Entries Tagged "fraud"

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Insider Attack Against Citibank

Insiders are the biggest threat:

The Pune police have unearthed a major siphoning racket involving former and serving callcentre employees.

They allegedly transferred a total of [15 million rupees (US $350,000)] from a multinational bank into their own accounts, opened under fictitious names. The money was used to splurge on luxuries like cars and mobile phones.

The call center was in India. The victim was Citibank.

Posted on April 11, 2005 at 9:14 AMView Comments

ChoicePoint Feeling the Heat

AP says:

An executive of embattled data broker ChoicePoint Inc. says the company is developing a system that would allow people
to review their personal information that is sold to law enforcement agencies, employers, landlords and businesses. ChoicePoint’s announcement comes a month after it disclosed
that thieves used previously stolen identities to create what appeared to be legitimate businesses seeking personal
records.

Posted on April 2, 2005 at 9:09 AMView Comments

Student Hacks System to Alter Grades

This is an interesting story:

A UCSB student is being charged with four felonies after she allegedly stole the identity of two professors and used the information to change her own and several other students’ grades, police said.

The Universty of California Santa Barbara has a custom program, eGrades, where faculty can submit and alter grades. It’s password protected, of course. But there’s a backup system, so that faculty who forget their password can reset it using their Social Security number and date of birth.

A student worked for an insurance company, and she was able to obtain SSN and DOB for two faculty members. She used that information to reset their passwords and change grades.

Police, university officials and campus computer specialists said Ramirez’s alleged illegal access to the computer grading system was not the result of a deficiency or flaw in the program.

Sounds like a flaw in the program to me. It’s even one I’ve written about: a primary security mechanism that fails to a less-secure secondary mechanism.

Posted on April 1, 2005 at 2:36 PMView Comments

ID Theft is Inescapable

The Register says what I’ve been saying all along:

While this is nothing new, there is an important observation here that’s worth emphasizing: none of these cases involved online transactions.

Many people innocently believe that they’re safe from credit card fraud and identity theft in the brick and mortar world. Nothing could be farther from the truth. The vast majority of incidents can be traced to skimming, dumpster diving, and just plain stupidity among those who “own” our personal data.

Only a small fraction of such incidents result from online transactions. Every time you pay by check, use a debit or credit card, or fill out an application for insurance, housing, credit, employment, or education, you lose control of sensitive data.

In the US, a merchant is at liberty to do anything he pleases with the information, and this includes selling it to a third party without your knowledge or permission, or entering it into a computerized database, possibly with lax access controls, and possibly connected to the Internet.

Sadly, Congress’s response has been to increase the penalties for identity theft, rather than to regulate access to, and use of, personal data by merchants, marketers, and data miners. Incredibly, the only person with absolutely no control over the collection, storage, security, and use of such sensitive information is its actual owner.

For this reason, it’s literally impossible for an individual to prevent identity theft and credit card fraud, and it will remain impossible until Congress sees fit to regulate the privacy invasion industry.

Posted on March 30, 2005 at 7:35 AMView Comments

Personal Information and Identity Theft

From BBC:

The chance to win theatre tickets is enough to make people give away their identity, reveals a survey.

Of those taking part 92% revealed details such as mother’s maiden name, first school and birth date.

Fraud due to impersonation—commonly called “identity theft”—works for two reasons. One, identity information is easy to obtain. And two, identity information is easy to use to commit fraud.

Studies like this show why attacking the first reason is futile; there are just too many ways to get the information. If we want to reduce the risks associated with identity theft, we have to make identity information less valuable. Too much of our security is based on identity, and it’s not working.

Posted on March 25, 2005 at 8:09 AMView Comments

The Failure of Two-Factor Authentication

Two-factor authentication isn’t our savior. It won’t defend against phishing. It’s not going to prevent identity theft. It’s not going to secure online accounts from fraudulent transactions. It solves the security problems we had ten years ago, not the security problems we have today.

The problem with passwords is that they’re too easy to lose control of. People give them to other people. People write them down, and other people read them. People send them in e-mail, and that e-mail is intercepted. People use them to log into remote servers, and their communications are eavesdropped on. They’re also easy to guess. And once any of that happens, the password no longer works as an authentication token because you can’t be sure who is typing that password in.

