All posts by Maria Scalone
Imagine the following scenario: an attacker acquires consumers’ login credentials through a data breach. They use these credentials to test account access and observe account activity to understand the ebbs and flows of normal cash movement – peering into private financial records – verifying the optimal time to strike for the most financial gain. Surveillance and fraud staging are the seemingly benign and often-transparent account activities that fraudsters undertake after an account has been compromised but before that compromise has been detected or money is moved. Activities include viewing balances, changing settings to more effectively cover tracks, and setting up account linkages to stage eventual fraudulent transfers. The unfortunate thing is that the actual theft is often the final event in a series of several fraudulent surveillance and staging activities that were not detected in time. It is the activity that occurs before theft that can severely undermine consumer trust and can devastate a brand’s reputation. Read more about surveillance, staging and the fraud lifecycle in this complimentary whitepaper.
Credit card declines Surag Patel, vice president of global product management for 41st Parameter, led a panel discussion on Digital Consumer Trust with experts from the merchant community and financial services industry at this week’s CNP Expo. During the hour-long session, the expert panel – which included Patel, Jeff Muschick of MasterCard and TJ Horan from FICO – discussed primary research explaining the $40 billion in revenue lost each year to unwarranted CNP credit card declines and what businesses can do to avoid it. Patel began the Thursday morning session by asking the audience how many have bought something online—of course, everyone raised their hands. He then asked how many had been declined—about half the hands stayed up. “Of those with your hands still up,” he said, “how many of you are fraudsters?” The audience chuckled, but the reality of false positives and unnecessary declines is no laughing matter. Unnecessary declines cause lost revenue and damage the customer relationship with merchants, banks and card issuers. The panel cited a 41st Parameter survey of 1,000 consumers and described their responses to the question, what do you do after you get declined? While many would call the card issuer or try a different payment method, one in six would actually skip the purchase altogether, one in ten would purchase from a different online merchant, and one in twelve would go buy the item at a brick-and-mortar store. So regardless of who the customer blames, ultimately, when a good purchase is declined, everybody loses. Jeff Muschick, who works in fraud solutions for MasterCard, spoke about the need for a solid rules engine, and recommended embracing new tools as they emerge to enhance their fraud prevention strategy. He acknowledged that for smaller merchants, keeping up with fraudsters can be incredibly taxing, and often even at larger organizations, fraud departments are understaffed. For that reason, he highlighted a tool that many fraud prevention strategies are leaving on the table, and that’s cooperation: “We talk about collaboration, but it’s not as gregarious as we’d like it to be.” TJ Horan, who is responsible for fraud solutions at FICO, encouraged merchants, banks, and card issuers to mitigate the damage of good declines through customer education. He observed that “if there was a positive thing to come out of the Target breach (and that’s a big ‘if’), it is an increase in general consumer awareness of credit-card fraud and data protection.” This helps inform customers’ attitudes when they are declined, because they realize it is probably a measure being taken for their own protection, and they are likely to be more forgiving. Click here for more information about TrustInsight and how online merchants can increase sales by approving more trusted transactions.
In a recent webinar, we addressed how both the growing diversity of technology used for online transactions and the many different types of access can make authentication complicated. Technology is ever-changing and is continually reshaping the way we live. This leaves our industry to question how device intelligence factors into both the problem and solution surrounding diverse technologies in the online transaction space. Industry experts Cherian Abraham from the Experian Decision Analytics team and David Britton from 41st Parameter, a part of Experian, weighed in on the discussion. Putting It All Into Context Britton harkened back to a simpler time of authentication practices. In the early days of the web, user names and passwords were the only tools people had to authenticate online identities. Eventually, this led organizations to begin streamlining the process. “They did things like using cookies or placing files onto a computer so that the computer would be “known” to the business,” said Britton. However, those original methods are now struggling to fit into the modern-day authentication puzzle. “The challenge has been that for both privacy reasons and for the advancements of technology we have actually moved to a more privacy-centric environment where those types of things have fallen away in terms of their efficacy. For example, cookies are often easily deleted by simply browsing incognito. So as a result there’s been a counter move approach to how to authenticate online,” said Britton. New Technology – A Quick Fix? Don’t be fooled. Newer technologies cannot necessarily provide an easy alternative and incorporate older authentication methods. Britton referenced how the advent of mobile has actually made recognizing the consumer behind the device, the behavior of the machine and the data that the consumer is presenting even more complex. Additionally, rudimentary methods of authentication don’t actually exist well in the mobile environment. On the other hand, newer technologies and the mobile environment force a more layered approach to authentication methods. “There is a better way and the better way is to look at a variety of other inspirations beyond user names and passwords before vindicating the customer. This is all the more evident when you get to newer channels such as mobile where consumer expectations are so different and you cannot rely on the customer having to answer a long stream of characters and letters such as a user name or a password,” said Abraham. Britton weighed in as well on device intelligence and the layered approach. “Our whole philosophy around this has been that if you can recognize aspects of the device in the form of device intelligence – we’re able to actually leverage that information without crossing the boundaries of good privacy management. Furthermore, we are then able to say we recognize the attributes of the device and can recognize the device as that person is attempting to come back into an environment,” said Britton. He emphasized how being able to help companies understand who might be on the other end of the device has made a world of difference. This increasingly points to how authentication will continue to evolve in a in a multi-device, multi-screen and multi-channel environment. For more information and access to the full webinar – Stay tuned for additional #fraudlifecycle posts.
