Entries Tagged "incentives"

Page 10 of 14

Aligning Interest with Capability

Have you ever been to a retail store and seen this sign on the register: “Your purchase free if you don’t get a receipt”? You almost certainly didn’t see it in an expensive or high-end store. You saw it in a convenience store, or a fast-food restaurant. Or maybe a liquor store. That sign is a security device, and a clever one at that. And it illustrates a very important rule about security: it works best when you align interests with capability.

If you’re a store owner, one of your security worries is employee theft. Your employees handle cash all day, and dishonest ones will pocket some of it for themselves. The history of the cash register is mostly a history of preventing this kind of theft. Early cash registers were just boxes with a bell attached. The bell rang when an employee opened the box, alerting the store owner—who was presumably elsewhere in the store—that an employee was handling money.

The register tape was an important development in security against employee theft. Every transaction is recorded in write-only media, in such a way that it’s impossible to insert or delete transactions. It’s an audit trail. Using that audit trail, the store owner can count the cash in the drawer, and compare the amount with what the register. Any discrepancies can be docked from the employee’s paycheck.

If you’re a dishonest employee, you have to keep transactions off the register. If someone hands you money for an item and walks out, you can pocket that money without anyone being the wiser. And, in fact, that’s how employees steal cash in retail stores.

What can the store owner do? He can stand there and watch the employee, of course. But that’s not very efficient; the whole point of having employees is so that the store owner can do other things. The customer is standing there anyway, but the customer doesn’t care one way or another about a receipt.

So here’s what the employer does: he hires the customer. By putting up a sign saying “Your purchase free if you don’t get a receipt,” the employer is getting the customer to guard the employee. The customer makes sure the employee gives him a receipt, and employee theft is reduced accordingly.

There is a general rule in security to align interest with capability. The customer has the capability of watching the employee; the sign gives him the interest.

In Beyond Fear I wrote about ATM fraud; you can see the same mechanism at work:

“When ATM cardholders in the US complained about phantom withdrawals from their accounts, the courts generally held that the banks had to prove fraud. Hence, the banks’ agenda was to improve security and keep fraud low, because they paid the costs of any fraud. In the UK, the reverse was true: The courts generally sided with the banks and assumed that any attempts to repudiate withdrawals were cardholder fraud, and the cardholder had to prove otherwise. This caused the banks to have the opposite agenda; they didn’t care about improving security, because they were content to blame the problems on the customers and send them to jail for complaining. The result was that in the US, the banks improved ATM security to forestall additional losses—most of the fraud actually was not the cardholder’s fault—while in the UK, the banks did nothing.”

The banks had the capability to improve security. In the US, they also had the interest. But in the UK, only the customer had the interest. It wasn’t until the UK courts reversed themselves and aligned interest with capability that ATM security improved.

Computer security is no different. For years I have argued in favor of software liabilities. Software vendors are in the best position to improve software security; they have the capability. But, unfortunately, they don’t have much interest. Features, schedule, and profitability are far more important. Software liabilities will change that. They’ll align interest with capability, and they’ll improve software security.

One last story… In Italy, tax fraud used to be a national hobby. (It may still be; I don’t know.) The government was tired of retail stores not reporting sales and paying taxes, so they passed a law regulating the customers. Any customer having just purchased an item and stopped within a certain distance of a retail store, has to produce a receipt or they would be fined. Just as in the “Your purchase free if you don’t get a receipt” story, the law turned the customers into tax inspectors. They demanded receipts from merchants, which in turn forced the merchants to create a paper audit trail for the purchase and pay the required tax.

This was a great idea, but it didn’t work very well. Customers, especially tourists, didn’t like to be stopped by police. People started demanding that the police prove they just purchased the item. Threatening people with fines if they didn’t guard merchants wasn’t as effective an enticement as offering people a reward if they didn’t get a receipt.

Interest must be aligned with capability, but you need to be careful how you generate interest.

