Krebs on Security

Adobe, Microsoft Issue Critical Security Fixes

June 10, 2015

Adobe today released software updates to plug at least 13 security holes in its Flash Player software. Separately, Microsoft pushed out fixes for at least three dozen flaws in Windows and associated software.

The bulk of the flaws Microsoft addressed today (23 of them) reside in the Internet Explorer Web browser. Microsoft also issued fixes for serious problems in Office, the Windows OS itself and Windows Media Player, among other components. A link to an index of the individual Microsoft updates released today is here.

As it normally does on Patch Tuesday, Adobe issued fixes for its Flash and AIR software, plugging a slew of dangerous flaws in both products. Flash continues to be one of the more complex programs to manage and update on a computer, mainly because its auto-update function tends to lag the actual patches by several days at least (your mileage may vary), and it’s difficult to know which version is the latest. Continue reading →

Firms Could Be Forced to Disgorge Profits from Tax Refund Fraud

June 9, 2015

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Last week, KrebsOnSecurity ran an interview with Julie Magee, Alabama’s chief tax administrator, to examine what the states are doing in tandem with the IRS and others to make it harder for ID thieves to commit tax refund fraud — a $6 billion a year problem. Today we’ll hear from John Valentine, chair of Utah’s State Tax Commission, about the challenges his state faced this year, as well as the prospect that tax preparation firms could be forced return to the U.S. Treasury any profits they make from processing fraudulent tax refunds.

Valentine was a tax attorney before being appointed the chair of Utah’s tax commission, so he’s familiar with the challenges facing both the tax preparation industry as well as the tax agencies.

“I came out of the private sector and spent nearly 40 years suing the state tax commission and the IRS,” Valentine said. “Now I am that.”

Utah is actively engaged in an IRS task force made up of state, federal and industry tax experts trying to quash refund fraud. Like Alabama’s deputy tax commissioner Joe Garrett — who had a $7,700 fraudulent refund filed in his name — several of Utah’s senior tax administration officials also were victimized by ID thieves this year.

“We’ve had some of our senior people who had tax returns filed on their behalf,” Valentine said. “Of course, they had not filed them yet and we knew that they were more than a little suspicious.”

Among the steps the task force is considering is whether to mail all taxpayers an Identity Protection Personal Identification Number (IP PIN) that is tied to each taxpayer and must be included in each tax return. The IRS issues the IP PINs to taxpayers who have suffered tax return fraud. Additionally, consumers willing to swear they have been victims of identity theft can apply for a filing PIN, however the IRS is picky about granting those requests.

Even if the IRS were to switch to issuing IP PINs to all taxpayers, the agency would still run up against the thorny problem of how to verify consumers’ identity (no doubt, that challenge would be exacerbated by millions of taxpayers phoning the IRS after losing or misplacing their assigned PINs). A major focus of the working groups attention is finding better ways to authenticate people beyond merely requesting static identifiers (Social Security numbers, dates of birth) and other data that is frequently exposed in data breaches and is readily for sale on underground markets.

“They’re going to have to switch to a 2-factor authentication system, where they really strengthen the front-end of that authentication,” Valentine said of the tax preparation firms like TurboTax, which briefly shut down all state tax filing this year after a massive spike in phony refund requests put through its systems via hijacked and fraudulently created TurboTax accounts.

Valentine also made the decision to halt all Utah tax refunds around that same time.

“When we installed our [anti-fraud] analytics program, we thought we were getting a lot of false positives, so we did a bunch of back checking,” he said “While we were doing that, I made a decision to stop all refunds. For a period of two weeks Utah gave no refunds while we worked through the analytics to make sure we’d identified the nature and extent of the fraud. It turned out to be much more extensive than we’ve ever seen.”

In fact, ten times as much as any year prior, according to Valentine.

“We’ve always seen fraud where a tax practitioner will file a whole bunch of fraudulent returns, or we’ll see ID theft targeting a large employer. But this fraud wave was a little tougher, because it went across spectrum of employers, across the entire demographic of taxpayers, high low and middle income. Also, the fraud wasn’t regionalized — it was across the whole state — and [the fraudsters] didn’t seem to be selective as to who they hit. They got people of notoriety and people nobody knew. In the end, it appeared that the common factor among all of them was how you filed in 2013,” because the phony 2014 returns all included nearly identical information as the victim’s 2013 returns.

