including operating system version, default browser, the system time, and the machine name that the victim user picked when installing the OS. But this version of Citadel sought much more information, and instructed all infected PCs to relay the output of several network diagnostic tools designed to help map out a local network.

Hosts infected with this version of Citadel were instructed to run several variations on the “net view” command, which displays a list of domains, computers and resources that are being shared by systems on the host PC’s local network. The hacked machines also were forced to run the command “osql -L”, which produces a list of database servers that may be present on the network. In addition, compromised PCs were prompted to run the Windows command line instruction “ipconfig /all”, which provides a wealth of data on the Internet addresses assigned to different components of the local network.

A screen shot of the Citadel panel. This page shows the breakdown of antivirus tools installed on infected PCs.

Other diagnostic commands run on each machine sought to dump the list of Windows users and groups on the network, as well as the homepage of the victim’s default browser (the latter is interesting because many organizations set internal systems to default to the company’s Intranet page).

It may well be that the miscreants behind this botnet simply wanted to cover their bases, in case the need arose to identify administrator accounts or users most likely to have access to sensitive financial information. And, of course, miscreants with complete control over infected systems always can run these commands manually. But it is rare to find examples of those involved in traditional cybercrime who are interested in gathering this information from so many infected systems by default, according to Dmitri Alperovitch, one of the aforementioned experts on Eastern European cybercrime who transitioned to tracking APT threats a few years back.

Alperovitch, co-founder of CrowdStrike, a security startup focused on identifying APT attacks and victims, called the development “troubling.” Alperovitch said the hackers behind this Citadel version may be trying to map out who exactly the victims are — as a precursor to selling access to those machines.

“Many of these techniques are exactly what the APT guys use to map out victim organization once they get access to it,” he said.

If APT attackers and the miscreants focused on ebanking fraud are such a match made in heaven, why aren’t we seeing more signs of interaction between these two communities? Alperovitch believes it’s because there aren’t many areas where these two worlds overlap.

“It always amazed me that this was not happening, and I questioned why that was the case for a number of years, and I’ve come to realize the reason is that these two communities — those doing intrusions for espionage purposes and cybercrime purposes — are so far apart and don’t really talk to each other or don’t know how to connect,” he said.  “If you’re a guy who’s specializing in banking cashouts, how do you find someone who is interested in F-35 fighter plane schematics? It’s not so easy.”

Alperovitch said he’s seen APT-based groups occasionally using financial cybercrime tools like ZeuS, but in those cases it appears the attackers were either lazy or were trying to conserve resources.

“That’s just the nature of convenience, because tools like ZeuS allow you to build [the malware] yourself and use it as a first-stage malware delivery system, instead of burning your own custom tool that’s much more valuable to you,” he said. “But just because these [APT actors] were using ZeuS doesn’t mean that they were collaborating with any cybercriminal group. I’m not discounting the possibility of an intermediary potentially bridging these two groups, but it would take someone in the cybercriminal world with a lot more connections with the intelligence agencies to take advantage of it.”

Adobe Systems Inc. today issued a security update to its Flash Player software. The company stressed that the update fixes a critical vulnerability that malicious actors have been using in targeted attacks.

Adobe classifies a security flaw as critical if it can be used to break into vulnerable machines without any help from users. The company said the vulnerability (CVE-2012-0779) fixed in the version released today has been exploited in targeted attacks designed to trick the user into clicking on a malicious file delivered in an email message, and that the exploit used in the attacks seen so far target Flash Player on Internet Explorer for Windows only.

Nevertheless, there are updates available for Flash Player versions designed for all operating systems that Adobe supports, including Mac, Linux and Android devices.

Adobe is urging users of Adobe Flash Player 11.2.202.233 and earlier versions for Windows, Macintosh and Linux update to Adobe Flash Player 11.2.202.235. Windows users of Flash Player 11.2.x who have selected the silent update option will receive the update automatically. Flash Player installed with Google Chrome is updated automatically, so no user action should be required for Chrome users. Users of Adobe Flash Player 11.1.115.7 and earlier versions on Android 4.x devices should update to Adobe Flash Player 11.1.115.8. Users of Adobe Flash Player 11.1.111.8 and earlier versions for Android 3.x and earlier versions should update to Flash Player 11.1.111.9.

To find out if you have Flash installed, or which version is on your system, visit this link. If you have trouble updating your Flash version, consider uninstalling the program using Adobe’s Flash removal tool, rebooting, and then reinstalling the latest version. Updates are available via the Adobe Flash Player Download Center. Direct links to the OS-specific downloads are here.

