I’ve repeatedly said that two-factor authentication won’t stop phishing, because the attackers will simply modify their techniques to get around it. Here’s an example where that has happened:
Scandinavian bank Nordea was forced to shut down part of its Web banking service for 12 hours last week following a phishing attack that specifically targeted its paper-based one-time password security system.
According to press reports, the scam targeted customers that access the Nordea Sweden Web banking site using a paper-based single-use password security system.
A blog posting by Finnish security firm F-Secure says recipients of the spam e-mail were directed to bogus Web sites but were also asked to enter their account details along with the next password on their list of one-time passwords issued to them by the bank on a “scratch sheet”.
From F-Secure’s blog:
The fake mails were explaining that Nordea is introducing new security measures, which can be accessed at www.nordea-se.com or www.nordea-bank.net (fake sites hosted in South Korea).
The fake sites looked fairly real. They were asking the user for his personal number, access code and the next available scratch code. Regardless of what you entered, the site would complain about the scratch code and asked you to try the next one. In reality the bad boys were trying to collect several scratch codes for their own use.
The Register also has a story.
Two-factor authentication won’t stop identity theft, because identity theft is not an authentication problem. It’s a transaction-security problem. I’ve written about that already. Solutions need to address the transactions directly, and my guess is that they’ll be a combination of things. Some transactions will become more cumbersome. It will definitely be more cumbersome to get a new credit card. Back-end systems will be put in place to identify fraudulent transaction patterns. Look at credit card security; that’s where you’re going to find ideas for solutions to this problem.
Unfortunately, until financial institutions are liable for all the losses associated with identity theft, and not just their direct losses, we’re not going to see a lot of these solutions. I’ve written about this before as well.
We got them for credit cards because Congress mandated that the banks were liable for all but the first $50 of fraudulent transactions.
EDITED TO ADD: Here’s a related story. The Bank of New Zealand suspended Internet banking because of phishing concerns. Now there’s a company that is taking the threat seriously.