Posts Tagged: Gartner Inc.


30
Oct 14

Chip & PIN vs. Chip & Signature

The Obama administration recently issued an executive order requiring that federal agencies migrate to more secure chip-and-PIN based credit cards for all federal employees that are issued payment cards. The move marks a departure from the far more prevalent “chip-and-signature” standard, an approach that has been overwhelmingly adopted by a majority of U.S. banks that are currently issuing chip-based cards. This post seeks to explore some of the possible reasons for the disparity.

emvkeyChip-based cards are designed to be far more expensive and difficult for thieves to counterfeit than regular credit cards that most U.S. consumers have in their wallets. Non-chip cards store cardholder data on a magnetic stripe, which can be trivially copied and re-encoded onto virtually anything else with a magnetic stripe.

Magnetic-stripe based cards are the primary target for hackers who have been breaking into retailers like Target and Home Depot and installing malicious software on the cash registers: The data is quite valuable to crooks because it can be sold to thieves who encode the information onto new plastic and go shopping at big box stores for stuff they can easily resell for cash (think high-dollar gift cards and electronics).

The United States is the last of the G20 nations to move to more secure chip-based cards. Other countries that have made this shift have done so by government fiat mandating the use of chip-and-PIN. Requiring a PIN at each transaction addresses both the card counterfeiting problem, as well as the use of lost or stolen cards.

Here in the States, however, the movement to chip-based cards has evolved overwhelmingly toward the chip-and-signature approach. Naturally, if your chip-and-signature card is lost or stolen and used fraudulently, there is little likelihood that a $9-per-hour checkout clerk is going to bat an eyelash at a thief who signs your name when using your stolen card to buy stuff at retailers. Nor will a signature card stop thieves from using a counterfeit card at automated payment terminals (think gas pumps).

But just how broadly adopted is chip-and-signature versus chip-and-PIN in the United States? According to an unscientific poll that’s been running for the past two years at the travel forum Flyertalk, only a handful of major U.S. banks issue chip-and-PIN cards; most have pushed chip-and-signature. Check out Flyertalk’s comprehensive Google Docs spreadsheet here for a member-contributed rundown of which banks support chip-and-PIN versus chip-and-signature.

I’ve been getting lots of questions from readers who are curious or upset at the prevalence of chip-and-signature over chip-and-PIN cards here in the United States, and I realized I didn’t know much about the reasons behind the disparity vis-a-vis other nations that have already made the switch to chip cards. So  I reached out to several experts to get their take on it.

Julie Conroy, a fraud analyst with The Aite Group, said that by and large Visa has been pushing chip-and-signature and that MasterCard has been promoting chip-and-PIN. Avivah Litan, an analyst at Gartner Inc., said MasterCard is neutral on the technology. For its part, Visa maintains that it is agnostic on the technology, saying in an emailed statement that the company believes “requiring stakeholders to use just one form of cardholder authentication may unnecessarily complicate the adoption of this important technology.”

BK: A lot of readers seem confused about why more banks wouldn’t adopt chip-and-PIN over chip-and-signature, given that the former protects against more forms of fraud.

Conroy: The PIN only addresses fraud when the card is lost or stolen, and in the U.S. market lost-and-stolen fraud is very small in comparison with counterfeit card fraud. Also, as we looked at other geographies — and our research has substantiated this — as you see these geographies go chip-and-PIN, the lost-and-stolen fraud dips a little bit but then the criminals adjust. So in the UK, the lost-and-stolen fraud is now back above where was before the migration. The criminals there have adjusted. and that increased focus on capturing the PIN gives them more opportunity, because if they do figure out ways to compromise that PIN, then they can perpetrate ATM fraud and get more bang for their buck.

So, PIN at the end of the day is a static data element, and it only goes so far from a security perspective. And as you weigh that potential for attrition versus the potential to address the relatively small amount of fraud that is lost and stolen fraud, the business case for chip and signature is really a no-brainer.