“What we saw in Utah was a population of the same information in the 2013 return into the 2014 return, with the exception of bank routing and bank account number,” Valentine said. “That’s a different fraud that we’d just never seen before.”

TurboTax’s lax security around authentication for new and existing accounts played a well-documented role in the type of fraud described by Valentine this year. But ID thieves also got help directly from the IRS this year. Late last month, the agency suspended the “get transcript” function that previously allowed taxpayers to order a copy of their previous year’s W2 information, among other data; turns out, crooks had used the service to pull tax data on more than 100,000 citizens, stealing tens of millions from the U.S. Treasury in the process. Continue reading →

How I Learned to Stop Worrying and Embrace the Security Freeze

June 8, 2015

119 Comments

If you’ve been paying attention in recent years, you might have noticed that just about everyone is losing your personal data. Even if you haven’t noticed (or maybe you just haven’t actually received a breach notice), I’m here to tell you that if you’re an American, your basic personal data is already for sale. What follows is a primer on what you can do to avoid becoming a victim of identity theft as a result of all this data (s)pillage.

Click here for a primer on identity theft protection services.

A seemingly never-ending stream of breaches at banks, healthcare providers, insurance companies and data brokers has created a robust market for thieves who sell identity data. Even without the help of mega breaches like the 80 million identities leaked in the Anthem compromise or last week’s news about 4 million records from the U.S. Office of Personnel Management gone missing, crooks already have access to the information needed to open new lines of credit or file phony tax refund requests in your name.

If your response to this breachapalooza is to do what each of the breached organizations suggest — to take them up on one or two years’ worth of free credit monitoring services — you might sleep better at night but you will probably not be any more protected against crooks stealing your identity. As I discussed at length in this primer, credit monitoring services aren’t really built to prevent ID theft. The most you can hope for from a credit monitoring service is that they give you a heads up when ID theft does happen, and then help you through the often labyrinthine process of getting the credit bureaus and/or creditors to remove the fraudulent activity and to fix your credit score.

In short, if you have already been victimized by identity theft (fraud involving existing credit or debit cards is not identity theft), it might be worth paying for these credit monitoring and repair services (although more than likely, you are already eligible for free coverage thanks to a recent breach at any one of dozens of companies that have lost your information over the past year). Otherwise, I’d strongly advise you to consider freezing your credit file at the major credit bureaus.

There is shockingly little public knowledge or education about the benefits of a security freeze, also known as a “credit freeze.” I routinely do public speaking engagements in front of bankers and other experts in the financial industry, and I’m amazed at how often I hear from people in this community who are puzzled to learn that there is even such a thing as a security freeze (to be fair, most of these people are in the business of opening new lines of credit, not blocking such activity).

Also, there is a great deal of misinformation and/or bad information about security freezes available online. As such, I thought it best to approach this subject in the form of a Q&A, which is the most direct method I know how to impart knowledge about a subject in way that is easy for readers to digest.

Q: What is a security freeze?

A: A security freeze essentially blocks any potential creditors from being able to view or “pull” your credit file, unless you affirmatively unfreeze or thaw your file beforehand. With a freeze in place on your credit file, ID thieves can apply for credit in your name all they want, but they will not succeed in getting new lines of credit in your name because few if any creditors will extend that credit without first being able to gauge how risky it is to loan to you (i.e., view your credit file). And because each credit inquiry caused by a creditor has the potential to lower your credit score, the freeze also helps protect your score, which is what most lenders use to decide whether to grant you credit when you truly do want it and apply for it.

Q: What’s involved in freezing my credit file?

