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.

ANALYSIS

C&K Systems has declined to answer direct questions about this breach. As such, it remains unclear exactly how their systems were compromised, information that could no doubt be helpful to other organizations in preventing future breaches. It’s also not clear whether the other two organizations impacted by this breach have or will disclose.

Here are a few thoughts about why we may not have heard about those other two breaches, and why the source of card breaches can very often go unreported.

Point-of-sale malware, like the malware that hit C&K as well as Target, Home Depot, Neiman Marcus and other retailers this past year, is designed to steal the data encoded onto the magnetic stripe on the backs of debit and credit cards. This data can be used to create counterfeit cards, which are then typically used to purchase physical goods at big-box retailers.

The magnetic stripe on a credit or debit card contains several areas, or “tracks,” where cardholder information is stored: “Track 1” includes the cardholder’s name, account number and other data. “Track 2,” contains the cardholder’s account, encrypted PIN and other information, but it does not include the account holder’s name.

An example of Track 1 and Track 2 data, together. Source:  Appsecconsulting.com

An example of Track 1 and Track 2 data, together. Source: Appsecconsulting.com

Most U.S. states have data breach laws requiring businesses that experience a breach involving the personal and financial information of their citizens to notify those individuals in a timely fashion. However, few of those notification requirements are triggered unless the data that is lost or stolen includes the consumer’s name (see my reporting on the 2012 breach at Global Payments, e.g.).

This is important because a great many of the underground stores that sell stolen credit and debit data only sell Track 2 data. Translation: If the thieves are only stealing Track 2 data, a breached business may not have an obligation under existing state data breach disclosure laws to notify consumers about a security incident that resulted in the theft of their card data.

ENCRYPTION, ENCRYPTION, ENCRYPTION

Breaches like the one at C&K Systems involving stolen mag stripe data will continue for several years to come, even beyond the much-ballyhooed October 2015 liability shift deadline from Visa and MasterCard.

Much of the retail community is working to meet an October 2015 deadline put in place by MasterCard and Visa to move to chip-and-PIN enabled card terminals at their checkout lanes (in most cases, however, this transition will involve the less-secure chip-and-signature approach). Somewhat embarrassingly, the United States is the last of the G20 nations to adopt this technology, which embeds a small computer chip in each card that makes it much more expensive and difficult (but not impossible) for fraudsters to clone stolen cards.

That October 2015 deadline comes with a shift in liability for merchants who haven’t yet adopted chip-and-PIN (i.e., those merchants not in compliance could find themselves responsible for all of the fraudulent charges on purchases involving chip-enabled cards that were instead merely swiped through a regular mag-stripe card reader at checkout time).

Business Week recently ran a story pointing out that Home Depot’s in-store payment system “wasn’t set up to encrypt customers’ credit- and debit-card data, a gap in its defenses that gave potential hackers a wider window to exploit.” The story observed that although Home Depot “this year purchased a tool that would encrypt customer-payment data at the cash register, two of the former managers say current Home Depot staffers have told them that the installation isn’t complete.”

The crazy aspect of all these breaches over the past year is that we’re only hearing about those intrusions that have been detected. In an era when third-party vendors such as C&K Systems can go 18 months without detecting a break-in, it’s reasonable to assume that the problem is much worse than it seems.

Avivah Litan, a fraud analyst with Gartner Inc., said that at least with stolen credit card data there are mechanisms for banks to report a suspected breached merchant to the card associations. At that point, Visa and MasterCard will aggregate the reports to the suspected breached merchant’s bank, and request that the bank demand that the merchant hire a security firm to investigate. But in the case of breaches involving more personal data — such as Social Security numbers and medical information — very often there are few such triggers, and little recourse for affected consumers.

“It’s usually only the credit and debit card stuff that gets exposed,” Litan said. “Nobody cares if the more sensitive personal data is stolen because nobody is damaged by that except you as the consumer, and anyway you probably won’t have any idea how that data was stolen in the first place.”

Maybe it’s best that most breaches go undisclosed: It’s not clear how much consumers could stand if they knew about them all. In an opinion piece published today, New York Times writer Joe Nocera observed that “seven years have passed between the huge T.J. Maxx breach and the huge Home Depot breach — and nothing has changed.” Nocera asks: “Have we become resigned to the idea that, as a condition of modern life, our personal financial data will be hacked on a regular basis? It is sure starting to seem that way.” Breach fatigue, indeed.

The other observation I’d make about these card breaches is that the entire credit card system in the United States seems currently set up so that one party to a transaction can reliably transfer the blame for an incident to another. The main reason the United States has not yet moved to a more secure standard for handling cards, for example, has a lot to do with the finger pointing and blame game that’s been going on for years between the banks and the retail industry. The banks have said, “If the retailers only started installing chip-and-PIN card readers, we’d start issuing those types of cards.” The retailers respond: “Why should we spend the money upgrading all our payment terminals to handle chip-and-PIN when hardly any banks are issuing those types of cards?” And so it has gone for years.

For its part, C&K systems says it was relying on hardware and software that met current security industry standards but that was nevertheless deficient. Happily, the company reports that it is in the process of implementing point-to-point encryption to block any future attacks on its payment infrastructure.

“What we have learned during this process is that we rely and put our trust in many systems and individuals to help prevent these kinds of things from happening. However, there is no 100% failsafe security solution for hosting Point of Sale environments,” C&K Systems said. Their statement continues:

“The software we host for our customers is from a leading POS company and meets current PCI-DSS requirements of encrypted data in transit and data at rest. Point of sale terminals are vulnerable to memory scraping malware, which catches cards in memory before encryption can occur. Our software vendor is in the process of rolling out a full P2PE solution with tokenization that we anticipate receiving in October 2014. Our experience with the state of today’s threats will help all current and future customers develop tighter security measures to help reduce threat exposure and to make them more cognizant of the APTs that exist today and the impact of the potential threat to their businesses.”

Too many organizations only get religion about security after they’ve had a serious security breach, and unfortunately that inaction usually ends up costing the consumer more in the long run. But that doesn’t mean you have to be further victimized in the process: Be smart about your financial habits.

Using a credit card over a debit card, for example, involves fewer hassles and risks when your card information inevitably gets breached by some merchant. Pay close attention to your monthly statements and report any unauthorized charges immediately. And spend more time and energy protecting yourself from identity theft. Finally, take proactive steps to keep your inbox and your computer from being ravaged by cybercrooks.

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61 comments

  1. Some bad guys were Goodwill Hunting.

    I can’t belive nobody already posted that lol

  2. Even EMV passes sensitive card data in plain text to the POS terminal. Part of the EMV data is plain text “track equivalent data”. Many issuers don’t change up the 3 digit iCVV in that data which means if it’s stolen from POS systems, they can create magstripe cards for use at magstripe terminals and EMV terminals supporting fallback mode which is most of them. Even if the 3 digit iCVV is changed to detect cloned magstripe cards created from stolen EMV transaction data, the account number and expiration date are in plain text which can be used to conduct card-not-present fraud. More on this including screenshots of card data in a process memory dump after an EMV chip read in the Black Hat USA talk I did. https://www.blackhat.com/docs/us-14/materials/us-14-Zaichkowsky-Point-Of-Sale%20System-Architecture-And-Security.pdf