Litan: Most card issuing banks and Visa don’t want PINs because the PINs can be stolen and used with the magnetic stripe data on the same cards (that also have a chip card) to withdraw cash from ATM machines. Banks eat the ATM fraud costs. This scenario has happened with the roll-out of chip cards with PIN – in Europe and in Canada. Continue reading →


27
Oct 14

‘Replay’ Attacks Spoof Chip Card Charges

An odd new pattern of credit card fraud emanating from Brazil and targeting U.S. financial institutions could spell costly trouble for banks that are just beginning to issue customers more secure chip-based credit and debit cards.

emvblueOver the past week, at least three U.S. financial institutions reported receiving tens of thousands of dollars in fraudulent credit and debit card transactions coming from Brazil and hitting card accounts stolen in recent retail heists, principally cards compromised as part of the breach at Home Depot.

The most puzzling aspect of these unauthorized charges? They were all submitted through Visa and MasterCard‘s networks as chip-enabled transactions, even though the banks that issued the cards in question haven’t even yet begun sending customers chip-enabled cards.

The most frustrating aspect of these unauthorized charges? They’re far harder for the bank to dispute. Banks usually end up eating the cost of fraud from unauthorized transactions when scammers counterfeit and use stolen credit cards. Even so, a bank may be able to recover some of that loss through dispute mechanisms set up by Visa and MasterCard, as long as the bank can show that the fraud was the result of a breach at a specific merchant (in this case Home Depot).

However, banks are responsible for all of the fraud costs that occur from any fraudulent use of their customers’ chip-enabled credit/debit cards — even fraudulent charges disguised as these pseudo-chip transactions.

CLONED CHIP CARDS, OR CLONED TRANSACTIONS?

The bank I first heard from about this fraud — a small financial institution in New England — battled some $120,000 in fraudulent charges from Brazilian stores in less than two days beginning last week. The bank managed to block $80,000 of those fraudulent charges, but the bank’s processor, which approves incoming transactions when the bank’s core systems are offline, let through the other $40,000. All of the transactions were debit charges, and all came across MasterCard’s network looking to MasterCard like chip transactions without a PIN.

The fraud expert with the New England bank said the institution had decided against reissuing customer cards that were potentially compromised in the five-month breach at Home Depot, mainly because that would mean reissuing a sizable chunk of the bank’s overall card base and because the bank had until that point seen virtually no fraud on the accounts.

“We saw very low penetration rates on our Home Depot cards, so we didn’t do a mass reissue,” the expert said. “And then in one day we matched a month’s worth of fraud on those cards thanks to these charges from Brazil.” Continue reading →


16
Sep 14

Breach at Goodwill Vendor Lasted 18 Months

C&K Systems Inc., a third-party payment vendor blamed for a credit and debit card breach at more than 330 Goodwill locations nationwide, disclosed this week that the intrusion lasted more than 18 months and has impacted at least two other organizations.

cksystemsOn July 21, 2014, this site broke the news that multiple banks were reporting indications that Goodwill Industries had suffered an apparent breach that led to the theft of customer credit and debit card data. Goodwill later confirmed that the breach impacted a portion of its stores, but blamed the incident on an unnamed “third-party vendor.”

Last week, KrebsOnSecurity obtained some internal talking points apparently sent by Goodwill to prepare its member organizations to respond to any calls from the news media about the incident. Those talking points identified the breached third-party vendor as C&K Systems, a retail point-of-sale operator based in Murrells Inlet, S.C.

In response to inquiries from this reporter, C&K released a statement acknowledging that it was informed on July 30 by “an independent security analyst” that its “hosted managed services environment may have experienced unauthorized access.” The company says it then hired an independent cyber investigative team and alerted law enforcement about the incident.

C&K says the investigation determined malicious hackers had access to its systems “intermittently” between Feb. 10, 2013 and Aug. 14, 2014, and that the intrusion led to the the installation of “highly specialized point of sale (POS) infostealer.rawpos malware variant that was undetectable by our security software systems until Sept. 5, 2014,” [link added].

