Thieves increasingly are exploiting vulnerabilities in consumer bank account systems, with an estimated 3 million U.S. consumers victimized by fraud involving ATM/debit cards in a recent 12-month period, according to Gartner, Inc.
    Gartner estimates that in the 12 months ending in May 2005, ATM/debit card fraud in the U.S. generated losses of $2.75 billion, with an average loss of more than $900. Criminals secretly are obtaining consumer banking account and password information by online phishing and keystroke logging attacks, and then using this information to hack into consumers’ ATM accounts.
    Most of the losses were covered by banks and other financial institutions that issued the specific ATM/debit cards exploited by thieves.
    The findings are based on a Gartner survey in May 2005 of 5,000 U.S. adults who are active online and demographically representative of the U.S. online adult population.

    “Criminals sometimes counterfeit ATM/debit cards with just account numbers and PINs in hand, and they can use this stolen information at ATMs to withdraw cash from a cardholder’s account,” said Avivah Litan, Vice President and Research Director at Gartner. “They succeed when the card-issuing bank is not validating security codes on the magnetic stripe of the card while authorizing transactions.” PINs are personal-identification numbers.
    “These security codes are stored on Track 2 of the magnetic stripe and include PIN offsets and Card Verification Value (CVV) codes,” Litan said. “The codes link the physical card to the customer’s account number. Surprisingly, perhaps as many as half of U.S.-based financial institutions are not validating Track 2 security data while authorizing ATM and PIN debit transactions. Most of these institutions are unaware that they, or the outsourced ATM transactions processor they rely on, should be doing so.”
    Banks have the ability to stop these attacks, but many have not taken the extra steps needed to prevent them. Banks can modify their ATM host systems to check for security data on a card’s magnetic strip. This data is unknown to bank customers and, therefore, cannot be phished. Thieves generally cannot duplicate this security data unless they have insider knowledge of the bank’s algorithms and security codes.
    Phishing occurs when a cyber thief sends an e-mail with a link to a false Web site. The false sites typically are disguised to look like sites of banks or well-known e-commerce merchants. Recipients of these e-mail attacks are asked to provide personal account information.
    “Criminals are seeking out customers of banks that are not validating ATM cards’ Track 2 magnetic stripe security data during cash withdrawal transactions,” Litan said. “The hackers call these banks ‘cashable.’ The prime candidates are banks with high cash withdrawal limits.”
    Gartner analysts said banks must protect against all types of fraud committed against checking accounts, regardless of the channel used, such as insider theft, online banking, phone banking, and automated clearing house transfers.
   “The best defense is a transaction anomaly detection system that compares incoming transactions with profiles of what is expected from the user,” Litan said. “Anomalies are flagged for further investigation and/or subsequent interactive authentication of the user, perhaps through a phone call to the user.”

    The ATM Industry Association recently launched a global fraud alert service focused on multichannel security alerts for financial services.
    The service, FAST (Fraud Alert Services Team), involves collating and distributing fraud alerts from a variety of sources such as the Global ATM Security Alliance (GASA) (www.globalasa.com).
    “The Global ATM Security Alliance has become aware of the need for a more holistic view of security in an increasingly inter-related multi-channel environment,” said Mike Lee, CEO of ATMIA.”Fraudsters are using one channel, such as Internet banking or Point of Sale devices, to commit fraud on a different channel, such as an ATM. In this context it is vital to supply security practitioners in our industry with a broad range of fraud alerts about threats to different channels. In addition, crime migrates, not just across channels but also across countries and continents, so that fraud alerts need to have global scope as well.”
    There will be a six-month trial period to test the system, which will work on the basis of pooling alerts from different sources and sending them throughout the distribution channels of each participating organization. These fraud alerts will bear both the FAST logo and the logo of the organization supplying the alert. The alerts will have a simple, standardized structure, outlining the nature of attack which gave rise to the alert and specifying which channel(s) are impacted by the threat and what preventive measures are recommended.