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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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February 10, 2020

Slowing Down the Mule Train

Slowing down the money mule train, that is. Money mules are those individuals who transfer money or goods received through fraudulent schemes on behalf of or at the direction of a criminal enterprise, often based outside the United States. It's a form of money laundering.

In December 2019, the FBI announced it was collaborating with other domestic and international law enforcement agencies to identify, stop, and prosecute major money mule networks. Two months later, it claimed that the operation had stopped the illegal actions of more than 600 domestic money mules—a 50 percent increase in their success rate over the entire previous year. (The U.S. efforts coincided with the European Money Mule Action, led by Europol, the European Union's agency that combats crime and terrorism.)

So who are these money mules and how are they recruited? The money mules fall into two main groups: innocent participants and those people who are as criminal as the leaders of the fraud schemes. It's the money mules who take the greatest risk; the leaders of the schemes use them to insulate themselves from arrest and prosecution.

The first group, the naïve participants, are generally recruited through online ads, résumés submitted to mainstream job search sites, or emails promising work-from-home employment as a "payment processing" or "money transfer" agent. Upon being "hired," these people must provide their bank account information so that deposits can be made to their accounts. If the victims say they want to open a new account to process these transactions, the contact dissuades them from doing so because new accounts face additional scrutiny and restrictions. When a deposit is made, a mule has to transfer those funds, minus the "commission," to another bank account. That account is usually outside the United States so the transfer occurs through an international money transfer service. The mule might also be asked to purchase gift cards, load funds onto them, and then provide the card numbers and PINs to the contact. Individual transactions are generally under $10,000 to avoid the filing of currency transaction reports or suspicious activity reports.

Sometimes truly innocent participants are caught in a "cuckoo smurfing" scheme. In this scenario, someone's bank account credentials are compromised without that person's knowledge. The criminal deposits or transfers money into the account and quickly moves it over to another account. The innocent participant isn't aware of this transaction until he or she checks the account.

However, the vast majority of money mules are people who clearly know they are acting illegally. They are often part of local, national, or international gangs, and use the proceeds of money mule activities to fund other criminal activities.

While there have been a number of enforcement successes, including the effort announced by the FBI, the constant attention being given to this problem indicates it persists. Hats off to all the various law enforcement agencies involved in this money mule crackdown. Hopefully, the increased publicity will prevent individuals from unknowingly becoming part of these networks as well as highlight the scams used to victimize others. What other actions do you think will help curb this type of crime?

October 28, 2019

Should We Throw in the Towel When It Comes to Data Breach Prevention?

We've all heard it said—we've probably, cynically, said it ourselves: "It's not a matter of if but when your company will be hit by a data breach." Reports about cyberattacks and network breaches fill my daily newsfeed with headlines on ransomware attacks, attacks on multifactor authentication, and 5G network vulnerabilities. For each new, better, stronger, faster solution the industry comes up with, criminals find a way to circumvent it in seemingly short order. Is there anyone whose personal information hasn't been stolen once, twice, five times? I've lost count of how many times I've received six months of free credit monitoring.

In today's world, is there any way for an organization to fully protect itself against the broad spectrum of ever-evolving threats and still have time, resources, and capital left over to conduct its everyday business? Or should we assume that breaches are a foregone conclusion, throw in the towel when it comes to prevention, and turn our focus instead to incident response?

According to Verizon's 2019 Data Breach Investigations Report , small businesses were frequent targets of breaches. (The report looked at incidents occurring from November 1, 2017, to October 31, 2018.) Other findings it reported: outside actors perpetrated 69 percent of breaches, 52 percent were the result of hacking, and it took months or longer to discover 56 percent of the incidents.

Last year, I wrote about committing to muscle memory your organization's plan for the right of boom. A Google search on "data breach response" returns pages of results with guides, resources, and services, but the midst of a cyber-event is probably not the best time to come up with a plan. Turns out, there's an app for that! At a recent fintech conference, I saw a demo of a dynamic breach response solution that turns response into a routine business process. The company likens its app to "an airbag for network breaches" and claims the tool helps organizations prepare for, detect, and respond to data breaches. Another company demonstrated a white-labeled application for financial institutions that aims to reduce post-breach fraud and identity theft of consumers through algorithmic risk assessments that produce recommendations for actions to take to mitigate these risks.

National Cybersecurity Awareness Month bannerOctober is National Cybersecurity Awareness Month. It's a good time to review your own right of boom plan or take steps to implement one. One resource: the Department of Homeland Security's Cybersecurity Resources Road Map  for small and midsize businesses.

While it is not hyperbole to assert that criminals will breach your organization's network, you should not throw in the towel or lower your defenses against such threats. Rather, you should avail yourself of technological innovations to support breach prevention and response preparedness so your organization can restore normal business operations as quickly as possible. What approach has your organization taken to adopting threat prevention and response preparedness?

