Posts Tagged: mastercard

Apr 16

Giant Food Sees Giant Card Fraud Spike

Citing a recent and large increase in credit card fraud, Washington, DC-area grocer Giant Food says it will no longer allow customers to use credit cards when purchasing gift cards and reloadable or prepaid debit cards.

A new warning sign at Giant Food checkout counters. Giant says the warning was prompted by a spike in credit card fraud.

A new warning sign at Giant Food checkout counters. Giant says the warning was prompted by a spike in credit card fraud.

I had no idea this was a new thing at Landover, Md.-based Giant, which operates 169 supermarkets in the Washington, D.C. metro area.  That is, until I encountered a couple of large new “attention” stickers in the checkout line at a local Giant in Virginia recently. Next to the credit card terminal were big decals with the warning:

“Attention Gift Card Customers: Effective immediately, all purchases of Visa, MasterCard, American Express Gift Cards and all General Purpose Reloadable or Prepaid Cards may only be made with Cash or Bank Pin-based Debit.”

Asked for comment about the change, Giant Food released a brief statement about the policy change that went into effect in March 2016, but otherwise didn’t respond to requests for more details.

“Giant has recently made a change in procedures for purchasing gift cards because of a large increase of fraudulent gift card purchasing,” the company said. “Giant will now accept only a Bank PIN-based debit card or cash for all VISA, MasterCard, and American Express gift cards, as well as re-loadable and prepaid gift cards. This change has been made in order to mitigate potential fraud risk.”

It’s not clear why Giant is only just now taking this basic anti-fraud step. Card thieves love to pick on grocery and convenience stores. Street gangs involved in card fraud (and they’re all involved in card fraud now) often extract money from grocery, dollar and convenience stores using “runners” — low-level members who are assigned the occasionally risky business of physically “cashing out” counterfeit credit and debit cards.

One of the easiest ways thieves can cash out? Walk into a grocery or retail store and buy prepaid gift cards using stolen credit cards. Such transactions — if successful — effectively launder money by converting the stolen item (counterfeit/stolen card) into a good that is equivalent to cash or can be easily resold for cash (gift cards).

I witnessed this exact crime firsthand at a Giant in Maryland last year. As I noted in a Dec. 2015 post about gift card fraud, the crooks caught in the process of these cashout schemes usually are found with dozens of counterfeit credit cards on their person or in their vehicle. From that post: Continue reading →

Feb 16

The Great EMV Fake-Out: No Chip For You!

Many banks are now issuing customers more secure chip-based credit cards, and most retailers now have card terminals in their checkout lanes that can handle the “dip” of chip-card transactions (as opposed to the usual swipe of the card’s magnetic stripe). But comparatively few retailers actually allow chip transactions: Most are still asking customers to swipe the stripe instead of dip the chip. This post will examine what’s going on here, why so many merchants are holding out on the dip, and where this all leaves consumers.

chiptransVisa CEO Charles W. Scharf said in an earnings call late last month that more than 750,000 locations representing 17 percent of the U.S. face-to-face card-accepting merchant base are now enabled to handle chip-based transactions, also known as the EMV (“Europay, Mastercard and Visa”) payment standard.

Viewed another way, that means U.S. consumers currently can expect to find chip cards accepted in checkout lines at fewer than one in five brick-and-mortar merchants.

Why are so many chip-capable checkout terminals already installed that have not been enabled to actually accept chip cards? Allen Weinberg, co-founder of Menlo Park, Calif. based management consulting firm Glenbrook Partners, examined this very question in a recent column that pointed to several factors holding retailers back from enabling dip-the-chip.


New MasterCard and Visa rules that went into effect Oct. 1, 2015 put merchants on the hook to absorb 100 percent of the costs of fraud associated with transactions in which the customer presented a chip-based card yet was not asked or able to dip the chip. The chip cards encrypt the cardholder data and are far more expensive and difficult for card thieves to clone.

Despite the increased risk of eating the entire loss from counterfeit card use in their stores, many merchants are taking a wait-and-see approach on enabling chip card transactions. Weinberg said some merchants — particularly the larger ones — want to turn the often painful experience of training customers how to use the chip cards and terminals into someone else’s problem.

“They see [chip cards] as just slowing down lines and chose to wait until consumers learned what to do — and do it quickly — at someone else’s store,” Weinberg wrote.

Weinberg adds that for many larger merchants, switching on the chip readers also can be a big and expensive project. Part of the problem, he says, is that many integrated point of sale systems — particularly the electronic cash register software for these systems — were just not ready in time for the Oct. 2015 liability shift.

“Even if the software was ahead of the game, they faced long certification queues at many acquirers,” Weinberg wrote. “I believe this is going to be a problem for a while.”