Fraud is not a point-in-time problem and data breaches should not be considered isolated attacks, which break through network defenses to abscond with credentials. In fact, data breaches are just the first stage of a rather complex lifecycle that begins with a vulnerability, advances through several stages of validation and surveillance, and culminates with a fraudulent transaction or monetary theft. Cyber criminals are sophisticated and have a growing arsenal of weapons at their disposal to infect individual and corporate systems and capture account information: phishing, SMSishing and Vishing attacks, malware, and the like are all attempts to thwart security and access-protected information. Criminal tactics have even evolved to include physical-world approaches like infiltrating physical call centers via social engineering attacks aimed at unsuspecting representatives. This, and similar efforts, are all part of the constant quest to identify and exploit weaknesses in order to stage and commit financial crimes. There are some companies that claim malware detection is the silver bullet to preventing fraud. This is simply not the case. The issue is that malware is only one method by which fraudsters may obtain credentials. The seemingly endless supply of pristine identity and account data in the criminal underground means that detecting a user’s system has been compromised is akin to closing the barn door after the hose has bolted. That is, malware can be an indicator that an account has been compromised, but it does not help identify the subsequent usage of the stolen credentials by the criminals, regardless of how the credentials were compromised. Compromised data is first validated by the seller as one of their “value adds” to the criminal underground and typically again by the buyer. Validation usually involves logging into an account to ensure that the credentials work as expected, and allows for a much higher “validated” price point. Once the credentials and/or account have been validated, cyber criminals can turn their attention to surveillance. Remember, by the time one realizes that credential information has been exposed, cyber criminal rings have captured the information they need – such as usernames, passwords, challenge responses and even token or session IDs – and have aded it to their underground data repositories. with traditional online authentication controls, it is nearly impossible to detect the initial fraudulent login that uses ill-gotten credentials. That is why it is critical to operate from the assumption that all account credentials have been compromised when designing an online authentication control scheme.
Online crooks are getting more sophisticated by the second. Nowadays, fraudsters have the ability to conduct “clean fraud,” obtaining legitimate identities of users from the black market or data breaches to compromise a victim’s card account. Malware, too, is becoming more sophisticated both in the mobile and non-mobile space. But how can organizations fight such high-level tactics in such a broad, complex space? John Sarreal, Senior Director of Product Management at 41st Parameter, an online fraud prevention player, sat down with PYMNTS after the recent release of the white paper “Surveillance, Staging, and the Fraud Lifecycle” to reveal the inner workings of a cyber criminal’s mind, what should be done before and after data is snatched, and which aspects of account takeover are the most overlooked and dangerous. Interview excerpts Take us through the mind of a cyber-criminal. What are the most sophisticated tactics used today to capture account information from corporate systems? JS: The amount of clean fraud that we see with our customers is unprecedented. By focusing on obtaining legitimate credentials and identities, fraudsters are more easily able to bypass traditional controls. This means that fraud tools need to adapt and gather additional attributes to augment their fraud screening. Although the techniques they’re using now to obtain these credentials are increasingly sophisticated, the MOs are still rooted in basic phishing and social engineering attacks. Fraudsters will use identity information obtained from the black market or data breaches to conduct very convincing phishing attacks to reveal everything that is needed to compromise a victim’s card account. There’s also increasing sophistication in the use of malware to steal sensitive credentials in both the mobile and non-mobile arena. In Android, for example, Google recently passed a vulnerability that allows sophisticated malware to impersonate digital certificate signing authorities. This vulnerability allowed the malware to install itself on a mobile device without any user notification or intervention – obviously, a very dangerous attack. Link to the podcast and transcript here.
