Secret Service Investigating Breach At Michael's Retail Chain

After reporting a major breach on Saturday, the Michael's retail craft store chain still has not revealed the source or scope of a data breach that could affect many of its customers.

In a media alert posted on its website (PDF), Michael's reported that "possible fraudulent activity" had occurred on some U.S. credit cards that had been used at its stores, "suggesting that the company may have experienced a data security attack."

The company is working with federal law enforcement agencies, according to the statement. A report by the Washington Post says the Secret Service has confirmed it is investigating the incident.

"We are concerned there may have been a data security attack on Michaels that may have affected our customers' payment card information and we are taking aggressive action to determine the nature and scope of the issue," said Chuck Rubin, CEO of Michael's, said in the Web statement. "While we have not confirmed a compromise to our systems, we believe it is in the best interest of our customers to alert them to this potential issue so they can take steps to protect themselves, for example, by reviewing their payment card account statements for unauthorized charges."

Michael's did not offer any details on how many customers might have been affected, and it did not provide any information on the source or nature of the breach. The company did experience a compromise of its point-of-sale systems in 2011, and such systems are also suspected in the recent breach of customer data at the Target retail chain.

Experts said the recent breaches at retail chains such as Target, Neiman-Marcus, and Michael's could continue unless retailers do some major rethinking of their security defenses.

"All indications at this point are that Target, Neiman Marcus, and Michael's aren't the only retailers that may have experienced a serious breach late last year, and I expect a number of others will come forward in the coming weeks," says Dmitri Alperovitch, CTO and co-Founder of threat intelligence company CrowdStrike. "CrowdStrike is currently working with a number of retail companies to evaluate their networks for signs of possible breach, and provide them with intelligence on how the attacks were conducted and how they can be discovered and mitigated."

"The continued point-of-sale breaches, regardless of which retailer -- Michael's, Neiman Marcus, Target, or others -- indicates a common threat vector," says Bala Venkat, chief marketing officer at application security vendor Cenzic.

"These POS systems and the back-office systems that reside at remote stores are often resource-constrained," Venkat observes. "While improperly configured remote access technologies could contribute, oftentimes the environment these retailers operate with is not well-suited to downloading and installing patches for core operating systems, critical applications, or anti-malware controls. Unless retailers start immediately putting serious security controls into their POS systems, we're bound to see more breaches of this nature."

W. Hord Tipton, executive director at security professional association (ISC)2, agreed that retailers should be rethinking the payment technologies they use today.

"Outside of the U.S., many countries have adopted EMV smart card technology as a countermeasure to thwart fraud," Tipton observes. "Unless the U.S. follows suit and takes swifter action to secure payment transactions by retiring old-school magnetic stripe cards and moving toward a more secure chip and pin method, we will continue to see more breaches and public outcry."

But Lucas Zaichowsky, enterprise defense architect at incident response company AccessData, notes there is no clear evidence to suggest any commonality between the three major retail breaches.

"Much of the speculation out there as of now is unfounded and incredibly off-base," Zaichowsky says. "Merchant breaches happen daily. It's not as though there's an atypical wave of attacks going on. Historically, most breaches haven't ended up in the news because they're narrowly limited to a single merchant location, and there isn't much public interest nationally. However, the public is currently in a state of hypersensitivity surrounding the topic of card data theft because of the massive Target breach."

Have a comment on this story? Please click "Add a Comment" below. If you'd like to contact Dark Reading's editors directly, send us a message.