Financial Cryptography

Two-channel breached: a milestone in threat evaluation, and a floor on monetary value

Readers will know we first published the account on "Man in the Browser by Philipp Güring way back when, and followed it up with news that the way forward was dual channel transaction signing. In short, this meant the bank sending an SMS to your handy mobile cell phone with the transaction details, and a check code to enter if you wanted the transaction to go through.

On the face of it, pretty secure. But at the back of our minds, we knew that this was just an increase in difficulty: a crook could seek to control both channels. And so it comes to pass:

In the days leading up to the fraud being committed, [Craig] had received two strange phone calls. One came through to his office two-to-three days earlier, claiming to be a representative of the Australian Tax Office, asking if he worked at the company. Another went through to his home number when he was at work. The caller claimed to be a client seeking his mobile phone number for an urgent job; his daughter gave out the number without hesitation.

The fraudsters used this information to make a call to Craig’s mobile phone provider, Vodafone Australia, asking for his phone number to be “ported” to a new device.

As the port request was processed, the criminals sent an SMS to Craig purporting to be from Vodafone. The message said that Vodafone was experiencing network difficulties and that he would likely experience problems with reception for the next 24 hours. This bought the criminals time to commit the fraud.

The unintended consequence of the phone being used for transaction signing is that the phone is now worth maybe as much as the fraud you can pull off. Assuming the crooks have already cracked the password for the bank account (something probably picked up on a market for pennies), the crooks are now ready to spend substantial amounts of time to crack the phone. In this case:

Within 30 minutes of the port being completed, and with a verification code in hand, the attackers were spending the $45,000 at an electronics retailer.

Thankfully, the abnormally large transaction raised a red flag within the fraud unit of the Commonwealth Bank before any more damage could be done. The team tried – unsuccessfully – to call Craig on his mobile. After several attempts to contact him, Craig’s bank account was frozen. The fraud unit eventually reached him on a landline.

So what happens now that the crooks walked with $45k of juicy electronics (probably convertible to cash at 50-70% off face over ebay) ?

As is standard practice for online banking fraud in Australia, the Commonwealth Bank has absorbed the hit for its customer and put $45,000 back into Craig's account.

A NSW Police detective contacted Craig on September 15 to ensure the bank had followed through with its promise to reinstate the $45,000. With this condition satisfied, the case was suspended on September 29 pending the bank asking the police to proceed with the matter any further.

One local police investigator told SC that in his long career, a bank has only asked for a suspended online fraud case to be investigated once. The vast majority of cases remain suspended. Further, SC Magazine was told that the police would, in any case, have to weigh up whether it has the adequate resources to investigate frauds involving such small amounts of money.

No attempt was made at a local police level to escalate the Craig matter to the NSW Police Fraud and Cybercrime squad, for the same reasons.

In a paper I wrote in 2008, I stated for some value below X, police wouldn't lift a finger. The Prosecutor has too much important work to do! What we have here is a very definate floor beyond which Internet systems which transmit and protect value are unable to rely on external resources such as the law . Reading more:

But the Commonwealth Bank claims it has forwarded evidence to the NSW and Federal Police forces that could have been used to prosecute the offenders.

The bank’s fraud squad – which had identified the suspect transactions within minutes of the fraud being committed - was able to track down where the criminals spent the stolen money.

A spokesman for the bank said it “dealt with both Federal and State (NSW) Police regarding the incident” and that “both authorities were advised on the availability of CCTV footage” of the offenders spending their ill-gotten gains.

“The Bank was advised by one of the authorities that the offender had left the country – reducing the likelihood of further action by that authority,” the spokesperson said.

This number goes up dramatically once we cross a border. In that paper I suggested 25k, here we have a reported number of $45k.

Why is that important? Because, some systems have implicit guarantees that go like "we do blah and blah and blah, and then you go to the police and all your problems are solved!" Sorry, not if it is too small, where small is surprisingly large. Any such system that handwaves you to the police without clearly indicating the floor of interest ... is probably worthless.

So when would you trust a system that backstopped to the police? I'll stick my neck out and say, if it is beyond your borders, and you're risking >> $100k, then you might get some help. Otherwise, don't bet your money on it.

Posted by iang at December 8, 2011 04:34 PM | TrackBack