In our most recent webinar, I had the pleasure of moderating a panel session with four fraud experts spanning across many diverse backgrounds. The consistent theme throughout was that cyber criminals have become quite proficient at stealing data or account credentials. Once a cyber criminal has valid account data, they have incredible access to a broad range of possibilities. How an account is used; a real-time view of deposit and withdrawal patterns and what types of alerts and notification settings are in place. A determined fraudster may observe accounts for long periods to ensure they are able to make their move at the optimal time. One of the biggest issues is being able to tell “friend from foe”, particularly in light of the endless supply of perfect, disposable data. I posed this scenario to our panel and asked what organizations can do now to protect themselves: SCENARIO – Telling friend from foe Credit card companies encourage travellers to alert them in advance of unusual travel to avoid red flags or declines while out of town. This can be a double-edged sword. A fraudster with appropriate credentials can contact a credit card company a few weeks before a “trip” to alert them of planned travel. At the start of the “trip” the distraught fraudster can then contact the credit card company to report a stolen card and request a replacement be expedited to them at their “destination.” The result is a fraudster armed with a completely legitimate card they can use at their leisure and with little risk of detection. There were three key take-aways the expert panel recommended: Enhance your visibility. Without this important tactic, you won’t know what hit you. Fraudsters are armed with pristine identity data so they will look and act more like your best customers. Employee multiple security layers. You may be focused on ensuring that you know your customer, but does the transaction pattern fit normal behavior for the user? Malware could be embedded on the device. Are items such as language and other settings consistent with what you’d expect for your legitimate customers? Protect profile setups / online enrolment and reward programs the way you protect transactions. While the financial risk to your business may be limited, the potential regulatory exposure and brand reputation hit can be significant. It takes years to build your reputation with your best customers – but only seconds to destroy it. Undermining their trust in online or mobile interactions with your business has an immediate and destructive impact on loyalty. What do you think? Let us know.
It’s no secret that e-commerce merchants, retailers, and financial institutions are prime targets for these digital ghosts as they look to quickly monetize their recent data heist. Unfortunately, many organizations are still scrambling to deploy proper defenses. So how do you defend against an unregulated, networked enemy intent on inciting chaos and filling their bank accounts? Following any data breach, it is essential that organizations gain complete visibility of their customers and transactions across channels. Once a breach has occurred, it is critical for organizations to perform a forensic review of the attack to identify and understand all of the potential points of vulnerability, what data was stolen and how that data was transmitted back to the attackers. What can be more concerning is that the initial scope may quickly expand into something much larger. This makes it essential that retailers and financial institutions rapidly gain complete visibility of their customer data and transactions across channels and keep drilling-down until the root cause can be identified and protected against a repeat attack. Unfortunately, that type of consolidated view does not exist in most companies. Organizations need to ask themselves some serious questions. Do you really know who is logging into your customers’ accounts? Without realizing their data has been compromised, consumers can fall prey to personalized phishing attacks and “give away the keys” to their accounts. How can you be certain a VIP customer is really behind a high-dollar transaction being rushed to an overseas address? No one wants to decline legitimate orders from loyal customers; but with revenue, reputation and brand equity at stake, no one can afford to ignore the potential risk. What controls are in-place to ensure that a fraudster in Malaysia isn’t using legitimate identity data and an anonymous proxy to submit credit card applications that are a perfect match to credit bureau data? Or to alert when a long-standing offline banking relationship suddenly enrolls online? Once access is established, address and other data can be updated and sold to the highest bidder in underground forums. All of these questions can be addressed through the combination of complex device intelligence, a powerful risk engine and support from industry-leading experts in fraud and risk management. Even after a breach has occurred, the risk can be managed. First, consumers need to be informed on how to protect themselves from sophisticated use of their data. Second, arm your organization with a layered security strategy that includes device intelligence. This will prepare you for the onslaught of compromised card usage, fraudulent enrollments, phishing attacks and attempted account takeovers that follow in the wake of a data breach.
There are some definite misunderstandings about the lifecycle of fraud. The very first phase is infection – and regardless of HOW it happens, the victim’s machine has been compromised. You may have no knowledge of this fact and no control. All of that compromised data is off in the ether and has been sold. The next phase is to make sure that the next set of fraudsters can validate those compromised accounts and make sure they got their money’s worth. It’s only at the last phase – theft – that any money movement occurs. We call this out because there are a lot of organizations out there who have built their entire solution on this last phase. We would say you are about two weeks too late as the crime actually began much earlier. So how can you protect your organization? Here are five take-aways to consider: User / device trust. Do this user and device share a history? Has this user seen of been associated with this device historically? It may not be fraud but it is something we watch for. User / device compatibility. Does the user align with devices they’ve used in the past? What are the attributes of the device with respect to user preferences, profile and so on. Device hostility. Look at its behavior across your ecosystem. How many identities has it been associating with? Is it associated with a number of personal attributes or focused on risky activities? Malware. Does this device configuration suggest malware? Because we have information about the device itself, we can show that it’s been infected. Device reputation. Has this device been associated with previous crimes? There are some organizations who have built their entire solution around device reputation. We believe this is interesting to include but it’s more important to look at everything in the context across your entire ecosystem rather that focus on just one area. Want to learn more? Listen to this on-demand webinar “Where the WWW..wild things are – when good data is exploited for fraudulent gain”.