Visa said based on recent client surveys it expects 50% of face-to-face card accepting merchants to have chip card transactions enabled by the end of this year. But even 50 percent adoption can mask a long tail of smaller merchants who will put off as long as they can the expensive software and hardware upgrades for accepting chip transactions.

“My dry cleaner isn’t worried about someone using counterfeit cards at his cash register,” Weinberg said, noting that many businesses meanwhile discount the chances that hackers will siphon customer cards by sneaking malicious software onto point-of-sale devices — a problem that has lead to one breach after another at brand name retailers, restaurants and hotels over the past several  years. Continue reading →

Nov 15

JPMorgan Hackers Breached Anti-Fraud Vendor G2 Web Services

Buried in the federal indictments unsealed this week against four men accused of stealing tens of millions of consumer records from JPMorgan Chase and other brokerage firms are other unnamed companies that were similarly victimized by the accused. One of them, identified in the indictments only as “Victim #12,” is an entity that helps banks block transactions for dodgy goods advertised in spam. Turns out, the hackers targeted this company so that they could more easily push through payments for spam-advertised prescription drugs and fake antivirus schemes.

g2webAccording to multiple sources, Victim #12 is none other than Bellevue, Wash. based G2 Web Services LLC, a company that helps banks figure out if a website is fraudulent or is selling contraband. G2 Web Services has not responded to multiple requests for comment.

In the final chapters of my book, Spam Nation: The Inside Story of Organized Cybercrime, I detailed the work of The International AntiCounterfeiting Coalition (IACC), a non-profit organization dedicated to combating product counterfeiting and piracy.

In 2011, G2 Web Services landed a contract to help the IACC conduct “test buys” at sites with products that were being advertised via spam. The company would identify which banks (mostly in Asia) were processing payments for these sites, and then Visa and MasterCard would rain down steep fines on the banks for violating their contracts with the credit card companies. The idea was to follow the money from schemes tied to cybercrime, deter banks from accepting funds from fraudulent transactions, and make it difficult for spammers to maintain stable credit card processing for those endeavors.

Prosecutors say the ringleader of the cybercrime gang accused of breaking into JPMC, Scottrade, E-Trade and others is 31-year-old Gery Shalon, a resident of Tel Aviv and Moscow. Investigators allege Shalon and his co-conspirators monitored credit card transactions processed through their payment processing business to attempt to discern which, if any, were undercover transactions made on behalf of credit card companies attempting to identify unlawful merchants. The government also charges that beginning in or about 2012, Shalon and his co-conspirators hacked into the computer networks of Victim-12 (G2 Web Services).

Shalon and his gang allegedly monitored Victim-12’s detection efforts, including reading emails of Victim-12 employees so they could take steps to evade detection.

“In particular, through their unlawful intrusion into Victim-12’s network, Shalon and his co-conspirators determined which credit and debit card numbers Victim-12 employees were using the make undercover purchases of illicit goods in the course of their effort to detect unlawful merchants,” Shalon’s indictment explains. “Upon identifying those credit and debit card numbers, Shalon and his co-conspirators blacklisted the numbers from their payment processing business, automatically declining any transaction for which payment was offered through one of those credit or debit card numbers.” Continue reading →

Apr 15

‘Revolution’ Crimeware & EMV Replay Attacks

In October 2014, KrebsOnSecurity examined a novel “replay” attack that sought to exploit implementation weaknesses at U.S. financial institutions that were in the process of transitioning to more secure chip-based credit and debit cards. Today’s post looks at one service offered in the cybercrime underground to help thieves perpetrate this type of fraud.

Several U.S. financial institutions last year 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 October 2014 breach at Home Depot. The affected banks were puzzled by the attacks because the fraudulent transactions were all submitted through Visa and MasterCard‘s networks as chip-enabled transactions, even though the banks that issued the cards in question hadn’t yet begun sending customers chip-enabled cards.

Seller in underground forum describes his "Revolution" software to conduct  EMV card fraud against banks that haven't implemented EMV correctly .

Seller in underground forum describes his “Revolution” software to conduct EMV card fraud against banks that haven’t implemented EMV fully.

Fraud experts said the most likely explanation for the activity was that crooks were pushing regular magnetic stripe transactions through the card network as chip card purchases using a technique known as a “replay” attack. According to one bank interviewed at the time, MasterCard officials explained that the thieves were likely in control of a payment terminal and had the ability to manipulate data fields for transactions put through that terminal. After capturing traffic from a real chip-based chip card transaction, the thieves could insert stolen card data into the transaction stream, while modifying the merchant and acquirer bank account data on-the-fly.

