Noted security researcher Ross Anderson and colleagues have published a paper showing how "Chip-and-PIN" (the European system for verifying credit- and debit-card transactions) has been thoroughly broken and cannot be considered secure any longer. I remember hearing rumbles that this attack was possible even as Chip-and-PIN was being rolled out across Europe, but that didn't stop the banks from pushing ahead with it, spending a fortune in the process.
The flaw is that when you put a card into a terminal, a negotiation takes place about how the cardholder should be authenticated: using a PIN, using a signature or not at all. This particular subprotocol is not authenticated, so you can trick the card into thinking it's doing a chip-and-signature transaction while the terminal thinks it's chip-and-PIN. The upshot is that you can buy stuff using a stolen card and a PIN of 0000 (or anything you want). We did so, on camera, using various journalists' cards. The transactions went through fine and the receipts say "Verified by PIN".
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It's no surprise to us or bankers that this attack works offline (when the merchant cannot contact the bank) -- in fact Steven blogged about it here last August.
But the real shocker is that it works online too: even when the bank authorisation system has all the transaction data sent back to it for verification. The reason why it works can be quite subtle and convoluted: bank authorisation systems are complex beasts, including cryptographic checks, account checks, database checks, and interfaces with fraud detection systems which might apply a points-scoring system to the output of all the above.
Brian Krebs continues to scare the pants off of me with his ongoing series on sophisticated ATM skimmers (devices that capture your card number, working with a hidden camera to catch your PIN). His slideshow of next-gen skimmers has me convinced that there's no way I'd notice a skimmer on an ATM that I was using: "According to Doten, the U.S. Secret Service estimates that annual losses from ATM fraud totaled about $1 billion in 2008, or about $350,000 each day. Card skimming, where the fraudster affixes a bogus card reader on top of the real reader, accounts for more than 80 percent of ATM fraud, Doten said."
ATM Skimmers, Part II
ATM card skimmer in real life -- Boing Boing Gadgets
ATM skimmer -- could you spot it in the wild?
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