Their statement continues:

“This unauthorized access currently is known to have affected only three (3) customers of C&K, including Goodwill Industries International. While many payment cards may have been compromised, the number of these cards of which we are informed have been used fraudulently is currently less than 25.”

C&K System’s full statement is posted here. Continue reading →


8
Sep 14

In Wake of Confirmed Breach at Home Depot, Banks See Spike in PIN Debit Card Fraud

Nearly a week after this blog first reported signs that Home Depot was battling a major security incident, the company has acknowledged that it suffered a credit and debit card breach involving its U.S. and Canadian stores dating back to April 2014. Home Depot was quick to assure customers and banks that no debit card PIN data was compromised in the break-in. Nevertheless, multiple financial institutions contacted by this publication are reporting a steep increase over the past few days in fraudulent ATM withdrawals on customer accounts.

pwnddepot

The card data for sale in the underground that was stolen from Home Depot shoppers allows thieves to create counterfeit copies of debit and credit cards that can be used to purchase merchandise in big box stores. But if the crooks who buy stolen debit cards also are able to change the PIN on those accounts, the fabricated debit cards can then be used to withdraw cash from ATMs.

Experts say the thieves who are perpetrating the debit card fraud are capitalizing on a glut of card information stolen from Home Depot customers and being sold in cybercrime shops online. Those same crooks also are taking advantage of weak authentication methods in the automated phone systems that many banks use to allow customers to reset the PINs on their cards.

Here’s the critical part: The card data stolen from Home Depot customers and now for sale on the crime shop Rescator[dot]cc includes both the information needed to fabricate counterfeit cards as well as the legitimate cardholder’s full name and the city, state and ZIP of the Home Depot store from which the card was stolen (presumably by malware installed on some part of the retailer’s network, and probably on each point-of-sale device).

This is especially helpful for fraudsters since most Home Depot transactions are likely to occur in the same or nearby ZIP code as the cardholder. The ZIP code data of the store is important because it allows the bad guys to quickly and more accurately locate the Social Security number and date of birth of cardholders using criminal services in the underground that sell this information.

Why do the thieves need Social Security and date of birth information? Countless banks in the United States let customers change their PINs with a simple telephone call, using an automated call-in system known as a Voice Response Unit (VRU). A large number of these VRU systems allow the caller to change their PIN provided they pass three out of five security checks. One is that the system checks to see if the call is coming from a phone number on file for that customer. It also requests the following four pieces of information:

-the 3-digit code (known as a card verification value or CVV/CV2) printed on the back of the debit card;
-the card’s expiration date;
-the customer’s date of birth;
-the last four digits of the customer’s Social Security number.

On Thursday, I spoke with a fraud fighter at a bank in New England that experienced more than $25,000 in PIN debit fraud at ATMs in Canada. The bank employee said thieves were able to change the PINs on the cards using the bank’s automated VRU system. In this attack, the fraudsters were calling from disposable, prepaid Magic Jack telephone numbers, and they did not have the Cv2 for each card. But they were able to supply the other three data points.

KrebsOnSecurity also heard from an employee at a much larger bank on the West Coast that lost more than $300,000 in two hours today to PIN fraud on multiple debit cards that had all been used recently at Home Depot. The manager said the bad guys called the customer service folks at the bank and provided the last four of each cardholder’s Social Security number, date of birth, and the expiration date on the card. And, as with the bank in New England, that was enough information for the bank to reset the customer’s PIN.

The fraud manager said the scammers in this case also told the customer service people they were traveling in Italy, which made two things possible: It raised the withdrawal limits on the debit cards and allowed thieves to withdraw $300,000 in cash from Italian ATMs in the span of less than 120 minutes. Continue reading →


19
Mar 14

Are Credit Monitoring Services Worth It?

In the wake of one data breach after another, millions of Americans each year are offered credit monitoring services that promise to shield them from identity thieves. Although these services can help true victims step out from beneath the shadow of ID theft, the sad truth is that most services offer little in the way of real preventative protection against the fastest-growing crime in America.

Experian 'protection' offered for Target victims.

Experian ‘protection’ offered for Target victims.

