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Card Processor Hit In A $40 Million Breach. Was It Yours?

Written by Frank Hayes
May 15th, 2013

A U.S. payment card processor was attacked in February as part of a $40 million cyberheist, federal prosecutors said last Thursday (May 9)—but they didn’t identify who the processor was. That left retailers no way of knowing whether their processor was the one that thieves breached to gain essentially unlimited access to the processor’s systems, potentially including merchant card data.

It wasn’t until Sunday that the mystery breach victim was revealed to be EnStage, a processor that’s headquartered in Silicon Valley but outsources its processing to a site in India. And it’s still not certain whether any merchant card data was actually stolen in the breach.

According to an indictment unsealed on Thursday, thieves gained access to EnStage’s systems and raised the withdrawal limits on 12 specific MasterCard (NYSE:MA) prepaid debit-card account numbers issued by a bank in Oman. As a result, gangs in 24 countries were able to use ATM machines to loot the accounts of roughly $40 million during a 10-hour period on Feb. 19 and 20.

As usual, the indictment wasn’t against the ringleaders of the international criminal operation—just eight New York residents who were part of a gang that helped convert the card numbers to cash at ATMs.

A $40 million haul is one very big cyberheist, and it appears to have had a very specific target: Oman’s Bank of Muscat. According to the indictment, this kind of scheme is called an “unlimited operation” because thieves remove limits on how much can be withdrawn. It also requires highly coordinated gangs to cash out the numbers at ATMs. In this case, withdrawals appear to have begun worldwide at 3 p.m. New York time on Feb. 19 and continued until 1:26 a.m. the next morning.

And “worldwide” here means Japan, Canada, Germany, Romania, United Arab Emirates, Dominican Republic, Mexico, Italy, Spain, Belgium, France, United Kingdom, Latvia, Estonia, Thailand and Malaysia. That’s not all 24 countries where debit-card numbers were cashed out, just the ones the U.S. attorney, the Secret Service and the Department of Homeland Security mentioned.

That’s the level of criminal operation that card breaches have gotten to these days. Thieves no longer steal card numbers and then sell them off a few hundred or thousand at a time. They have enough “cashers” on the street to run thousands of ATM transactions an hour. Even more disturbing, they have the ability to break into processors and turn off withdrawal limits, so even a group as small as the eight New York cashers can steal $2.4 million overnight.

Fortunately, no individual bank accounts were compromised by the operation. At least that’s what U.S. Attorney Loretta E. Lynch told a press conference on Thursday. How does she know that more debit-card numbers and PINs weren’t stolen? Considering that none of the ringleaders were caught, none of the thieves who actually broke into the card processor’s systems were caught, and they got really deep into the processor’s systems, the fact that no other card numbers have been used for fraud yetdoesn’t exactly inspire confidence that they won’t be soon.

Certainly if a retailer was hit by this deep a breach, Visa (NYSE:V) and MasterCard would assume the worst.


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Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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