This essay originally appeared on Wired.com.

Posted on June 1, 2006 at 6:27 AM • View Comments

Security Risks of Airline Passenger Data

Reporter finds an old British Airways boarding pass, and proceeds to use it to find everything else about the person:

We logged on to the BA website, bought a ticket in Broer’s name and then, using the frequent flyer number on his boarding pass stub, without typing in a password, were given full access to all his personal details – including his passport number, the date it expired, his nationality (he is Dutch, living in the UK) and his date of birth. The system even allowed us to change the information.

Using this information and surfing publicly available databases, we were able – within 15 minutes – to find out where Broer lived, who lived there with him, where he worked, which universities he had attended and even how much his house was worth when he bought it two years ago. (This was particularly easy given his unusual name, but it would have been possible even if his name had been John Smith. We now had his date of birth and passport number, so we would have known exactly which John Smith.)

Notice the economic pressures:

“The problem here is that a commercial organisation is being given the task of collecting data on behalf of a foreign government, for which it gets no financial reward, and which offers no business benefit in return,” says Laurie. “Naturally, in such a case, they will seek to minimise their costs, which they do by handing the problem off to the passengers themselves. This has the neat side-effect of also handing off liability for data errors.”

Posted on May 9, 2006 at 1:17 PM • View Comments

Security Screening for New York Helicopters

There’s a helicopter shuttle that runs from Lower Manhattan to Kennedy Airport. It’s basically a luxury item: for $139 you can avoid the drive to the airport. But, of course, security screeners are required for passengers, and that’s causing some concern:

At the request of U.S. Helicopter’s executives, the federal Transportation Security Administration set up a checkpoint, with X-ray and bomb-detection machines, to screen passengers and their luggage at the heliport.

The security agency is spending $560,000 this year to operate the checkpoint with a staff of eight screeners and is considering adding a checkpoint at the heliport at the east end of 34th Street. The agency’s involvement has drawn criticism from some elected officials.

“The bottom line here is that there are not enough screeners to go around,” said Senator Charles E. Schumer, Democrat of New York. “The fact that we are taking screeners that are needed at airports to satisfy a luxury market on the government’s dime is a problem.”

This is not a security problem; it’s an economics problem. And it’s a good illustration of the concept of “externalities.” An externality is an effect of a decision not borne by the decision-maker. In this example, U.S. Helicopter made a business decision to offer this service at a certain price. And customers will make a decision about whether or not the service is worth the money. But there is more to the cost than the $139. The cost of that checkpoint is an externality to both U.S. Helicopter and its customers, because the $560,000 spent on the security checkpoint is paid for by taxpayers. Taxpayers are effectively subsidizing the true cost of the helicopter trip.

The only way to solve this is for the government to bill the airline passengers for the cost of security screening. It wouldn’t be much per ticket, maybe $15. And it would be much less at major airports, because the economies of scale are so much greater.

The article even points out that customers would gladly pay the extra $15 because of another externality: the people who decide whether or not to take the helicopter trip are not the people actually paying for it.

Bobby Weiss, a self-employed stock trader and real estate broker who was U.S. Helicopter’s first paying customer yesterday, said he would pay $300 for a round trip to Kennedy, and he expected most corporate executives would, too.

“It’s $300, but so what? It goes on the expense account,” said Mr. Weiss, adding that he had no qualms about the diversion of federal resources to smooth the path of highfliers. “Maybe a richer guy may save a little time at the expense of a poorer guy who spends a little more time in line.”

What Mr. Weiss is saying is that the costs—both the direct cost and the cost of the security checkpoint—are externalities to him, so he really doesn’t care. Exactly.

Posted on April 4, 2006 at 7:51 AM • View Comments

Bypassing the Airport Identity Check

Here’s an article about how you can modify, and then print, you own boarding pass and get on an airplane even if you’re on the no-fly list. This isn’t news; I wrote about it in 2003.