Hackers are actively exploiting a dangerous security vulnerability in OpenX — an online ad-serving solution for Web sites — to run booby-trapped ads that serve malware and browser exploits across countless Web sites that depend on the solution.

Security experts have been warning for months about mysterious attacks on OpenX installations in which the site owners discovered new rogue administrator accounts. That access allows miscreants to load tainted ads on sites that rely on the software. The bad ads usually try to foist malware on visitors, or frighten them into paying for bogus security software.

OpenX is only now just starting to acknowledge the attacks, as more users are coming forward with unanswered questions about the mysteriously added administrator accounts.

This problem first came to my attention after I read a blog post by infosec researcher Mark Baldwin, who wrote late last month about finding an unauthorized administrative account called “openx-manager” on one of his clients’ OpenX 2.8.8 installations, the latest version. After much investigation, Baldwin found that the rogue admin account was created virtually at the same instant that he’d last logged in to the customer’s OpenX installation.

Based on these and other findings documented in his blog, Baldwin concluded that OpenX 2.8.8 contains an unpatched flaw known as a cross-site request forgery (CSRF) vulnerability. These types of flaws can be especially sneaky because they are used to trick the victim into loading a page that contains a malicious request. CSRF attacks are most often used to force an end user to execute unwanted actions on a Web application in which he/she is currently authenticated, such as purchasing an item, or adding/deleting account information.

Baldwin told me he believes the attackers were able to add the rogue admin account to his client’s OpenX installation because OpenX contains a CSRF vulnerability that allows such actions.

“When you login to the OpenX application, an ad loads via an iframe on the right side of the dashboard,” Baldwin said in an interview with KrebsOnSecurity. “OpenX uses this to promote different products of theirs (currently OpenX Market). This iframe makes calls to d1.openx.org and most importantly, loads some Javascript. This is important because the only way the CSRF attack would be able to create a new user is via javascript, since that action uses the POST method. The IP address of d1.openx.org is 173.241.250.2 and the address of adserver.openx.org is 173.241.250.3. For all I know these may be the same servers. My belief is that these systems were compromised and the Javascript was modified to inject the rogue admin account via the iframe in the dashboard. So when an administrator logs in, the account would be created without any interaction from him.”

I confronted OpenX officials about this on Monday. In a very brief phone call today, company executives declined to discuss the attacks in detail, but acknowledged the existence of a CSRF vulnerability in the software that powers both their free and enterprise advertising platforms. OpenX Chief Technology Officer Michael Todd said the company would soon be publishing instructions on its blog outlining steps that users can take to prevent attackers from taking advantage of this flaw, and that it hoped to roll out an official fix for its OpenX Source product, which is the free version of the platform offered to anyone who wishes to host their own digital advertising services.

“What we’re going to do early next week — on Monday or Tuesday — is release a new version of OpenX for people to download as soon as possible,” Todd said. “We’re taking an extra few days to make sure that this gets done correctly and that we’re doing all the testing we need to do before we push that out. But first, we’ll publish a mitigation post that will tell people how they can change their systems,” to mitigate the threat, he said.

OpenX’s head of communications, Al Duncan, inexplicably cut the interview short after I’d asked just two questions, so I was unable to gain clarity on other aspects of this attack, such as whether OpenX’s internal systems may have been abused in the compromises, and how long the company has been aware of the problem. I also wanted to know more about how this vulnerability differed from a similar CSRF flaw in OpenX v. 2.8.7 that was disclosed in June 2011 by researcher Narendra Shinde.

It’s unclear whether the CSRF flaw detailed by Shinde is effectively the same bug that exists in this latest version. But the attackers targeting these flaws appear to have used the same name for the rogue admin account that Baldwin discovered on his client’s OpenX installation: “openx-manager.”

Until OpenX publishes its blog post, users and customers of this product should consider reviewing the mitigation advice offered at Baldwin’s blog.

For more background on this subject, see OpenX forum posts from Nov. 2011, January 2012,  March 2012, and April 2012. Internet security firms Armorize and Sophos also have been sounding the alarm about these attacks.

A hacker break-in at credit and debit card processor Global Payments Inc. dates back to at least early June 2011, Visa and MasterCard warned in updated alerts sent to card-issuing banks in the past week. The disclosures offer the first additional details about the length of the breach since Global Payments acknowledged the incident on March 30, 2012.

Visa and MasterCard send periodic alerts to card-issuing banks about cards that may need to be re-issued following a security breach at a processor or merchant. Indeed, it was two such alerts — issued within a day of each other in the final week of March — which prompted my reporting that ultimately exposed the incident. Since those initial alerts, Visa and MasterCard have issued at least seven updates, warning of additional compromised cards and pushing the window of vulnerability at Global Payments back further each time.