Having purchased credit monitoring/protection services for the past 24 months — and having been the target of multiple identity theft attempts — I feel somewhat qualified to share my experience with readers. The biggest takeaway for me has been that although these services may alert you when someone opens or attempts to open a new line of credit in your name, most will do little — if anything — to block that activity. My take: If you’re being offered free monitoring, it probably can’t hurt to sign up, but you shouldn’t expect the service to stop identity thieves from ruining your credit.

Avivah Litan, a fraud analyst at Gartner Inc., said offering credit monitoring has become the de facto public response for companies that experience a data breach, whether or not that breach resulted in the loss of personal information that could lead to actual identity theft (as opposed to mere credit card fraud).

“These are basically PR vehicles for most of the breached companies who offer credit report monitoring to potentially compromised consumers,” Litan said. “Breached companies such as Target like to offer it as a good PR move even though it does absolutely nothing to compensate for the fact that a criminal stole credit card mag stripe account data. My advice for consumers has been – sure get it for free from one of the companies where your data has been compromised (and surely these days there is at least one).  But don’t expect it to help much – by the time you get the alert, it’s too late, the damage has been done.  It just shortens the time to detection so you may have a slightly improved chance of cleaning up the damage faster.  And you can get your credit reports three times a year from the government website for free which is almost just as good so why pay for it ever?”

FRAUD ALERT BREAKDOWN

Normally, I place fraud alerts on my credit file every 90 days, as allowed by law. This step is supposed to require potential creditors to contact you and obtain your permission before opening new lines of credit in your name. You merely need to file a fraud alert (also called a “security alert”) with one of the credit bureaus (Equifax, Experian or Trans Union). Whichever one you file with is required by law to alert the other two bureaus as well.

Most consumers don’t know this (few consumers know the names of the three main credit bureaus), but there is actually a fourth credit bureau that you should alert: Innovis. This bureau follows the same rules as the big three, and you may file a fraud alert with them at this link.

Fraud alerts last 90 days, and you can renew them as often as you like (a recurring calendar entry can help with this task); consumers who can demonstrate that they are victims or are likely to be victims of identity theft can apply for a long-term fraud alert that lasts up to 7 years (a police report and other documentation may be required).

Continue reading →


3
Mar 14

Illinois Bank: Use Cash for Chicago Taxis

First American Bank in Illinois is urging residents and tourists alike to avoid paying for cab rides in Chicago with credit or debit cards, warning that an ongoing data breach seems to be connected with card processing systems used by a large number of taxis in the Windy City.

The notice that First American sent to customers on Friday.

The notice that First American sent to customers on Friday.

In an unusually blunt and public statement sent to customers on Friday, Elk Grove, Ill.-based First American Bank said, “We are advising you not to use your First American Bank debit cards (or any other cards) in local taxis.” The message, penned by the bank’s chairman Tom Wells, continued:

“We have become aware of a data breach that occurs when a card is used in Chicago taxis, including American United, Checker, Yellow, and Blue Diamond and others that utilize Taxi Affiliation Services and Dispatch Taxi to process card transactions.”

“We have reported the breach to MasterCard® and have kept them apprised of details as they’ve developed. We have also made repeated attempts to deal directly with Banc of America Merchant Services and Bank of America, the payment processors for the taxis, to discontinue payment processing for the companies suffering this compromise until its source is discovered and remediated. These companies have not shared information about their actions and appear to not have stopped the breach.”

Bank of America, in a written statement, declined to discuss the matter, saying BofA “cannot discuss specific client matters.” Neither Taxi Affiliation Services nor Dispatch Taxi returned messages seeking comment.

Christi Childers, associate general counsel and compliance officer at First American Bank, said the bank made the decision to issue the warning about 18 days after being alerted to a pattern of fraud on cards that were all previously used at taxis in Chicago. The bank, which only issues MasterCard debit cards, has begun canceling cards used in Chicago taxis, and has already reissued 220 cards related to the fraud pattern. So far, the bank has seen more than 466 suspicious charges totaling more than $62,000 subsequent to those cards being used in Chicago taxis.