I don’t worry about it now any more than I worried about it then:

In terms of security, this is no big deal; the photo-ID requirement doesn’t provide much security. Identification of passengers doesn’t increase security very much. All of the 9/11 terrorists presented photo-IDs, many in their real names. Others had legitimate driver’s licenses in fake names that they bought from unscrupulous people working in motor vehicle offices.

The photo-ID requirement is presented as a security measure, but business is the real reason. Airlines didn’t resist it, even though they resisted every other security measure of the past few decades, because it solved a business problem: the reselling of nonrefundable tickets. Such tickets used to be advertised regularly in newspaper classifieds. An ad might read: “Round trip, Boston to Chicago, 11/22-11/30, female, $50.” Since the airlines didn’t check IDs and could observe gender, any female could buy the ticket and fly the route. Now that won’t work. Under the guise of helping prevent terrorism, the airlines solved a business problem of their own and passed the blame for the solution on to FAA security requirements.

But the system fails. I can fly on your ticket. You can fly on my ticket. We don’t even have to be the same gender.

Posted on March 14, 2006 at 7:58 AM • View Comments

Credit Card Companies and Agenda

This has been making the rounds on the Internet. Basically, a guy tears up a credit card application, tapes it back together, fills it out with someone else’s address and a different phone number, and send it in. He still gets a credit card.

Imagine that some fraudster is rummaging through your trash and finds a torn-up credit card application. That’s why this is bad.

To understand why it’s happening, you need to understand the trade-offs and the agenda. From the point of view of the credit card company, the benefits of giving someone a credit card is that he’ll use it and generate revenue. The risk is that it’s a fraudster who will cost the company revenue. The credit card industry has dealt with the risk in two ways: they’ve pushed a lot of the risk onto the merchants, and they’ve implemented fraud detection systems to limit the damage.

All other costs and problems of identity theft are borne by the consumer; they’re an externality to the credit card company. They don’t enter into the trade-off decision at all.

We can laugh at this kind of thing all day, but it’s actually in the best interests of the credit card industry to mail cards in response to torn-up and taped-together applications without doing much checking of the address or phone number. If we want that to change, we need to fix the externality.

Posted on March 13, 2006 at 2:18 PM • View Comments

Unfortunate Court Ruling Regarding Gramm-Leach-Bliley

“A Federal Court Rules That A Financial Institution Has No Duty To Encrypt A Customer Database“:

In a legal decision that could have broad implications for financial institutions, a court has ruled recently that a student loan company was not negligent and did not have a duty under the Gramm-Leach-Bliley statute to encrypt a customer database on a laptop computer that fell into the wrong hands.

Basically, an employee of Brazos Higher Education Service Corporation, Inc., had customer information on a laptop computer he was using at home. The computer was stolen, and a customer sued Brazos.

The judge dismissed the lawsuit. And then he went further:

Significantly, while recognizing that Gramm-Leach-Bliley does require financial institutions to protect against unauthorized access to customer records, Judge Kyle held that the statute “does not prohibit someone from working with sensitive data on a laptop computer in a home office,” and does not require that “any nonpublic personal information stored on a laptop computer should be encrypted.”

I know nothing of the legal merits of the case, nor do I have an opinion about whether Gramm-Leach-Bliley does or does not require financial companies to encrypt personal data in its purview. But I do know that we as a society need to force companies to encrypt personal data about us. Companies won’t do it on their own—the market just doesn’t encourage this behavior—so legislation or liability are the only available mechanisms. If this law doesn’t do it, we need another one.

EDITED TO ADD (2/22): Some commentary here.

Posted on February 21, 2006 at 1:34 PM • View Comments

Proof that Employees Don't Care About Security

Does anyone think that this experiment would turn out any differently?

An experiment carried out within London’s square mile has revealed that employees in some of the City’s best known financial services companies don’t care about basic security policy.