Initially, MasterCard and Visa warned that hackers may have had access to card numbers handled by the processor between Jan. 21, 2012 and Feb. 25, 2012. Subsequent alerts sent to banks have pushed that exposure window back to January, December, and then August. In an alert sent in the last few days, the card associations warned issuers of even more compromised cards, saying the breach extended back at least eight months, to June 2011.

Security experts say it is common for the tally of compromised cards to increase as forensic investigators gain a better grasp on the extent of a security breach. But so far, Global Payments has offered few details about the incident beyond repeating that less than 1.5 million card numbers may have been stolen from its systems.

In a letter (PDF) responding to questions from  Senator Robert P. Casey (D-Pa.), Global Payments CEO Paul Garcia maintained that the company discovered the breach internally and on its own on March 8, and that it began alerting the card associations the following day. Garcia said their initial disclosure was “forced by wild speculation in the press regarding this matter and our company.”

Global Payments spokeswoman Amy Korn declined to comment for this story, but said the company would be releasing additional information about the incident in a statement on its Web site, 2012infosecurityupdate.com, later this evening.

Update, May 4, 12:37 p.m. ET: The Wall Street Journal published a story today citing unidentified sources as saying that at least 7 million card accounts are now considered potentially vulnerable because of this breach.

An earlier version of this blog post incorrectly stated that Oracle had shipped security updates for its Java software. Oracle did push out an update for Java earlier this month — Java 6 Update 32 — but the new version was a maintenance update that did not include security fixes. My apologies for any confusion this may have caused.

Recent ebanking heists — such as a $121,000 online robbery at a New York fuel supplier last month — suggest that cyber thieves increasingly are cashing out by sending victim funds to prepaid debit card accounts. The shift appears to be an effort to route around a major bottleneck for these crimes: Their dependency on unreliable money mules.

Mules traditionally have played a key role in helping thieves cash out hacked accounts and launder money.  They are recruited through email-based work-at-home job scams, and are told they will be helping companies process payments. In a typical scheme, the mule provides her banking details to the recruiter, who eventually sends a fraudulent transfer and tells the mule to withdraw the funds in cash, keep a small percentage, and wire the remainder to co-conspirators abroad.

Some of the mule gangs I've identified.

But mules are hardly the most expedient method of extracting funds. To avoid arousing suspicion (and triggering anti-money laundering reporting requirements by the banks), cyber crooks usually send less than $10,000 to each mule. In other words, for every $100,000 that the thieves want to steal, they need to have  at least 10 money mules at the ready.

In reality, though, that number is quite often closer to 15 mules per $100,000. That’s because the thieves may send much lower amounts to mules that bank at institutions which have low transfer limit triggers. For instance, they almost always limit transfers to less than $5,000 when dealing with Bank of America mules, because they know transfers for more than that amount to consumer accounts will raise fraud flags at BofA.

Thus, the average mule is worth up to $10,000 to a cybercrook. Unsurprisingly, there is much competition and demand for available money mules in the cybercriminal underground. I’ve identified close to two dozen distinct money mule recruitment networks, most of which demand between 40-50 percent of the fraudulent transfer amounts for their trouble. Not only are mule expensive to acquire, they often take weeks to groom before they’re trusted with transfers.

But these mules also come with their own, well, baggage. I’ve interviewed now more than 200 money mules, and it’s hard to escape the conclusion that many mules simply are not the sharpest crayons in the box. They often have trouble following simple instructions, and frequently screw up important details when it comes time to cash out (there are probably good reasons that a lot of these folks are unemployed). Common goofs include transposing digits in account and routing numbers, or failing to get to the bank to withdraw the cash shortly after the fraudulent transfer, giving the victim’s bank precious time to reverse the transaction. In isolated cases, the mules simply disappear with the money and stiff the cyber thieves.

In several recent ebanking heists, however, thieves appear to have sent at least half of the transfers to prepaid cards, potentially sidestepping the expense and hassle of hiring and using money mules. For example, last month cyber crooks struck Alta East, a wholesale gasoline dealer in Middletown, N.Y. According to the firm’s comptroller Debbie Weeden, the thieves initiated 30 separate fraudulent transfers totaling more than $121,000. Half of those transfers went to prepaid cards issued by Metabank, a large prepaid card provider.

Prepaid cards are ideal because they can be purchased anonymously for small amounts ($25-$100 values) from supermarkets and other stores. A majority of these low-value cards are not reloadable, unless the cardholder goes online and provides identity information that the prepaid card issuer can tie to a legitimate credit holder. After that card is activated, it can be reloaded remotely by transferring or depositing funds into the account, and it can be used like a debit, ATM or credit card.