FICO, a leading predictive analytics and decision management software company, has partnered with 41st Parameter®, a part of Experian® and a leader in securing online relationships, to fight fraud on card-not-present (CNP) transactions, the top source of payment card fraud today, while letting more genuine transactions proceed in real time. FICO is integrating 41st Parameter’s TrustInsight™ with the FICO® Falcon® Platform, which protects 2.5 billion card accounts and is used by more than 9,000 financial institutions worldwide. Authenticating the device being used in a transaction provides yet another layer of detection to the Falcon Platform, which includes proprietary analytics based on more than 30 patents. 41st Parameter’s TrustInsight™ solution provides a real-time analysis of a transaction, crowd-sourced from a network of merchants, that produces a TrustScore™ indicating whether the transaction is likely to be genuine and should be approved. TrustInsight helps reduce the number of “false positives,” or good transactions that are declined or investigated by the card issuer. The TrustScore, integrated with the FICO Falcon Fraud Manager Platform, provides a link between data the merchant knows and data the issuer knows to enable issuers to utilize additional information that is not currently available in their fraud detection process, including the identification of a cardholder’s “trusted devices.” Read the entire release here.
Surag Patel, vice president of global product management for 41st Parameter, led a panel discussion on Digital Consumer Trust with experts from the merchant community and financial services industry at this week’s CNP Expo. During the hour-long session, the expert panel – which included Patel, Jeff Muschick of MasterCard and TJ Horan from FICO – discussed primary research explaining the $40 billion in revenue lost each year to unwarranted CNP credit-card declines and what businesses can do to avoid it. Patel began the Thursday morning session by asking the audience how many have bought something online—of course, everyone raised their hands. He then asked how many had been declined—about half the hands stayed up. “Of those with your hands still up,” he said, “how many of you are fraudsters?” The audience chuckled, but the reality of false positives and unnecessary declines is no laughing matter. Unnecessary declines cause lost revenue and damage the customer relationship with merchants, banks and card issuers. The panel cited a 41st Parameter survey of 1,000 consumers and described their responses to the question, what do you do after you get declined? While many would call the card issuer or try a different payment method, one in six would actually skip the purchase altogether, one in ten would purchase from a different online merchant, and one in twelve would go buy the item at a brick-and-mortar store. So regardless of who the customer blames, ultimately, when a good purchase is declined, everybody loses. Jeff Muschick, who works in fraud solutions for MasterCard, spoke about the need for a solid rules engine, and recommended embracing new tools as they emerge to enhance their fraud prevention strategy. He acknowledged that for smaller merchants, keeping up with fraudsters can be incredibly taxing, and often even at larger organizations, fraud departments are understaffed. For that reason, he highlighted a tool that many fraud prevention strategies are leaving on the table, and that’s cooperation: “We talk about collaboration, but it’s not as gregarious as we’d like it to be.” TJ Horan, who is responsible for fraud solutions at FICO, encouraged merchants, banks, and card issuers to mitigate the damage of good declines through customer education. He observed that “if there was a positive thing to come out of the Target breach (and that’s a big ‘if’), it is an increase in general consumer awareness of credit-card fraud and data protection.” This helps inform customers’ attitudes when they are declined, because they realize it is probably a measure being taken for their own protection, and they are likely to be more forgiving. Click here for more information about TrustInsight and how online merchants can increase sales by approving more trusted transactions.
Today, our TrustInsight division announced a major milestone at this year’s CNP Expo (CardNotPresent). TrustInsight provides reliable TrustScores for a significant portion of US digital consumers leveraging insights from150 of the top online retailers in the US. Now retailers, banks and credit card companies can confidently approve more legitimate CNP transactions. As Surag Patel, vice president, global product management, put it, “We have been working with some of the largest online merchants to help them determine the trustworthiness of a customer during a transaction to help let more good transactions through. The result has been a sharp increase in top-line revenue that can be measured in the tens of millions of dollars.” Patel is leading a panel discussion on Digital Consumer Trust at CNP Expo 2014 on Thursday, May 22 with experts from the merchant community and financial services industry. During the hour-long session, the expert panel will discuss primary research explaining the $40 billion in revenue lost each year to unwarranted CNP credit-card declines and what businesses can do to avoid it. Read the full release here.
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