Posts Tagged: John Marshall Law School


24
Jul 18

Hackers Breached Virginia Bank Twice in Eight Months, Stole $2.4M

Hackers used phishing emails to break into a Virginia bank in two separate cyber intrusions over an eight-month period, making off with more than $2.4 million total. Now the financial institution is suing its insurance provider for refusing to fully cover the losses.

According to a lawsuit filed last month in the Western District of Virginia, the first heist took place in late May 2016, after an employee at The National Bank of Blacksburg fell victim to a targeted phishing email.

Photo copyright: Kerri Farley

The email allowed the intruders to install malware on the victim’s PC and to compromise a second computer at the bank that had access to the STAR Network, a system run by financial industry giant First Data that the bank uses to handle debit card transactions for customers. That second computer had the ability to manage National Bank customer accounts and their use of ATMs and bank cards.

Armed with this access, the bank says, hackers were able to disable and alter anti-theft and anti-fraud protections, such as 4-digit personal identification numbers (PINs), daily withdrawal limits, daily debit card usage limits, and fraud score protections.

National Bank said the first breach began Saturday, May 28, 2016 and continued through the following Monday. Normally, the bank would be open on a Monday, but that particular Monday was Memorial Day, a federal holiday in the United States. The hackers used hundreds of ATMs across North America to dispense funds from customer accounts. All told, the perpetrators stole more than $569,000 in that incident.

Following the 2016 breach, National Bank hired cybersecurity forensics firm Foregenix to investigate. The company determined the hacking tools and activity appeared to come from Russian-based Internet addresses.

In June of 2016, National Bank implemented additional security protocols, as recommended by FirstData. These protocols are known as “velocity rules” and were put in place to help the bank flag specific types of repeated transaction patterns that happen within a short period of time.

But just eight months later — in January 2017 according to the lawsuit — hackers broke in to the bank’s systems once more, again gaining access to the financial institution’s systems via a phishing email.

This time not only did the intruders regain access to the bank’s STAR Network, they also managed to compromise a workstation that had access to Navigator, which is software used by National Bank to manage credits and debits to customer accounts.

Prior to executing the second heist, the hackers used the bank’s Navigator system to fraudulently credit more than $2 million to various National Bank accounts. As with the first incident, the intruders executed their heist on a weekend. Between Jan. 7 and 9, 2017, the hackers modified or removed critical security controls and withdrew the fraudulent credits using hundreds of ATMs.

All the while, the intruders used the bank’s systems to actively monitor customer accounts from which the funds were being withdrawn. At the conclusion of the 2017 heist, the hackers used their access to delete evidence of fraudulent debits from customer accounts. The bank’s total reported loss from that breach was $1,833,984.

Verizon was hired to investigate the 2017 attack, and according to the bank Verizon’s forensics experts concluded that the tools and servers used by the hackers were of Russian origin. The lawsuit notes the company determined that it was likely the same group of attackers responsible for both intrusions. Verizon also told the bank that the malware the attackers used to gain their initial foothold at the bank in the 2017 breach was embedded in a booby-trapped Microsoft Word document. Continue reading →


16
Jun 14

Ruling Raises Stakes for Cyberheist Victims

A Missouri firm that unsuccessfully sued its bank to recover $440,000 stolen in a 2010 cyberheist may now be on the hook to cover the financial institution’s legal fees, an appeals court has ruled. Legal experts say the decision is likely to discourage future victims from pursuing such cases.

Choice Escrow and Land Title LLC sued Tupelo, Miss. based BancorpSouth Inc., after hackers who had stolen the firm’s online banking ID and password used the information to make a single unauthorized wire transfer for $440,000 to a corporate bank account in Cyprus.

BancorpSouth’s most secure option for Internet-based authentication at the time was “dual control,” which required the customer to have one user ID and password to approve a wire transfer and another user ID and password to release the same wire transfer. The other option — if the customer chose not to use choose dual control — required one user ID and password to both approve and release a wire transfer.

Choice Escrow’s lawyers argued that because BancorpSouth allowed wire or funds transfers using two options which were both password-based, its commercial online banking security procedures fell short of 2005 guidance from the Federal Financial Institutions Examination Council (FFIEC), which warned that single-factor authentication as the only control mechanism is inadequate for high-risk transactions involving the movement of funds to other parties.

A trial court was unconvinced, and last week The 8th Circuit Court of Appeals found essentially the same thing, while leaning even more toward the defendants.

“It’s a good opinion for banks [and] it’s definitely more pro-bank than pro-consumer,” said Dan Mitchell, a lawyer who chairs the data security practice at Bernstein Shur in Portland, Maine. “The appellate court found the same thing as the basic court. The customer was offered dual controls — that two people should be required to sign off on all transactions — and they were informed that it was important for them to take advantage of this. So, when [Choice Escrow] made an informed decision in writing not to use dual controls, the bank was careful to document that.”

Perhaps most significantly, Mitchell said, the decision could be a blow to companies trying to recover cyberheist losses from their banks. Bancorp South had asserted at the trial court level that its contract with Choice Escrow indemnified it against paying legal fees in such a dispute. The trial court dismissed that claim, but the appeals court said in its decision that the bank could recover the costs from the escrow firm. Continue reading →