Another EMV Security Hole, But This One Is Preventable In The U.S.

Written by Evan Schuman
September 19th, 2012

A recent security hole discovered in EMV (yes, another one) involving the way it handles encryption is one that can be prevented based on how a retailer sets up its system. The hole is a major issue in regions where EMV is dominant, including Europe, Canada and Mexico. But with U.S. retailers just starting to consider EMV, it’s a theoretically preventable attack.

The report, from the U.K.’s University of Cambridge, describes the hole as exploiting a lack of true randomness in the calculations. From the report: “This protocol requires POS terminals to generate a nonce, called the unpredictable number, for each transaction to ensure it is fresh. We have discovered that some EMV implementers have merely used counters, timestamps or homegrown algorithms to supply this number. This exposes them to a ‘pre-play’ attack, which is indistinguishable from card cloning from the standpoint of the logs available to the card-issuing bank, and can be carried out even if it is impossible to clone a card physically, in the sense of extracting the key material and loading it into another card. Card cloning is the very type of fraud that EMV was supposed to prevent.”

One security manager with a major chain, who specializes in encryption issues, said having a retailer requesting a random number from its issuer would improve security, but at the cost of a slightly slower transaction—anywhere from one-tenth of a second faster on a traditional network to perhaps more than a second when using a dial-up terminal.

“Having the terminal request the nonce from the issuer adds another full round-trip message, which is a lot of extra time. Nobody wants that,” she said. “It’s an extra pass through the payment network. That raises the question of cost. Will payment providers carry them for free? Will that impact their peak season throughput?”

But what caused this error in the first place? “The vulnerability would have been greatly reduced by having the protocol include terminal ID in the message, in addition to the nonce, and that oversight should have been caught in the protocol’s design. That would have prevented my terminal from attacking your terminal,” the retail security manager said. “But that was designed more than 15 years ago, and the lessons in protocol security learned in the 1970s had not been carried forward. The EMV designers apparently assumed the retailers’ terminals could be trusted. It’s too late for protocol changes now, anyway.”

She said: “Unguessable is what it really needs to be. But all we’ve truly got is ‘slightly unpredictable.'”

The retail IT operative added that there are ways to deal with this problem without causing too much disruption. “First, the standard for Unguessable/Unpredictable Number has to be updated to clearly state the requirement for a cryptographically secure pseudorandom number generator (it has been) and how to securely seed it (it hasn’t been). Second, all old non-random terminals would need to be updated to use the new standard. But that’s still a tremendous amount of privately owned equipment to update.”

As for new systems, the answer is theoretically easier. But it also requires a team with some cryptography background, which is not generally present within every retailer’s IT group.

“Anyone buying a new system today could consider asking their vendor to describe their system’s approach to defend against this attack. But the answer is likely to be technical cryptobabble and won’t mean much to most people,” she said. “If I had a nickel for every business analyst I know who understands what a cryptographically secure pseudorandom number generator is, or would ask about the source of the entropy used to seed it, I’d have about 40 cents.”

Failing have some good crypto team members, a legally oriented approach would be getting the vendor to accept more responsibility. “I think it would be more effective to work with the vendor to agree to a comprehensive security warranty where the vendor accepts a long-term liability for fixing currently undiscovered security defects, even if the customer is outside the normal warranty or paid-for support period.”

And while you’re at it, get your medical doctors to start doing housecalls again. But seriously, this is a rare situation where the U.S. retail community is in a very good spot security-wise. Whether EMV will ever make it the U.S. retail community in major numbers is debatable. But the fact that we have resisted it so long enables us to much more easily sidestep holes such as this one.


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Most Recent Comments

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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