Recently, KrebsOnSecurity encountered a fraudster in a popular cybercrime forum selling a fairly sophisticated software-as-a-service package to do just that. The seller, a hacker who reportedly specializes in selling skimming products to help thieves steal card data from ATMs and point-of-sale devices, calls his product “Revolution” and offers to provide buyers with a list of U.S. financial institutions that have not fully or properly implemented systems for accepting and validating chip-card transactions. Continue reading →

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 →

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.


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 →

Sep 14

In Home Depot Breach, Investigation Focuses on Self-Checkout Lanes

The malicious software that unknown thieves used to steal credit and debit card numbers in the data breach at Home Depot this year was installed mainly on payment systems in the self-checkout lanes at retail stores, according to sources close to the investigation. The finding could mean thieves stole far fewer cards during the almost five-month breach than they might have otherwise.

A self-checkout lane at a Home Depot in N. Virginia.

A self-checkout lane at a Home Depot in N. Virginia.

Since news of the Home Depot breach first broke on Sept. 2, this publication has been in constant contact with multiple financial institutions that are closely monitoring daily alerts from Visa and MasterCard for reports about new batches of accounts that the card associations believe were compromised in the break-in. Many banks have been bracing for a financial hit that is much bigger than the exposure caused by the breach at Target, which lasted only three weeks and exposed 40 million cards.

But so far, banking sources say Visa and MasterCard have been reporting far fewer compromised cards than expected given the length of the Home Depot exposure.

Sources now tell KrebsOnSecurity that in a conference call with financial institutions today, officials at MasterCard shared several updates from the ongoing forensic investigation into the breach at the nationwide home improvement store chain. The card brand reportedly told banks that at this time it is believed that only self-checkout terminals were impacted in the breach, but stressed that the investigation is far from complete. Continue reading →

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 →

Mar 14

Sources: Credit Card Breach at California DMV

The California Department of Motor Vehicles appears to have suffered a wide-ranging credit card data breach involving online payments for DMV-related services, according to banks in California and elsewhere that received alerts this week about compromised cards that all had been previously used online at the California DMV.

CAdmvThe alert, sent privately by MasterCard to financial institutions this week, did not name the breached entity but said the organization in question experienced a “card-not-present” breach — industry speak for transactions conducted online. The alert further stated that the date range of the potentially compromised transactions extended from Aug. 2, 2013 to Jan. 31, 2014, and that the data stolen included the card number, expiration date, and three-digit security code printed on the back of cards.

Five different financial institutions contacted by this publication — including two mid-sized banks in California — confirmed receipt of the MasterCard notice, and said that all of the cards MasterCard alerted them about as compromised had been used for charges bearing the notation “STATE OF CALIF DMV INT”.

A representative from MasterCard, speaking on background, confirmed sending out an alert this week. According to bank sources, Visa has not sent out a similar alert. A Visa spokesperson said “Visa cannot comment on potential third party data compromises or ongoing investigations.”

Contacted about the alerts early Friday afternoon pacific time, California DMV Spokesperson Jessica Gonzalez said the agency would investigate the matter. Reached again at 6:30 p.m. PT (well after DMV business hours on a Friday), Ms. Gonzalez said her office was working late as a result of the inquiry from KrebsOnSecurity. She said the agency was still in the process of getting a statement approved, but that it planned to email the statement later that evening. So far, however, the California DMV has yet to issue a statement or respond to further requests for comment.

Update, 6:44 p.m. ET: The CA DMV just issued the following statement, which placed blame for the incident on the organization’s external card processing firm:

“The Department of Motor Vehicles has been alerted by law enforcement authorities to a potential security issue within its credit card processing services.”

” There is no evidence at this time of a direct breach of the DMV’s computer system. However, out of an abundance of caution and in the interest of protecting the sensitive information of California drivers, the DMV has opened an investigation into any potential security breach in conjunction with state and federal law enforcement.”

“In its investigation, the department is performing a forensic review of its systems and seeking information regarding any potential breach from both the external vendor that processes the DMV’s credit card transactions and the credit card companies themselves.”

The CA DMV did not say who their card processor is, but this document from the California Department of General Services seems to suggest that the processor is Elavon, a company based in Atlanta, Ga. Representatives for Elavon could not be immediately reached for comment [hat tip to @walshman23 for finding this document].

Update, Mar. 24, 10:54 a.m.: Elavon officials could not be reached for comment. But a spokesperson for Elavon parent firm U.S. Bank told this publication that “there has been NO confirmation of a breach. We are in touch with the CA-DMV and the authorities to determine if there is an issue.”

Original story:

If indeed the California DMV has suffered a breach of their online payments system, it’s unclear how many card numbers may have been stolen. But the experience of one institution that received the MasterCard alert this week may offer some perspective.

Continue reading →