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3/4/2015
04:20 PM
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Apple Pay Fraud Gives Us A New Reason To Hate Data Breaches And SSNs

There may already be millions of dollars in losses, but you can't blame Apple for this one.

The fact that attackers may have already made millions of dollars in fraudulent Apple Pay purchases is another example of how even the best security technology is rendered useless by poor implementation.

Just last week, payment security experts told Dark Reading that Apple's secure mobile payment technology -- first released in September -- is superior to any of the other payment tech on the market. Since then, however, they became aware of "rampant" Apple Pay fraud, detailed well by The Guardian. The perpetrators are linking their iOS devices to victims' payment card accounts, and using Apple Pay to make in-person purchases (often at Apple Stores) which are then charged to the victim's account.      

While the quickness of the attackers and extent of the fraud surprised experts, they maintain that the technology is strong.

"Apple Pay is great," says Gartner distinguished analyst Avivah Litan. "It’s the bank processes for identity-proofing that are weak."

In other words, Apple Pay fraud has nothing to do with Apple -- nor its encryption, nor its tokenization protocol -- and everything to do with the banks that provision payment cards/tokens.

"The one constant we have seen for every mobile financial service thus far has been the issue of [bank account] takeovers, whether that be mobile banking, mobile RDC, or mobile payments," says Al Pascual, director of security, risk, and fraud for Javelin Strategy and Research. "More needs to be done to ensure that the device to which data is provisioned belongs to the legitimate accountholder."

When an iOS user adds their credit account information to the Apple Pay system on their device, the data is encrypted and sent "along with other information about your iTunes account activity and device (such as the name of your device, its current location, or if you have a long history of transactions within iTunes) to your bank," according to Apple.

Some banks give approval on that information alone, and others add an additional method of authorization. Oftentimes that extra check is simply to call the person claiming to be the accountholder and ask them to verify the last four digits of their Social Security number. In that case, fraudsters don't need to try to crack into the issuing bank or into Apple's token vault -- they can get personal data, including SSNs, by breaching third parties' databases or by simply buying it on the black market.

SSNs overlap two sorts of authentication factors -- "something you know" and "something you are" -- and offer only the worst characteristics of both. A last-four-digit combination is as easy to brute force as any 4-digit PIN. SSNs are impossible to change, unless you've already had extensive identity theft problems, joined the Witness Protection Program, or proven you have intense religious objections to your particular number. Plus, it is impossible to verify an SSN is really "you," because the Social Security Administration will neither confirm nor deny that a certain SSN matches with a certain name.

"Consider that 66 percent of the top 50 [financial institutions] allow consumers to authenticate with an SSN according to our research," says Pascual, "and we just witnessed a breach of 80 million SSNs. Fortunately, we have better options for call center authentication, such as biometrics or through phone print authentication."

Litan recommends that financial institutions reduce their reliance on static data (like SSNs), increase use of dynamic data (like behavior analysis), and layer multiple authentication methods upon one another. For example, examining linkages between a device, email address, phone number, mailing address, and name; and examining behavior, like navigation and network habits; and examining endpoint-centric factors like geolocation and device fingerprinting. She also recommends that for high-risk cases, financial institutions consider implementing biometrics tools or slowing the authorization process down by using snail mail or requiring in-person interactions.

"As for tying the device to the accountholder," says Pascual, "there are some technologies out there that authenticate the mobile device by leveraging the [mobile network operator] relationship. We can expect these solutions to become more popular, if not central to addressing this issue."

"The problem for Apple," says Litan, "is that consumers see Apple Pay and the banks as one and the same entity here," but "I doubt it will slow Apple Pay adoption down in any meaningful way."

Sara Peters is Senior Editor at Dark Reading and formerly the editor-in-chief of Enterprise Efficiency. Prior that she was senior editor for the Computer Security Institute, writing and speaking about virtualization, identity management, cybersecurity law, and a myriad ... View Full Bio

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Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
3/10/2015 | 2:29:25 AM
SSNs
An InfoSec blog I recently (though I can't remember which at the moment) put it best: SSNs were designed as usernames.  They are now being used to double as passwords.  From a security standpoint, that is absurd and unacceptable.
prospecttoreza
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prospecttoreza,
User Rank: Strategist
3/6/2015 | 9:54:28 AM
Re: I don't get the US Banks' mentality
There could be two reason why we do not hear about data breaches in Europe - (a) they do not exist (b) European companies are not disclosing them. I am inclined to think that the latter is true.
Technocrati
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Technocrati,
User Rank: Ninja
3/5/2015 | 5:44:11 PM
Re: I don't get the US Banks' mentality
@Pablo       All I can say is "better late than never"...

A new American motto.
Technocrati
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Technocrati,
User Rank: Ninja
3/5/2015 | 5:39:55 PM
Re: And Yet Another Reason To Hate Breeches .....
@Marilyn        True.   And I have to give Mr.Gregg some credit - he did per your linked article at least take responsibility for it.

Granted his noble deed is alot easier carry out when you don't have to worry about where your next check is coming from.
Technocrati
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Technocrati,
User Rank: Ninja
3/5/2015 | 5:32:13 PM
Re: And Yet Another Reason To Hate Breeches .....
"...The board is deeply grateful to Gregg for his significant contributions and outstanding service throughout his notable 35-year career with the company."

Let me see if I understand this statement by Target's board correctly.   He was at the helm when 40mil debit and credit cards were compromised and he is praised for his "significant contributions and outstanding service" ?

Does anyone else see the problem here ?    Maybe the board should ask the 40mil customers whose information was compromised if they think Mr. Gregg was outstanding or significant in any way.
Pablo Valerio
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Pablo Valerio,
User Rank: Strategist
3/5/2015 | 5:09:06 PM
Re: I don't get the US Banks' mentality
"This is where that arrogance comes in that I mentioned earlier.  Go to Europe and see how others are doing it ?   No Way.   Europe is only for vacations and hiding assets."

@Technocrati. at least they are taking EMV, which is an European standard, only 10 years after has implemented here, saving banks and customers billions of Euros of potential fraud.

 
Marilyn Cohodas
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Marilyn Cohodas,
User Rank: Strategist
3/5/2015 | 4:55:38 PM
Re: And Yet Another Reason To Hate Breeches .....
It was justice and also a watershed for the industry. A first for a CEO to get the axe as the result of a company data breach. Probably won't be the last....
Technocrati
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Technocrati,
User Rank: Ninja
3/5/2015 | 4:50:55 PM
Re: And Yet Another Reason To Hate Breeches .....

@Marilyn     Ah Thank you !   So there is some justice, not much but some.

Technocrati
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Technocrati,
User Rank: Ninja
3/5/2015 | 4:49:09 PM
Re: I don't get the US Banks' mentality

"...As you know we have that system here in Europe for many years and very few people complain."

 

@Pablo    This is where that arrogance comes in that I mentioned earlier.  Go to Europe and see how others are doing it ?   No Way.   Europe is only for vacations and hiding assets.

Marilyn Cohodas
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50%
Marilyn Cohodas,
User Rank: Strategist
3/5/2015 | 4:46:39 PM
Re: And Yet Another Reason To Hate Breeches .....
@Technocrati  The Target CEO did loose his job as a result of the breach. He stepped down last May. 
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