United States: Hackers And Phishers And Pretexters, Oh My!

On August 10, the FBI delivered a confidential memo to certain banks, warning of an imminent and sophisticated hacking plot using compromised ATM systems. Over the next few days, hackers breached an ATM network operated by a bank in India and siphoned off $11.5 million through 14,849 fraudulent ATM withdrawals in 28 countries in about 2 hours and $2 million in fraudulent bank transfers to China. This wasn't the first attack of this type on a financial institution and it will certainly not be the last.

With the scale, speed, and international scope of such an attack, we all might want to say, "Toto, I've a feeling we're not in Kansas anymore."

This type of attack is known as an "ATM cash-out" scheme or "unlimited operation" where hackers use malware to breach bank software and access customer card information. Once inside the organization, hackers can delete fraud controls, such as limits on daily withdrawal amounts. The hackers can then remotely instruct ATMs to disperse money at their control. They only need a local co-conspirator to physically pick up the money on a given day. The identity of the criminal on the ground can be protected, as the hackers are able to remotely dismantle the video cameras in the ATM while the cash is dispensed.

And community banks are particularly vulnerable. The FBI memo reportedly noted that, "Historic compromises have included small to medium-size financial institutions, likely due to less robust implementation of cybersecurity controls, budgets or third-party vendor vulnerabilities."

At least one community bank in Virginia is no stranger to this type of attack. In May 2016 and again in January 2017, Russian hackers allegedly stole a total of $2.4 million from a Virginia community bank in two separate ATM cash-outs. In each attack, hackers were able to infiltrate the bank's systems after an employee opened a phishing email. Hackers were then able to install malware, allowing them to disable and modify anti-theft and anti-fraud protections and daily withdrawal and debit card usage limits, and then use ATMs across the country to access funds from customer accounts.

Community banks should be proactive in hardening themselves and their employees against these "social engineering attacks." In its "2018 Data Breach Investigations Report," Verizon analyzed over 53,000 security incidents and found that an average of 4% of targets in any given phishing campaign will click on the bait. Given that just one click is enough to grant hackers access, 4% is far too high. Also troubling, Verizon reported that only 17% of phishing campaigns were reported, limiting the ability of companies to quickly warn employees of an ongoing phishing scheme. While these forms of attacks are not new, their ongoing success highlights the need for continuing attention and wariness, from the boardroom and C-suite down to line employees.

The Verizon report stated that phishing and pretexting represented 93% of all social breaches that it studied. Email was the most common form of attack. "Phishing" is a relatively familiar type of attack, usually sent via email, that encourages users to open a malicious link or attachment. Hackers can then distribute malware within the organization. "Pretexting," on the other hand, employs a false narrative and/or identity to obtain information or influence behavior. This generally includes interpersonal interaction (typically over the phone), often targeting employees in finance or human resources due to their access to information, where the criminal lies to obtain privileged information or access. Unlike phishing attacks that capitalize on urgency or even fear, pretexting attacks are based on establishing trust through a credible story.

Because the human factor remains a key weakness, protecting banks against these threats requires ongoing security awareness training at all levels. The Verizon report includes several breach prevention strategies, including, but not limited to, the following:

  • Providing role-specific education and training for users likely to be targeted based on their privileges or access to data, especially those with access to employee data (e.g., W-2s) or the ability to transfer funds;
  • Increasing employees' level of skepticism of inbound emails and telephone calls;
  • Conducting regular security training and routine security audits to help prevent successful phishing attacks and miscellaneous errors; and
  • Implementing strong authentication for at least the administrators of any web applications or databases – and preferably for all users in the organization.

In addition to bank-wide breach prevention training, there are other steps that boards and senior management should consider when assessing and managing phishing, pretexting and other cybersecurity threats, including:

  • Ensuring that the board has sufficient understanding of the nature of cybersecurity risks facing the bank and the policies, controls, procedures, crisis response plans and technology in place to manage such risks to permit the board to exercise effective oversight of management's day-to-day handling of cybersecurity issues;
  • Communicating clearly to management the scope, level of detail, and frequency of cybersecurity reports desired by the board;
  • Establishing policies for evaluating and mitigating cybersecurity risks posed by reliance on third-party service providers;
  • Providing adequate resources for the board and management to address cybersecurity concerns, including money, access to outside experts and – importantly – adequate time on the board's agenda and management's schedule to consider and discuss cybersecurity;
  • Considering cybersecurity expertise when assessing the board's collective strengths and weaknesses as part of the bank's ongoing evaluation of board composition;
  • Evaluating whether or not to obtain cybersecurity insurance and, if obtained, ensuring that the board and management has a clear understanding of the policy's coverage; and
  • For SEC reporting companies, implementing disclosure controls and procedures that provide for adequate disclosure of cybersecurity risks in periodic reports.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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