Two-factor authentication mitigates this problem. If your password includes a number that changes every minute, or a unique reply to a random challenge, then it’s harder for someone else to intercept. You can’t write down the ever-changing part. An intercepted password won’t be good the next time it’s needed. And a two-factor password is harder to guess. Sure, someone can always give his password and token to his secretary, but no solution is foolproof.

These tokens have been around for at least two decades, but it’s only recently that they have gotten mass-market attention. AOL is rolling them out. Some banks are issuing them to customers, and even more are talking about doing it. It seems that corporations are finally waking up to the fact that passwords don’t provide adequate security, and are hoping that two-factor authentication will fix their problems.

Unfortunately, the nature of attacks has changed over those two decades. Back then, the threats were all passive: eavesdropping and offline password guessing. Today, the threats are more active: phishing and Trojan horses.

Here are two new active attacks we’re starting to see:

  • Man-in-the-Middle attack. An attacker puts up a fake bank website and entices user to that website. User types in his password, and the attacker in turn uses it to access the bank’s real website. Done right, the user will never realize that he isn’t at the bank’s website. Then the attacker either disconnects the user and makes any fraudulent transactions he wants, or passes along the user’s banking transactions while making his own transactions at the same time.

  • Trojan attack. Attacker gets Trojan installed on user’s computer. When user logs into his bank’s website, the attacker piggybacks on that session via the Trojan to make any fraudulent transaction he wants.

See how two-factor authentication doesn’t solve anything? In the first case, the attacker can pass the ever-changing part of the password to the bank along with the never-changing part. And in the second case, the attacker is relying on the user to log in.

The real threat is fraud due to impersonation, and the tactics of impersonation will change in response to the defenses. Two-factor authentication will force criminals to modify their tactics, that’s all.

Recently I’ve seen examples of two-factor authentication using two different communications paths: call it “two-channel authentication.” One bank sends a challenge to the user’s cell phone via SMS and expects a reply via SMS. If you assume that all your customers have cell phones, then this results in a two-factor authentication process without extra hardware. And even better, the second authentication piece goes over a different communications channel than the first; eavesdropping is much, much harder.

But in this new world of active attacks, no one cares. An attacker using a man-in-the-middle attack is happy to have the user deal with the SMS portion of the log-in, since he can’t do it himself. And a Trojan attacker doesn’t care, because he’s relying on the user to log in anyway.

Two-factor authentication is not useless. It works for local login, and it works within some corporate networks. But it won’t work for remote authentication over the Internet. I predict that banks and other financial institutions will spend millions outfitting their users with two-factor authentication tokens. Early adopters of this technology may very well experience a significant drop in fraud for a while as attackers move to easier targets, but in the end there will be a negligible drop in the amount of fraud and identity theft.

This essay will appear in the April issue of Communications of the ACM.

Posted on March 15, 2005 at 7:54 AMView Comments

Choicepoint's CISO Speaks

Richard Baich, Choicepoint’s CISO, is interviewed on SearchSecurity.com:

This is not an information security issue. My biggest concern is the impact this has on the industry from the standpoint that people are saying ChoicePoint was hacked. No we weren’t. This type of fraud happens every day.

Nice spin job, but it just doesn’t make sense. This isn’t a computer hack in the traditional sense, but it’s a social engineering hack of their system. Information security controls were compromised, and confidential information was leaked.

It’s created a media frenzy; this has been mislabeled a hack and a security breach. That’s such a negative impression that suggests we failed to provide adequate protection. Fraud happens every day. Hacks don’t.

So, Choicepoint believes that providing adequate protection doesn’t include preventing this kind of attack.

I’m sure he’s exaggerating when he says that “this type of fraud happens every day” and “frauds happens every day,” but if it’s true then Choicepoint has a huge information security problem.