“The information we gather in opening it is the same information you’d be asked if you were opening a credit card account online,” said Brad Hanson, president of Metabank’s payment systems division. “We do checks against different public resources like Experian and LexisNexis to verify that all the information matches and is accurate, and that we have a reasonable belief that you are the person applying for the card.”

The trouble is, the thieves pulling these ebanking heists have access to massive amounts of stolen data that can be used to fraudulently open up prepaid cards in the names of people whose identities and computers have already been hijacked. Once those cards are approved, the crooks can simply transfer funds to them from cyberheist victims, and extract the cash at ATMs. Alternatively, wire transfer locations like Western Union even allow senders to use their debit cards to execute a “debit spend,” thereby sending money overseas directly from the card.

THE ATTACK

Sometime on March 13, four different employees of Alta East received emails that appeared to have been sent from a current client. The messages inquired about a recent transaction, and cited an invoice number. According to Weeden, all four Alta East employees opened the attached Adobe PDF file, which contained a hidden Javascript element that infected their Windows XP systems with a variant of the ZeuS Trojan.

Six days later, the thieves set up a batch of fraudulent payroll payments, sending instructions to Alta East’s bank to fund 15 Metabank prepaid cards; the remainder of the funds apparently were sent to traditional money mules at locations around the country.

“The emails came from a legitimate customer, and we thought he was questioning an invoice,” Weeden said. “There were four of us who hit that attachment. Afterwards, we asked the customer about the email, but he said he hadn’t sent it.”

Weeden said Alta East’s internal IT guys scanned her machine with six different antivirus tools, but the scans turned up no evidence of infection. It wasn’t until the company hired an outside forensics expert who removed the hard drive and examined it in an isolated environment that the expert found the ZeuS infection.

The thieves didn’t route their fraudulent logins to Alta East’s bank account through the company’s systems; rather they proxied the traffic through  the networks of the Center for Discovery, a rehabilitation facility for disabled individuals that is located in nearby Harris, N.Y. The center did not return calls seeking comment.

Rick Jones, executive vice president business services at Alta East’s financial institution – Provident Bank — said the bank followed its agreement with Alta East, and sent the company an email about the fraudulent payroll batch the very day it was initiated. But Jones said that Alta East admitted to overlooking the notification until the following morning. By that time, most of the unauthorized transfers had already gone through.

Weeden said Provident was able to retrieve roughly $20,000 worth of illicit transfers from mule accounts, and that it expected to recover another $21,000 in the coming weeks. She added that her firm is in the process of setting up a system whereby online banking is done only from an isolated computer that will not be used for email or regular Internet browsing. Still, the company is facing an $80,000 loss from the incident.

It remains to be seen whether cyber thieves continue shifting more of their operations from traditional mules to prepaid debit accounts. I’ve talked to a number of victims who lost more than $100,000 but noted that the thieves left several hundred thousand dollars untouched in the company’s accounts. “Why would they leave so much money on the table like that? Why not just take it all?” the victims usually ask. The answer? Just as real life bank robbers are limited in the amounts they can steal by the volume of cash they can physically haul from the scene of the crime, so are cyber thieves. Usually, the thieves simply did not have access to enough mules to help them haul all of the available loot. That limitation is eased if they start depending more on prepaid cards, an entire stack of which can fit easily into a single miscreant’s wallet.

ANALYSIS

There are a few things worth calling out from the above story, and every business owner would do well to consider them closely:

-eBanking losses are likely to increase if thieves continue to find success with the prepaid card approach.

-Today’s cyber thieves are patient and willing to jump through multiple hoops to steal your money.

-Clicking on links and email attachments continues to be a risky activity, even when the links and attachments appear to come from someone you know or trust.

-Traditional antivirus tools have an atrocious record in detecting ZeuS and its ilk. If you suspect a machine is compromised, you cannot trust a report from a security program that is running on top of the potentially infected operating system.

-A majority of these ebanking heists start with a social engineering scam sent via email. Companies should be actively phishing their own employees and grading them on their performance, and perhaps even tying performance to year-end bonuses or other (dis)incentives.

-Unlike consumers, businesses have basically no legal protection from their bank due to losses from cyber fraud. Yes, organizations should push their banks to do more on security. But for better or worse, small to mid-sized businesses who are counting on their banks to prevent this type of fraud are setting themselves up for disappointment and major financial losses.

-Banking from a Live CD or from an isolated (preferably non-Windows) computer is the surest way to avoid ebanking heists. However, this approach only works if it is consistently observed.