CDs were handed out to commuters as they entered the City by employees of IT skills specialist The Training Camp and recipients were told the disks contained a special Valentine’s Day promotion.

However, the CDs contained nothing more than code which informed The Training Camp how many of the recipients had tried to open the CD. Among those who were duped were employees of a major retail bank and two global insurers.

The CD packaging even contained a clear warning about installing third-party software and acting in breach of company acceptable-use policies—but that didn’t deter many individuals who showed little regard for the security of their PC and their company.

This was a benign stunt, but it could have been much more serious. A CD-ROM carried into the office and run on a computer bypasses the company’s network security systems. You could easily imagine a criminal ring using this technique to deliver a malicious program into a corporate network—and it would work.

But concluding that employees don’t care about security is a bit naive. Employees care about security; they just don’t understand it. Computer and network security is complicated and confusing, and unless you’re technologically inclined, you’re just not going to have an intuitive feel for what’s appropriate and what’s a security risk. Even worse, technology changes quickly, and any security intuition an employee has is likely to be out of date within a short time.

Education is one way to deal with this, but education has its limitations. I’m sure these banks had security awareness campaigns; they just didn’t stick. Punishment is another form of education, and my guess it would be more effective. If the banks fired everyone who fell for the CD-ROM-on-the-street trick, you can be sure that no one would ever do that again. (At least, until everyone forgot.) That won’t ever happen, though, because the morale effects would be huge.

Rather than blaming this kind of behavior on the users, we would be better served by focusing on the technology. Why does the average computer user at a bank need the ability to install software from a CD-ROM? Why doesn’t the computer block that action, or at least inform the IT department? Computers need to be secure regardless of who’s sitting in front of them, irrespective of what they do.

If I go downstairs and try to repair the heating system in my home, I’m likely to break all sorts of safety rules—and probably the system and myself in the process. I have no experience in that sort of thing, and honestly, there’s no point trying to educate me. But my home heating system works fine without my having to learn anything about it. I know how to set my thermostat, and to call a professional if something goes wrong.

Computers need to work more like that.

Posted on February 20, 2006 at 8:11 AM • View Comments

Security, Economics, and Lost Conference Badges

Conference badges are an interesting security token. They can be very valuable—a full conference registration at the RSA Conference this week in San Jose, for example, costs $1,985—but their value decays rapidly with time. By tomorrow afternoon, they’ll be worthless.

Counterfeiting badges is one security concern, but an even bigger concern is people losing their badge or having their badge stolen. It’s way cheaper to find or steal someone else’s badge than it is to buy your own. People could do this sort of thing on purpose, pretending to lose their badge and giving it to someone else.

A few years ago, the RSA Conference charged people $100 for a replacement badge, which is far cheaper than a second membership. So the fraud remained. (At least, I assume it did. I don’t know anything about how prevalent this kind of fraud was at RSA.)

Last year, the RSA Conference tried to further limit these types of fraud by putting people’s photographs on their badges. Clever idea, but difficult to implement.

For this to work, though, guards need to match photographs with faces. This means that either 1) you need a lot more guards at entrance points, or 2) the lines will move a lot slower. Actually, far more likely is 3) no one will check the photographs.

And it was an expensive solution for the RSA Conference. They needed the equipment to put the photos on the badges. Registration was much slower. And pro-privacy people objected to the conference keeping their photographs on file.

This year, the RSA Conference solved the problem through economics:

If you lose your badge and/or badge holder, you will be required to purchase a new one for a fee of $1,895.00.

Look how clever this is. Instead of trying to solve this particular badge fraud problem through security, they simply moved the problem from the conference to the attendee. The badges still have that $1,895 value, but now if it’s stolen and used by someone else, it’s the attendee who’s out the money. As far as the RSA Conference is concerned, the security risk is an externality.

