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Michaels Breach Convictions Point To The Most Sophisticated PIN Pad Attack Yet

August 1st, 2012

In other words, this isn’t the type of breach chains would have expected even three years ago. That 19-state, 3,000-mile swath of breaches might have been a few fraudsters on one very long road trip. But in light of the fact that the thieves outsourced the cashing-in to at least one street gang, it’s more likely this is a well-organized effort at every level.

At this point, it’s still not clear whether the 80-plus PIN pads were actually stolen from Michaels stores progressively, as the thieves worked their way across the country, or were purchased separately by the thieves. If it’s the second case, that’s a large investment—and a bigger, more coordinated operation.

The possibility that this breach involved so much organization would be worrisome enough. But in retrospect, it almost looks like the 2010 Aldi breach—a year before Michaels—was a dress rehearsal. Like the Michaels breach, it involved a single chain, with rigged PIN pads installed in stores across the geographical extent of the chain (in Aldi’s case, from Georgia to Illinois).

Also like Michaels, the PIN pads seem to have collected a relatively small number of account numbers per store—a few hundred with Aldi, just over a thousand with Michaels. And in both cases, the center of the cash collection from ATMs was Los Angeles.

That doesn’t mean both breaches are from the same thieves, or that they’re connected in any way. But which is worse: the idea that a single gang has done this in two successive years (and has probably done it again, but the breach hasn’t yet been spotted), or that completely unrelated gangs have figured out how to do it and only two bottom-rung cash-collectors have been caught—and then only because bank employees reported them to police for loitering near an ATM?

The baseline advice for avoiding PIN pad tampering remains the same: Screw down the PIN pads so they can’t easily be physically swapped out. Log their connection status and set up alarms to flag any disconnects. And audit the devices regularly—which includes encouraging store managers to examine them carefully on a regular basis. If anything looks funny, taking a picture with a mobile phone and sending it to IT is an easy way to at least give IT a better idea of whether anything is likely wrong.

That may not sound like much as a last line of defense. But if PIN pad thieves really have grown this sophisticated—and distributed—it could be the only hope chains have.


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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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