Posted on March 1, 2005 at 10:45 AMView Comments

Identity Theft out of Golf Lockers

When someone goes golfing in Japan, he’s given a locker in which to store his valuables. Generally, and at the golf course in question, these are electronic combination locks. The user selects a code himself and locks his valuables. Of course, there’s a back door—a literal one—to the lockers, in case someone forgets his unlock code. Furthermore, the back door allows the administrator of these lockers to read all the codes to all the lockers.

Here’s the scam: A group of thieves worked in conjunction with the locker administrator to open the lockers, copy the golfers’ debit cards, and replace them in their wallets and in their lockers before they were done golfing. In many cases, the golfers used the same code to lock their locker as their bank card PIN, so the thieves got those as well. Then the thieves stole a lot of money from multiple ATMs.

Several factors make this scam even worse. One, unlike the U.S., ATM cards in Japan have no limit. You can literally withdraw everything out of the account. Two, the victims don’t know anything until they find out they have no money when they use their card somewhere. Three, the victims, since they play golf at these expensive courses, are
usually very rich. And four, unlike the United States, Japanese banks do not guarantee loss due to theft.

Posted on March 1, 2005 at 9:20 AMView Comments

ChoicePoint

The ChoicePoint fiasco has been news for over a week now, and there are only a few things I can add. For those who haven’t been following along, ChoicePoint mistakenly sold personal credit reports for about 145,000 Americans to criminals.

This story would have never been made public if it were not for SB 1386, a California law requiring companies to notify California residents if any of a specific set of personal information is leaked.

ChoicePoint’s behavior is a textbook example of how to be a bad corporate citizen. The information leakage occurred in October, and it didn’t tell any victims until February. First, ChoicePoint notified 30,000 Californians and said that it would not notify anyone who lived outside California (since the law didn’t require it). Finally, after public outcry, it announced that it would notify everyone affected.

The clear moral here is that first, SB 1386 needs to be a national law, since without it ChoicePoint would have covered up their mistakes forever. And second, the national law needs to force companies to disclose these sorts of privacy breaches immediately, and not allow them to hide for four months behind the “ongoing FBI investigation” shield.

More is required. Compare the difference in ChoicePoint’s public marketing slogans with its private reality.

From “Identity Theft Puts Pressure on Data Sellers,” by Evan Perez, in the 18 Feb 2005 Wall Street Journal:

The current investigation involving ChoicePoint began in October when the company found the 50 accounts it said were fraudulent. According to the company and police, criminals opened the accounts, posing as businesses seeking information on potential employees and customers. They paid fees of $100 to $200, and provided fake documentation, gaining access to a trove of
personal data including addresses, phone numbers, and social security numbers.

From ChoicePoint Chairman and CEO Derek V. Smith:

ChoicePoint’s core competency is verifying and authenticating individuals
and their credentials.

The reason there is a difference is purely economic. Identity theft is the fastest-growing crime in the U.S., and an enormous problem elsewhere in the world. It’s expensive—both in money and time—to the victims. And there’s not much people can do to stop it, as much of their personal identifying information is not under their control: it’s in the computers of companies like ChoicePoint.

ChoicePoint protects its data, but only to the extent that it values it. The hundreds of millions of people in ChoicePoint’s databases are not ChoicePoint’s customers. They have no power to switch credit agencies. They have no economic pressure that they can bring to bear on the problem. Maybe they should rename the company “NoChoicePoint.”

The upshot of this is that ChoicePoint doesn’t bear the costs of identity theft, so ChoicePoint doesn’t take those costs into account when figuring out how much money to spend on data security. In economic terms, it’s an “externality.”

The point of regulation is to make externalities internal. SB 1386 did that to some extent, since ChoicePoint now must figure the cost of public humiliation when they decide how much money to spend on security. But the actual cost of ChoicePoint’s security failure is much, much greater.

Until ChoicePoint feels those costs—whether through regulation or liability—it has no economic incentive to reduce them. Capitalism works, not through corporate charity, but through the free market. I see no other way of solving the problem.