A: Freezing your credit involves notifying each of the major credit bureaus that you wish to place a freeze on your credit file. This can usually be done online, but in a few cases you may need to contact one or more credit bureaus by phone or in writing. Once you complete the application process, each bureau will provide a unique personal identification number (PIN) that you can use to unfreeze or “thaw” your credit file in the event that you need to apply for new lines of credit sometime in the future. Depending on your state of residence and your circumstances, you may also have to pay a small fee to place a freeze at each bureau. There are four consumer credit bureaus, including Equifax, Experian, Innovis and Trans Union.

Q: How much is the fee, and how can I know whether I have to pay it?

A: The fee ranges from $0 to $15 per bureau, meaning that it can cost upwards of $60 to place a freeze at all four credit bureaus (recommended). However, in most states, consumers can freeze their credit file for free at each of the major credit bureaus if they also supply a copy of a police report and in some cases an affidavit stating that the filer believes he/she is or is likely to be the victim of identity theft. In many states, that police report can be filed and obtained online. The fee covers a freeze as long as the consumer keeps it in place. Equifax has a decent breakdown of the state laws and freeze fees/requirements. Continue reading →

States Seek Better Mousetrap to Stop Tax Refund Fraud

June 2, 2015

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With the 2014 tax filing season in the rearview mirror, state tax authorities are struggling to incorporate new approaches to identifying and stopping fraudulent tax refund requests, a $6 billion-a-year problem that’s hit many states particularly hard this year. But some states say they are encountering resistance to those efforts on nearly every front, from Uncle Sam to online tax vendors and from the myriad of financial firms that profit handsomely from processing phony tax refunds.

Cash Cow: Check out this primer on which companies are profiting from tax refund fraud.

Cash Cow: Click on the image above for a primer on how many companies are profiting from tax refund fraud.

Last week, the Internal Revenue Service (IRS) disclosed that thieves had stolen up to $50 million in phony refunds by pulling tax data on more than 100,000 Americans directly from the agency’s own Web site. The thieves were able to do this for the same reason that fraudsters are able to get away with filing and getting paid for bogus refunds: The IRS, the states and the tax preparation firms all try to authenticate filers based on static identifiers about the filer — such as birthdays and Social Security numbers, as well as answers to a handful of easily-guessed or researched “knowledge based-authentication” questions.

I spoke at length with several state tax commissioners about the size and scope of the tax refund fraud problem, and what the IRS and the states are doing to move beyond reliance on static identifiers to authenticate taxpayers. One of the state experts I spoke with was Julie Magee, commissioner of Alabama’s Department of Revenue.

Magee described her work on a new task force organized by the IRS aimed at finding solutions for reducing the tax refund fraud problem across the board. Magee is one of several folks working on a fraud and authentication working group within the IRS’s task force, which is trying to come to a consensus about ways to do a better job authenticating taxpayers and to improve security around online tax preparation services such as TurboTax.

Earlier this year, TurboTax briefly suspended the online filing of state tax returns after dozens of state revenue departments complained about a massive spike in fraudulent refund requests — many of which were tied back to hijacked or fraudulently-created TurboTax accounts.

One of those victimized in that scourge was Joe W. Garrett, — Magee’s deputy commissioner — who had a $7,700 fraudulent return filed in his name after thieves created a duplicate TurboTax account with his personal information.

Magee said her working group — one of three on the IRS’s task force — is populated by stakeholders with competing agendas.

“You have companies like Intuit that don’t want the government getting into the online tax preparation business, and then there are the bricks-and-mortar operations like Liberty and H&R Block that don’t want to see their businesses cannibalized by the do-it-yourself online firms like TurboTax,” Magee said. “And then we have the banking industry, which is making a fortune off of this whole problem. Right now, the only entities that are really losing out are states and the US Treasury.” (For a look at which companies stand to profit from fraudulent refunds, see this sidebar).

In February, KrebsOnSecurity published exclusive interviews with two former TurboTax security professionals who accused TurboTax of making millions of dollars knowingly processing state and federal tax refunds filed by identity thieves. Magee said Intuit — the company that owns TurboTax — came to the first two working group meetings with a plan to provide states with an anti-fraud screening mechanism similar to Apple Pay‘s “green/yellow/red path” program, which seeks to offer participating banks some idea of the relative likelihood that a given new customer is in fact a fraudster signing up in the name of an ID theft victim.

“The first two meetings, Intuit acted like they were leading the charge on this, and they were really amenable to everything,” Magee said. “They had come up with an idea that was very much like the red- yellow-green kind of thing, and they were asking us what data elements they should be looking at and sharing.”

According to the Alabama tax commissioner, that’s when the American Coalition for Taxpayer Rights (ACTR), a trade group representing the tax preparation firms, stepped in. “The lobbyist group put the kibosh on that idea. They basically said it’s not their right to be the police – that it should be the IRS or the states — but that they would be more than willing to send us the indicators and that we could use our own system to do the scoring,” Magee said. “The states aren’t hung up on getting some red, yellow, green type system. I think we’re more interested in making sure data elements we can use to make a score are passed on to us.”

Magee said ACTR also protested that tax prep firms like Intuit couldn’t legally share certain information about their customers with the states and the IRS. Representatives with ACTR did not respond to requests for comment. Intuit declined to be interviewed for this story.

“They threw up a red flag and basically said, ‘We can’t you pass that information because it’s protected by IRS code sections regarding taxpayer confidentiality issues,'” Magee recalled. “Thankfully, the IRS brought in their attorneys and the commissioner a few weeks ago and they said, ‘That’s bunk, you can most certainly send that information to us and to the states. So we won that battle.” Continue reading →

Phony Tax Refunds: A Cash Cow for Everyone

June 2, 2015

28 Comments

When identity thieves filed a phony $7,700 tax refund request in the name of Joe Garrett, Alabama’s deputy tax commissioner, they didn’t get all of the money they requested. A portion of the cash went to more than a half dozen U.S. companies that each grab a slice of the fraudulent refund, including banks, payment processing firms, tax preparation companies and e-commerce giants.

When tax scammers file a fraudulent refund request, they usually take advantage of a process called a refund transfer. That allows the third party firm that helped prepare and process the return for filing (e.g. TurboTax) to get paid for their services by deducting the amount of their fee from the refund. Effectively, this lets identity thieves avoid paying a dime to TurboTax or other providers for processing the return.

In Garrett’s case, as with no doubt countless other fraudulent returns filed this year, the thieves requested that the return be deposited into a prepaid debit card account, which they could then use as a regular debit card to pay for goods and services, and/or use at ATMs to withdraw the ill-gotten gains in cash.

What’s more, the crooks asked the government to deposit $2,000 of the $7,700 they applied for in his name to an Amazon gift card ($2,000 is the maximum allowed under the Amazon gift card program). This is just another way for thieves to hedge their bets in case the debit card to which the majority of the stolen funds gets canceled.

“There are so many people making money off of electronic transfer of funds, it’s ridiculous,” said Julie Magee, Garrett’s boss and commissioner of Alabama’s Department of Revenue. “Five different financial institutions touched the fraudulent refund they filed in Joe’s name before it went to the thieves.” Continue reading →

Malware Evolution Calls for Actor Attribution?

May 31, 2015

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What makes one novel strain of malicious software more dangerous or noteworthy than another? Is it the sheer capability and feature set of the new malware, or are these qualities meaningless without also considering the skills, intentions and ingenuity of the person wielding it? Most experts probably would say it’s important to consider attribution insofar as it is knowable, but it’s remarkable how seldom companies that regularly publish reports on the latest criminal innovations go the extra mile to add context about the crooks apparently involved in deploying those tools.

Perhaps with some new malware samples, the associated actor attribution data is too inconclusive to publish —particularly when corporate lawyers are involved and such findings are juxtaposed to facts about a new code sample that can be demonstrated empirically. Maybe in other cases, the company publishing the research privately has concerns that airing their findings on attribution will somehow cause people to take them or the newfound threat less seriously?

I doubt many who are familiar with my reporting will have trouble telling where I come down on this subject, which explains why I’m fascinated by a bit of digging done into the actor behind a new malware sample that recently received quite a bit of media attention. That threat, known variously as “Rombertik” and “Carbon Grabber,” is financial crimeware that gained media attention because of a curious feature: it was apparently designed to overwrite key sections of the hard drive, rendering the host system unbootable.

News about Rombertik’s destructive ways was first published by Cisco, which posited that the feature was a defense mechanism built into the malware to frustrate security researchers who might be trying to unlock its secrets. Other security firms published competing theories about the purpose of the destructive component of the malware. Some argued it was the malware author’s way of enforcing licensing agreements with his customers: Those who tried to use the malware on Web addresses or domains that were not authorized as part of the original sale would be considered in violation of the software agreement — their malware infrastructure thus exposed to (criminal) a copyright enforcement regime of the most unforgiving kind.

Incredibly, none of these companies bothered to look more closely at the clues rather clumsily left behind by the person apparently responsible for spreading the malware sample that prompted Cisco to blog about Rombertik in the first place. Had they done so, they might have discovered that this ultra-sophisticated new malware strain was unearthed precisely because it was being wielded by a relatively unsophisticated actor who seems to pose more of a threat to himself than to others.

AFRICAN PERSISTENT THREAT

As much as I would love to take credit for this research, that glory belongs to the community which has sprung up around ThreatConnect, a company that specializes in threat attribution with a special focus on crowdsourcing raw actor data across a large community of users.

In this case, ThreatConnect dug deeper into centozos[dot]org[dot]in, the control server used in the Rombertik sample featured in the original Cisco report. The Web site registration records for that domain lists an individual in Lagos, Nigeria who used the email address genhostkay@dispostable.com. For those unfamiliar with Dispostable, it is a free, throwaway email service that allows anyone to send and receive email without supplying a password for the account. While this kind of service relieves the user of having to remember their password, it also allows anyone who knows the username to read all of the mail associated with that account.

KallySky’s inbox at Dispostable.

Continue reading →

Phishing Gang is Audacious Manipulator

May 28, 2015

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Cybercriminals who specialize in phishing — or tricking people into giving up usernames and passwords at fake bank and ecommerce sites — aren’t generally considered the most sophisticated crooks, but occasionally they do exhibit creativity and chutzpah. That’s most definitely the case with a phishing gang that calls itself the “Manipulaters Team”, whose Web site boasts that it specializes in brand research and development.

I first learned about the Manipulaters from a source at an Australian bank who clued me in to a phishing group that specializes in targeting Apple’s iCloud services and a whole mess of U.S., European and Asian banks. For whatever reason (probably because they’re proud of their work), these guys leave a calling card of sorts in the WHOIS Web site registration records for most of the phishing domains that they register: According to Domaintools.com, some 329 domains are registered to “admin@manipulaters[dot]com” (complete list of domains: in PDF and CSV).

The Web site for the “Manipulaters Team,” a phishing gang that brazenly advertises a specialization in “brand research.”

Manipulaters[dot]com is a pretty amusing site all around. Their home page advises that Mainpulaters “is an institute that caters to brand research & development. We have studied computer related products immensely, and are confident that we can get the job done. The learning never stops for us though, as we are always looking for ways to improve.” Brand research. Yeah, right.

“Our goal is to help each business and brand reach their ultimate potential,” explains the “Our Members” section of the site. “We have contracts with our members that allows us to have guidelines for them to follow on their path to success. We have put these in place for a reason. This provides the stability and direction that companies/brands need to succeed.” Points for brazenness.

Their site advises that interested parties can “become a member” of the Manipulaters Team just by paying a one-time membership fee of $15, and providing a driver’s license/ID card plus a phone or electricity bill. Ah, there’s nothing quite like phishers phishing phishers.

The scary aspect of this fraud gang is that they appear to play in the Web hosting space as well. Most of their phishing pages are in fact hosted on Internet address space that is assigned to Manipulaters[dot]com: Incredibly, the group is listed as the current occupants of an entire Class C range of Internet addresses, from 167.160.46.0 to 167.160.46.255. Continue reading →

More Evidence of mSpy Apathy Over Breach

May 27, 2015

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Mobile spyware maker mSpy has expended a great deal of energy denying and then later downplaying a breach involving data stolen from tens of thousands of mobile devices running its software. Unfortunately for victims of this breach, mSpy’s lackadaisical response has left millions of screenshots taken from those devices wide open and exposed to the Internet via its own Web site.