Continue reading →


20
Oct 13

Experian Sold Consumer Data to ID Theft Service

An identity theft service that sold Social Security and drivers license numbers — as well as bank account and credit card data on millions of Americans — purchased much of its data from Experian, one of the three major credit bureaus, according to a lengthy investigation by KrebsOnSecurity.

superget.info home page

superget.info home page

In November 2011, this publication ran a story about an underground service called Superget.info, a fraudster-friendly site that marketed the ability to look up full Social Security numbers, birthdays, drivers license records and financial information on millions of Americans. Registration was free, and accounts were funded via WebMoney and other virtual currencies that are popular in the cybercriminal underground.

Each SSN search on Superget.info returned consumer records that were marked with a set of varying and mysterious two- and three-letter “sourceid:” identifiers, including “TH,” “MV,” and “NCO,” among others. I asked readers who may have a clue about the meaning or source of those abbreviations to contact me. In the weeks following that post, I heard from many readers who had guesses and ideas, but none who seemed to have conclusive information.

That changed in the past week. An individual who read a story about the operators of a similar ID theft service online having broken into the networks of LexisNexis and other major data brokers wrote to say that he’d gone back and reviewed my previous stories on this topic, and that he’d identified the source of the data being resold by Superget.info. The reader said the abbreviations matched data sets produced by Columbus, Ohio-based USInfoSearch.com.

Contacted about the reader’s claim, U.S. Info Search CEO Marc Martin said the data sold by the ID theft service was not obtained directly through his company, but rather via Court Ventures, a third-party company with which US Info Search had previously struck an information sharing agreement. Martin said that several years ago US Info Search and CourtVentures each agreed to grant the other company complete access to its stores of information on US consumers.

Founded in 2001, Court Ventures described itself as a firm that “aggregates, repackages and distributes public record data, obtained from over 1,400 state and county sources.” Cached, historic copies of courtventures.com are available through archive.org.

THE ROLE OF EXPERIAN

In March 2012, Court Ventures was purchased by Costa Mesa, Calif.-based Experian, one of the three major consumer credit bureaus. According to Martin, the proprietors of Superget.info had gained access to Experian’s databases by posing as a U.S.-based private investigator. In reality, Martin said, the individuals apparently responsible for running Superget.info were based in Vietnam.

Martin said he first learned of the ID theft service after hearing from a U.S. Secret Service agent who called and said the law enforcement agency was investigating Experian and had obtained a grand jury subpoena against the company.

The "sourceid" abbreviations pointed toward Court Ventures.

The “sourceid” abbreviations pointed toward Court Ventures.

While the private investigator ruse may have gotten the fraudsters past Experian and/or CourtVentures’ screening process, according to Martin there were other signs that should have alerted Experian to potential fraud associated with the account. For example, Martin said the Secret Service told him that the alleged proprietor of Superget.info had paid Experian for his monthly data access charges using wire transfers sent from Singapore.

“The issue in my mind was the fact that this went on for almost a year after Experian did their due diligence and purchased” Court Ventures, Martin said. “Why didn’t they question cash wires coming in every month? Experian portrays themselves as the databreach experts, and they sell identity theft protection services. How this could go on without them detecting it I don’t know. Our agreement with them was that our information was to be used for fraud prevention and ID verification, and was only to be sold to licensed and credentialed U.S. businesses, not to someone overseas.”

Experian declined multiple requests for an interview. But in a written statement provided to KrebsOnSecurity, Experian acknowledged the broad outlines of Martin’s story and said it had worked with the Secret Service to bring a Vietnamese national to justice in connection with the online ID theft service. Their statement is as follows:

“Experian acquired Court Ventures in March, 2012 because of its national public records database. After the acquisition, the US Secret Service notified Experian that Court Ventures had been and was continuing to resell data from US Info Search to a third party possibly engaged in illegal activity. Following notice by the US Secret Service, Experian discontinued reselling US Info Search data and worked closely and in full cooperation with law enforcement to bring Vietnamese national Hieu Minh Ngo, the alleged perpetrator, to justice.  Experian’s credit files were not accessed.  Because of the ongoing federal investigation, we are not free to say anything further at this time.”