Posted on February 23, 2005 at 3:19 PMView Comments

Illegal Aliens and Driver's Licenses

Has anyone heard of the Center for Advanced Studies in Science and Technology Policy? They released a statement saying that not issuing driver’s licenses to illegal aliens is bad for security. Their analysis is good, and worth reading:

As part of the legislative compromise to pass the intelligence reform bill signed into law by the President today, the administration and Congressional leaders have promised to attach to the first ‘must pass’ legislation of the new year a controversial provision that was rightly dropped from the intelligence reform bill—this provision would effectively prevent the states from issuing driver’s licenses to illegal aliens by requiring ‘legal presence’ status for holders of licenses to be used as ‘national ID.’

Although this provision is being touted by its supporters as a security measure, its implementation in practice will be to undermine national security because it ignores three widely-recognized principles of counter-terrorism security: the shrinking perimeter of defense; the need to allocate resources to more likely targets; and the economics of fraud.

First, the very fact that 13 million illegal aliens are already within our borders means that a perimeter-based defense is porous. The proposed policy would eliminate another opportunity to screen this large pool of people and to separate ‘otherwise law abiding’ illegal aliens from terrorists or criminals by confirming identity when licenses are issued or when such licenses are presented or used for identity screening at checkpoints.

Recognizing the porous nature of perimeter defense does not mean that border security should not be improved or that additional steps to prevent illegal immigration should not be taken, however, not recognizing its porous nature is unrealistic, counter to current trends in security practice, and undermines national security. Rather than excluding 13 million people already within our borders, we should encourage non-terrorist illegal aliens to participate in internal security screening systems.

This leads to the second point. Contrary to the argument made by its supporters that denying illegal aliens licenses would prevent terrorists from ‘melting’ into society, this legislation would guarantee a larger haystack in which terrorists can hide thus making it more difficult for law enforcement to identify them. Counter-terrorism strategy is based on reducing the suspect population so that security resources can be focused on more likely suspects. Denying identity legitimacy to 13 million illegal aliens—the vast majority of whom are not terrorists or otherwise threats to national security—just increases the size of the suspect pool for law enforcement to have to sort through. Since law enforcement resources are already unable to effectively cope with the large illegal alien population why further complicate their task?

Third, the proposed legislation would increase the incentives for fraud by greatly inflating the value of a driver’s license and by creating significant new demand for fraudulent licenses by making the driver’s license actual proof of citizenship or legal status. Arguments in support of the legislation are based in part on denying illegal aliens the de facto legitimacy that a driver’s license currently confers, yet the legislation would actually make such legitimacy a matter of law, thus increasing the demand for fraudulent licenses not only among those illegal aliens wishing to drive but among all 13 million who may now see it as a way to get jobs or otherwise prove their legitimate status.

If 13 million people living within our borders can’t drive, fly, travel on a train or bus, or otherwise participate in society without a driver’s license and they cannot get a legitimate one, then the market will supply them an illegal fraudulent one. State DMV bureaucracies, no matter how well- intentioned, do not have the resources, training, or skill to prevent fraud driven by this additional demand and no federal mandate will be able to prevent organized criminal elements from responding.

On the other hand, if illegal aliens are allowed to get legitimate licenses upon thorough vetting of their identity, then the only ones who will be trying to get fraudulent documents will be terrorists or criminals—who will face increased costs and more opportunities for mistakes if there is less overall demand—and law enforcement resources can be focused on these activities.

Fourteen states currently allow driver’s licenses to be obtained without showing ‘legal presence.’ These laws were enacted for public safety reasons—to ensure that drivers meet some standard to drive and to lower insurance premiums by decreasing the pool of unlicensed and uninsured drivers. In most cases, these laws were passed with the strong support of state law enforcement officials who recognized the advantages of being able to identify drivers and discourage unlicensed drivers from fleeing from minor traffic infractions or accidents because they were fearful of being caught without a license. The analogous arguments hold for national security—the more we can encourage otherwise law abiding people within our borders to participate in the system the easier it will be to identify those that pose a true threat.

There may be legitimate reasons for cracking down on illegal immigration, there may even be reasons to deny illegal aliens driver’s licenses, but counter-terrorism security is not one. This provision was appropriately dropped from the intelligence reform bill and it should not be resurrected in the 109th Congress.

Posted on January 4, 2005 at 8:00 AM

Sidebar photo of Bruce Schneier by Joe MacInnis.