The mSpy data was leaked to the Deep Web, where hundreds of gigabytes of files, chat logs, location records and other data was dumped after the company reportedly declined to comply with extortion demands made by hackers who’d broken into mSpy’s servers. Included in that huge archive is a 13 gigabyte (compressed) directory referencing countless screen shots taken from devices running mSpy’s software — including screen shots taken secretly by users who installed the software on a friend or partner’s device.

The log file of the screen shots taken from mSpy-infested devices doesn’t store the actual screenshot, but instead includes incomplete links to the images. Incredibly, nearly two weeks after this breach became public, all of the leaked screen shots remain viewable over the Internet with nothing more than a Web browser if one knows the base URL that precedes the file name. And that base URL is trivial to work out if you have an active mSpy account.

For example, here’s a fairly benign screen shot reference that was included in the leaked files:

“ref”: “dav/a00/003/628/359/2015/02/24/cGWmz4OjqoyImZQh-25493887.jpg.open

Adding the base URL to that URL stem produces a screen shot showing an mSpy-enabled device browsing seberizeni.cz, a Czech news site. Disturbingly, it is trivial to identify the owners of many mSpy-enabled devices merely based on the information available in the bookmarks bar or Web browser windows shown in many of these screen shots.

According to mSpy, however, this is not a big deal. Almost a week after I requested comment from mSpy, a person named Amelie Ross responded with a somewhat nonsensical statement that essentially said the whole incident was dramatically exaggerated and aggravated by the media. Continue reading →

IRS: Crooks Stole Data on 100K Taxpayers Via ‘Get Transcript’ Feature

May 26, 2015

58 Comments

In March 2015, KrebsOnSecurity broke the news that identity thieves engaged in filing fraudulent tax refund requests with the Internal Revenue Service (IRS) were using the IRS’s own Web site to obtain taxpayer data needed to complete the phony requests. Today, IRS Commissioner John Koskinen acknowledged that crooks used this feature to pull sensitive data on more than 100,000 taxpayers this year.

That March story — Sign Up at IRS.gov Before Crooks Do It For You — tracked the nightmarish story of Michael Kasper, one of millions of Americans victimized by tax refund fraud each year. When Kasper tried to get a transcript of the fraudulent return using the “Get Transcript” function on IRS.gov, he learned that someone had already registered through the IRS’s site using his Social Security number and an unknown email address.

Koskinen was quoted today in an Associated Press story saying the IRS was alerted to the thieves when technicians noticed an increase in the number of taxpayers seeking transcripts. The story noted that the IRS said they targeted the system from February to mid-May, and that the service has been temporarily shut down. Prior to that shutdown, the IRS estimates that thieves used the data to steal up to $50 million in fraudulent refunds.

“In all, about 200,000 attempts were made from questionable email domains, with more than 100,000 of those attempts successfully clearing authentication hurdles,” the IRS said in a statement. “During this filing season, taxpayers successfully and safely downloaded a total of approximately 23 million transcripts.” Continue reading →

Recent Breaches a Boon to Extortionists

May 26, 2015

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The recent breaches involving the leak of personal data on millions of customers at online hookup site Adult Friend Finder and mobile spyware maker mSpy give extortionists and blackmailers plenty of ammunition with which to ply their trade. And there is some evidence that ne’er-do-wells are actively trading this data and planning to abuse it for financial gain.

Within hours after data on tens (if not hundreds) of thousands of mSpy users leaked onto the Deep Web, miscreants on the “Hell” forum (reachable only via Tor) were busy extracting countless Apple iTunes usernames and passwords from the archive.

“Apple Id accounts you can use Tor to login perfectly safe! Good method so far use ‘Find My phone,'” wrote Ping, a moderator on the forum. “Wipe data and set a message that they been hacked and the only way to get their data back is to pay a ransom.”

“Hell” forum users discuss extorting mSpy users who had iTunes account credentials compromised in the breach.

Continue reading →

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