September 30, 2019

"Insuring" Ransomware Will Continue to Flourish

Making predictions is a dangerous game. More than two years ago, I predicted that 2017 and 2018 would be the Years of Ransomware. And while I am not willing to admit that I completely missed out on that prediction, it does appear to be a bit short-sighted. If I could go back to May 2017, I would also include 2019 in my prediction. According to the insurance firm Beazley, ransomware attack notifications from clients increased by 105 percent in the first quarter of this year compared to the first quarter of 2018, and the average ransom demand increased to $225,000 from $116,000 during the same period. My colleague Dave Lott wrote two blogs in July highlighting the changing nature of ransomware attacks and suggesting ways to avoid them or minimize their impact.

In just the few weeks since Dave's posts were published, ransomware attacks have continued to flourish. On August 16, 22 Texas municipalities and agencies were hit by an apparent coordinated attack. On August 26, a cloud management provider for the dental industry was stricken with ransomware, impacting approximately 400 of its dental clients. And over Labor Day weekend, a small Pennsylvania school district was attacked.

In both of his posts, Dave noted that law enforcement officials urge ransomware victims not to pay ransom because doing so encourages criminals to continue. Moreover, there is no guarantee that they will send the decryption keys. Ultimately, the decision of whether or not to pay a ransom lies with the organization that has been attacked and its unique situation. The ransom payment dilemma was recently featured in the Wall Street Journal's September 18 Cybersecurity Journal Reports section. Two cybersecurity experts debated whether or not cities affected by ransomware should succumb to the criminals' demands for payment.

But now an interesting twist in ransom payments has emerged: who is making the ransom payment, the attacked organization or an insurance company?

In his last ransomware blog, Dave wrote that entities should evaluate their "cybersecurity insurance policy in terms of its ransomware coverage." This brings us to an interesting question: Are insurers making ransom payments on behalf of their clients under cybersecurity insurance policies? The answer is yes. So this begs a couple of other questions: Will insurers paying ransoms on behalf of ransomware victims guarantee that ransomware attacks will continue? And could they lead to larger ransoms? I believe the answer to both questions is a resounding yes. It's not my place to debate whether or not insurers should be in the business of paying ransoms, but continuing the practice could cause ransomware attacks to continue to flourish.

July 22, 2019

Ransomware Attacks Continue

Ransomware attacks have only continued since I addressed the problem in a recent post, and they've continued to target municipal and state agencies. Riviera Beach (May) and Lake City (June), both in Florida, were successfully attacked. Lake City paid a bitcoin ransom of approximately $470,000 while Riviera Beach paid about $600,000, also in bitcoin. These attacks took place soon after the one in Jackson County, Georgia, whose government paid $400,000 for decryption keys. While law enforcement officials recommend that victims not pay ransom for fear that doing so encourages the criminals to continue their attacks, the affected agencies often view paying the ransom as a cost-effective way to restore operations as soon as possible. Moreover, Lake City and Riviera Beach were both insured against such attacks, with a $10,000 and a $25,000 deductible, respectively. It appears that in all three of these instances, when they got their ransom, the criminals supplied the necessary data that allowed officials to regain control of the systems.

So how can governments, schools, hospitals and doctors' offices, financial services, and consumers best protect their systems from these nefarious attacks? It's not easy—criminals are constantly developing new malware to get into systems. However, here are some critical guidelines from IT security professionals that can help us all avoid or minimize the impact of a ransomware attack.

  • Perform data backups at least daily, and keep at least one backup copy offsite or on portable storage devices not connected to the network.
  • Avoid using end-of-life operating systems and software that cannot be updated to address known vulnerabilities.
  • Install software updates and security patches as soon as possible, and follow established change control guidelines.
  • Evaluate segmenting your network into separate zones to minimize the spread of a ransomware infection.
  • Train and test employees regularly about how criminals use phishing attacks to load malware onto computers that can then compromise system access credentials.
  • Require employees to use strong passwords.
  • The IT security community is divided about how frequently passwords should be changed, but do so at least every six months.
  • Maintain comprehensive access controls so that only the employees that require access to individual system have such rights, especially regarding remote access.
  • Use reliable security software and, as the second bulleted item recommends, keep it updated. Evaluate adding special trusted anti-ransomware tools, some of which are free.
  • Evaluate your cybersecurity insurance policy in terms of its ransomware coverage.

In addition, every agency and organization should develop a ransomware response plan that can be implemented as soon as an attack has been detected. While the immediate focus should be on minimizing the impact of the attack, elements for business continuity, law enforcement notification, media communications must also be part of the plan.

We hope you won't be a victim, but simply keeping your fingers crossed isn't an effective plan.

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