Continue reading →


25
Sep 13

Data Broker Giants Hacked by ID Theft Service

An identity theft service that sells Social Security numbers, birth records, credit and background reports on millions of Americans has infiltrated computers at some of America’s largest consumer and business data aggregators, according to a seven-month investigation by KrebsOnSecurity.

ssndobhomeThe Web site ssndob[dot]ms (hereafter referred to simply as SSNDOB) has for the past two years marketed itself on underground cybercrime forums as a reliable and affordable service that customers can use to look up SSNs, birthdays and other personal data on any U.S. resident. Prices range from 50 cents to $2.50 per record, and from $5 to $15 for credit and background checks. Customers pay for their subscriptions using largely unregulated and anonymous virtual currencies, such as Bitcoin and WebMoney.

Until very recently, the source of the data sold by SSNDOB has remained a mystery. That mystery began to unravel in March 2013, when teenage hackers allegedly associated with the hacktivist group UGNazi showed just how deeply the service’s access went. The young hackers used SSNDOB to collect data for exposed.su, a Web site that listed the SSNs, birthdays, phone numbers, current and previous addresses for dozens of top celebrities — such as performers Beyonce, Kanye West and Jay Z — as well as prominent public figures, including First Lady Michelle Obama, CIA Director John Brennan, and then-FBI Director Robert Mueller.

Earlier this summer, SSNDOB was compromised by multiple attackers, its own database plundered. A copy of the SSNDOB database was exhaustively reviewed by KrebsOnSecurity.com. The database shows that the site’s 1,300 customers have spent hundreds of thousands of dollars looking up SSNs, birthdays, drivers license records, and obtaining unauthorized credit and background reports on more than four million Americans.

Frustratingly, the SSNDOB database did not list the sources of that stolen information; it merely indicated that the data was being drawn from a number of different places designated only as “DB1,” “DB2,” and so on.

But late last month, an analysis of the networks, network activity and credentials used by SSNDOB administrators indicate that these individuals also were responsible for operating a small but very potent botnet — a collection of hacked computers that are controlled remotely by attackers. This botnet appears to have been in direct communications with internal systems at several large data brokers in the United States.  The botnet’s Web-based interface (portions of which are shown below) indicated that the miscreants behind this ID theft service controlled at least five infected systems at different U.S.-based consumer and business data aggregators.

The botnet interface used by  the miscreants who own and operate ssndob[dot]ms

The botnet interface used by the miscreants who own and operate ssndob[dot]ms

DATA-BROKER BOTNET

Two of the hacked servers were inside the networks of Atlanta, Ga.-based LexisNexis Inc., a company that according to Wikipedia maintains the world’s largest electronic database for legal and public-records related information. Contacted about the findings, LexisNexis confirmed that the two systems listed in the botnet interface were public-facing LexisNexis Web servers that had been compromised.

One of two bots connected to SSNDOB that was inside of LexisNexis.

One of two bots connected to SSNDOB that was inside of LexisNexis.

The botnet’s online dashboard for the LexisNexis systems shows that a tiny unauthorized program called “nbc.exe” was placed on the servers as far back as April 10, 2013, suggesting the intruders have had access to the company’s internal networks for at least the past five months. The program was designed to open an encrypted channel of communications from within LexisNexis’s internal systems to the botnet controller on the public Internet.

Two other compromised systems were located inside the networks of Dun & Bradstreet, a Short Hills, New Jersey data aggregator that licenses information on businesses and corporations for use in credit decisions, business-to-business marketing and supply chain management. According to the date on the files listed in the botnet administration panel, those machines were compromised at least as far back as March 27, 2013.

The fifth server compromised as part of this botnet was located at Internet addresses assigned to Kroll Background America, Inc., a company that provides employment background, drug and health screening. Kroll Background America is now part of HireRight, a background-checking firm managed by the Falls Church, Va.-based holding company Altegrity, which owns both the Kroll and HireRight properties. Files left behind by intruders into the company’s internal network suggest the HireRight breach extends back to at least June 2013.

An initial analysis of the malicious bot program installed on the hacked servers reveals that it was carefully engineered to avoid detection by antivirus tools. A review of the bot malware in early September using Virustotal.com — which scrutinizes submitted files for signs of malicious behavior by scanning them with antivirus software from nearly four dozen security firms simultaneously — gave it a clean bill of health: none of the 46 top anti-malware tools on the market today detected it as malicious (as of publication, the malware is currently detected by 6 out of 46 anti-malware tools at Virustotal).

Continue reading →


28
Jan 13

Big Bank Mules Target Small Bank Businesses

A $170,000 cyberheist last month against an Illinois nursing home provider starkly illustrates how large financial institutions are being leveraged to target security weaknesses at small to regional banks and credit unions.

I have written about more than 80 organizations that were victims of cyberheists, and a few recurring themes have emerged from nearly all of these breaches. First, a majority of the victim organizations banked at smaller institutions. Second, virtually all of the money mules — willing or unwitting individuals recruited to help launder the stolen funds — used accounts at the top five largest U.S. banks.

The attack on Niles Nursing Inc. provides a textbook example. On Monday, Dec. 17, 2012, computer crooks logged into the company’s online banking accounts using the controller’s credentials and tunneling their connection through his hacked PC. At the beginning of the heist, the miscreants added 11 money mules to Niles’ payroll, sending them automated clearing house (ACH) payments totaling more than $58,000, asking each mule to withdraw their transfers in cash and wire the money to individuals in Ukraine and Russia.

nilesmulespartNiles’ financial institution — Ft. Lauderdale, Fla. based Optimum Bank — evidently saw nothing suspicious about 11 new employees scattered across five states being added to its customer’s payroll overnight. From the bank’s perspective, the user submitting the payroll batch logged in to the account with the proper credentials and with the same PC that was typically used to administer the account. The thieves would put through another two fraudulent payment batches over next two days (the bank blocked the last batch on the 19th).

In total, the attackers appear to have recruited at least two dozen money mules to help haul the stolen loot. All but two of the mules used or opened accounts at four out of five of the nation’s top U.S. banks, including Bank of America, Chase, Citibank, and Wells Fargo. No doubt these institutions together account for a huge percentage of the retail banking accounts in America today, but interviews with mules recruited by this crime gang indicate that they were instructed to open accounts at these institutions if they did not already have them.

ANALYSIS

I’ve spoken at numerous financial industry conferences over the past three years to talk about these cyberheists, and one question I am almost always asked is, “Is it safer for businesses to bank at larger institutions?” This is a tricky question to answer because banking online remains a legally and financially risky affair for any business, regardless of which bank it uses. Businesses do not enjoy the same fraud protections as consumers; if a Trojan lets the bad guys siphon an organization’s online accounts, that victim organization is legally responsible for the loss. The financial institution may decide to reimburse the victim for some or all of the costs of the fraud, but that is entirely up to the bank.

What’s more, it is likely that fewer cyberheists involving customers of Top 5 banks ever see the light of day, principally because the larger banks are in a better financial position to assume responsibility for some or all of the loss (provided, of course, that the victim in return agrees not to sue the bank or disclose the breach publicly).

I prefer to answer the question as if I were a modern cyberthief in charge of selecting targets. The organized crooks behind these attacks blast out tens of millions of booby-trapped emails daily, and undoubtedly have thousands of stolen online banking credentials to use at any one time. There are more than 7,000 financial institutions in the United States…should I choose a target at one of the top 10 banks? These institutions hold a majority of the financial industry’s assets, and they’re accustomed to moving huge sums of money around each day.

On the other hand, their potential for fraud is almost certainly orders of magnitude greater than at smaller institutions. That would suggest that it may be easier for these larger institutions to justify antifraud expenditures. That incentive to enact antifraud protections is even greater because these institutions have huge numbers of retail customers, a channel in which they legally eat the loss from unauthorized account activity.

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