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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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