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May 20, 2013

ATM Cash-Outs: A Major Escalation

The banking news this week has been dominated by the story about the two ATM cash-out schemes that netted the criminals a total of $45 million. (We mentioned the $40 million fraud involving prepaid cards issued by a bank in Oman in a post earlier this month.) The news articles and opinion pieces have focused on what I consider secondary aspects of this attack—counterfeit card production and prepaid cards. Some observers have pointed to this attack as further justification for a faster move to EMV reader capability in the United States. While it is certainly true that an EMV-only environment will virtually eliminate counterfeit card crimes such as this, the reality is that a dual EMV-magnetic stripe environment is going to exist, both here in the United States and the rest of the world, for quite some time. And while some categorize the United States as the only EMV holdout, the fact that 94 percent of the ATM cash withdrawals took place at ATMs outside the United States shows that we are not the non-EMV island that we are often portrayed as. Others have pointed out that the targeted cards were tied to prepaid accounts, implying or outright stating that a prepaid card management application is less secure than a regular debit card management application. This is not the case, as the fraud was not a product or an access device issue.

The real threat from this attack comes from the criminals' ability to gain access to the card management application on a real-time basis. It is still unclear whether they gained the account number and PIN from accessing the card management system or through the more traditional skimming means. What is clear is that they had the ability to continually replenish account balances and reset usage limit parameters during the 10–13 hour attack that involved more than 3,600 withdrawal transactions from ATMs located in 26 different countries. The investigation of the two processors located in India will tell if there was some level of insider involvement or if the criminals learned how to gain access to the card application and make the changes to keep the fraudulent attack going.

So how should bankers and card management processors address these concerns? I would suggest they consider an immediate review and understanding of their card management application access controls that identify the personnel having the authority to make "on-the-fly" changes to specific account parameters. Some access is required for actions such as flagging a reported lost or stolen card, but other parameters should be completely off limits or tightly controlled and monitored. Another safeguard would be to have account velocity monitoring, which would identify unusual card usage activity or usage from different parts of the world occurring at about the same time.

This highly sophisticated and coordinated attack is a game changer for the security controls of all types of card management applications. Let us know how you are responding.

David LottBy Dave Lott, a retail payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed