Gonzalez Case Raises Very OId Retail Security Issues

Written by Evan Schuman
August 23rd, 2009

Since the earliest days of law enforcement, police have wrestled with the appropriate way to deal with criminal gangs. At its simplest, what should be done with two burglars who break into a house? Who is the primary lawbreaker and who is merely the assistant? Legislatures and courts have often tried to sidestep the question, declaring that a murder charge, for example, will be applied to all participants of a home break-in if anyone gets killed.

As a tactical practical matter, police (and that includes FBI, Secret Service, assistant district attorneys, deputy attorneys general and anyone who else charged with apprehending and punishing wrongdoers) often uses that ambiguity as a tool to pressure confessions. In short, the one who talks first gets to point the finger at the others and cut himself/herself the sweeter cooperating witness deal, while the suspect who hesitated gets left being charged as the scheme’s mastermind.

Such a drama is now unfolding with the Albert Gonzalez case, the Miami man accused of breaking into TJX, Hannaford, Heartland, Barnes & Noble, Sports Authority and a laundry list of others. Is Gonzalez the masterhead of a cyber thief ring? Was he coordinating different teams in the U.S., each group assigned to attack different retail chains? Or was he merely the pawn of an Eastern European data theft syndicate? In Dickensian terms, was he more Fagin, the Artful Dodger or even Oliver Twist?

(Editor’s Note: There are two new stories published that update this one: J.C. Penney, Target Added To List Of Gonzalez Retail Victims. and Gonzalez’s Plea Agreement Details.)

The attorney for Gonzalez, in various media interviews (including two conversations with StorefrontBacktalk), has painted a Gonzalez colleague—Damon Patrick Toey, who plead guilty in December to working with Gonzalez on the TJX breach—as the true master cyberthief, with Gonzalez just going along for the ride.

“Mr. Toey has been cooperating since Day One. He was staying at (Gonzalez’s) apartment. This whole creation was Mr. Toey’s idea,” said Gonzalez attorney Rene Palomino. “It was his baby. This was not Albert Gonzalez. I know for a fact that he wasn’t involved in all of the chains that were hacked from New Jersey.”

From a legal standpoint, though, it’s unclear how any of this would help his client, except perhaps at sentencing (and it’s questionable, even then). If Gonzalez was actively involved in the overall criminal enterprise—and did nothing to stop it—it’s hard for him to avoid blame for the consequences. Granted, this is in the midst of plea negotiations and Gonzalez is trying to cut his own best deal. Palomino confirmed that a deal for all of the federal retail charges involving his client—New York charges involving the Dave & Buster’s restaurant chain, a Boston case involving TJX, BJ’s Wholesale, Forever 21 and many others, plus new charges out of Newark, N.J., involving Heartland, Hannaford and 7-Eleven, among others—had been resolved and a guilty plea was imminent when, the lawyer charges, the U.S. Attorney for New Jersey pulled a switch. (If you can’t trust a New Jersey politician, what is this world coming to? The Artful Dodger, indeed.)


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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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