Note that from an outside perspective, this isn’t the most efficient way to deal with the security problem. It’s likely that the cost to the RSA Conference for centralized security is less than the aggregate cost of all the individual security measures. But the RSA Conference gets to make the trade-off, so they chose a solution that was cheaper for them.

Of course, it would have been nice if the conference provided a slightly more secure attachment point for the badge holder than a thin strip of plastic. But why should they? It’s not their problem anymore.

Posted on February 16, 2006 at 7:16 AM • View Comments

Multi-Use ID Cards

My eleventh column for Wired.com is about ID cards, and why you don’t—and won’t—have a single card in your wallet for everything. It has nothing to do with security.

My airline wants a card with its logo on it in my wallet. So does my rental car company, my supermarket and everyone else I do business with. My credit card company wants me to open up my wallet and notice its card; I’m far more likely to use a physical card than a virtual one that I have to remember is attached to my driver’s license number. And I’m more likely to feel important if I have a card, especially a card that recognizes me as a frequent flier or a preferred customer.

Some years ago, when credit cards with embedded chips were new, the card manufacturers designed a secure, multi-application operating system for these smartcards. The idea was that a single physical card could be used for everything: multiple credit card accounts, airline affinity memberships, public-transportation payment cards, etc. Nobody bought into the system: not because of security concerns, but because of branding concerns. Whose logo would get to be on the card? When the manufacturers envisioned a card with multiple small logos, one for each application, everyone wanted to know: Whose logo would be first? On top? In color?

The companies give you their own card partly because they want complete control of the rules around their own system, but mostly because they want you to carry around a small piece of advertising in your wallet. An American Express Gold Card is supposed to make you feel powerful and everyone else feel green. They want you to wave it around.

Posted on February 9, 2006 at 6:39 AM • View Comments

Privatizing Registered Traveler

Last week the TSA announced details of its Registered Traveler program. Basically, you pay money for a background check and get a biometric ID—a fingerprint—that gets you through airline security faster. (See also this and this AP story.)

I’ve already written about why this is a bad idea for security:

What the Trusted Traveler program does is create two different access paths into the airport: high security and low security. The intent is that only good guys will take the low-security path, and the bad guys will be forced to take the high-security path, but it rarely works out that way. You have to assume that the bad guys will find a way to take the low-security path.

The Trusted Traveler program is based on the dangerous myth that terrorists match a particular profile and that we can somehow pick terrorists out of a crowd if we only can identify everyone. That’s simply not true. Most of the 9/11 terrorists were unknown and not on any watch list. Timothy McVeigh was an upstanding US citizen before he blew up the Oklahoma City Federal Building. Palestinian suicide bombers in Israel are normal, nondescript people. Intelligence reports indicate that Al Qaeda is recruiting non-Arab terrorists for US operations.

But what the TSA is actually doing is even more bizarre. The TSA is privatizing this system. They want the companies that sell for-profit, Registered Traveler passes to do the background checks. They want the companies to use error-filled commercial databases to do this. What incentive do these companies have to not sell someone a pass? Who is liable for mistakes?

I thought airline security was important.

This essay is an excellent discussion of the problems here.

Welcome to the brave new world of “market-driven” airport security, where different private security firms run and operate different lanes at different checkpoints, offering varied levels of accelerated screening depending on how much a user paid and how deep of a background check he or she submitted to. Thus the speed at which you move through a checkpoint will theoretically depend on a multiplicity of factors, only two of which are under your control (the depth of your background check and the firm(s) with which you’ve contracted). Other factors affecting your screening time, like which private security firm is manning a checkpoint and what resources that particular firm has invested in a particular checkpoint (e.g. extra personnel, more screening equipment, and so on) at a particular time of day, are entirely out of your control.

This is certainly a good point:

What’s worse than having identity thieves impersonate you to Chase Bank? Having terrorists impersonate you to the TSA.

Posted on February 1, 2006 at 6:11 AM • View Comments

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Sidebar photo of Bruce Schneier by Joe MacInnis.