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Can Banks Shift Phishing Losses to Customers?
Posted by
Zonk
on Fri Sep 15, 2006 05:16 PM
from the gee-that'd-be-great dept.
from the gee-that'd-be-great dept.
1sockchuck writes to mention a Netcraft article wondering who should bear the brunt of phishing costs. A group of customers with the Bank of Ireland recently had $202,000 drained from their accounts by phishers. The bank initially resisted the request to refund their money, but allowed it after a suit was threatened. From the article: "The Bank of Ireland incident is one of the first public cases of a bank seeking to force phishing victims to accept financial responsibility for their losses, but it likely won't be the last. Phishing scams continue to proliferate, as Netcraft has blocked more than 100,000 URLs already in 2006, up from 41,000 in all of 2005. Financial institutions continue to cover most customer losses from unauthorized withdrawals. But after several years of intensive customer education efforts, the details of phishing cases are coming under closer scrutiny, and the effectiveness of anti-phishing efforts taken by both the customer and the bank are likely to become an issue in a larger number of cases." So, should a bank be forced to pay back a customer who has lost money to phishers? Or is it ultimately the customer's responsibility to make educated use of technology?
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News: Phishers Defeat Citibank's 2-Factor Authentication 233 comments
An anonymous reader writes "Crypto experts and U.S. Government regulations (FFIEC) have been pushing the need for financial Web sites to move beyond mere passwords and implement so-called "two-factor authentication" — the second factor being something the user has in their physical possession like a token — as the answer to protecting customers from phishing attacks that use phony e-mails and bogus Web sites to trick users into forking over their personal and financial data. According to a Washington Post Blog, 'SecurityFix,' phishers have now started phishing for the two-factor token ID from the user as well. The most interesting part is that these tokens only give you one minute to log in to the bank until that key will expire. The phishers employ a man-in-the-middle attack against the victim and Citibank to log in via php and conduct money transfers immediately when logged in." (An update to the blog entry notes that the phishing site mentioned has since been shut down.)
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I do what I can to the phishers (Score:4, Interesting)
The banks with the helpful "report here" links also typically have helpful auto-responders, and their sites and form letters at least make it seem like they care about security. The banks who make it hard to hear from their customers usually don't reply at all. If I were shopping for a new bank, I'd definitely stay away from those that don't have an easy-to-find contact point near the front of their site. I get the impression they do not take security or phishing threats seriously at all. They'll probably be the ones that would fight their victims.
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I used to do that about spam......in 1992. Seriously, where do you find the time?
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Re:I do what I can to the phishers (Score:4, Insightful)
That, and every dollar the banks lose, ultimately if it isn't paid for by the scammed, it is paid for by EVERYONE ELSE, in the form of fees, insurance, taxes, and service charges.
So if you don't help stop the problem, you will pay for it in one way or another.
Parent
Read your bank's TOS lately? (Score:4, Interesting)
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Re:Read your bank's TOS lately? (Score:4, Funny)
The funny part is, when I asked the branch manager what could be done, he tole me, "Just don't give your account number to anyone." Basicly, he told me to never use any checks from my account, because ALL OF THEM HAVE MY ACCOUNT NUMBER! If I write a check to someone, he can then take the check, go onto the Internets, and sign up for pron using CCBill and the account number at the bottom of my check.
Thanks Mr. Manager!!
Parent
Same here (Score:3, Insightful)
Re:I do what I can to the phishers (Score:5, Insightful)
Otherwise, I could print a book of checks for your account and write checks, and it'd be your fault for giving me the info to make that possible (even though a check is sufficient info).
The bank promises that only transactions actually authorized by you will be applied. The fact that someone has figured out how to trick the bank in to thinking they're talking to you does not imply that you authorized the transactions, although what you did might be exceptionally stupid.
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Re: (Score:3, Interesting)
Trick????
I'm a call center engineer for a large financial institution. Guess what they do to verify you are who you say you are? They ask questions. They ask for the same information people enter into the phishing sites.
They require 3 pieces of information. (Mother's maiden, DOB, SSN, etc). Once the caller answers those questions, they HAVE TO treat th
I say, "Yes. Yes they should." (Score:4, Insightful)
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You haven't done anything wrong, neither has the bank. How are phishing emails different than, say, somebody calling you on the phone pretending to be from your bank's credit card department? If you fall for it, who should be responsible? The customer for not being more careful? The bank for not making it more difficult for people to impersonate customers (and at the same time making it more difficult for honest people to
Re:I say, "Yes. Yes they should." (Score:5, Insightful)
Given a few large lawsuits, banks will probably have to sign up for fraud insurance. But if their insurers set their rates based on an assesors' estimate of their security, it'll be in their best interests to improve security to get the cheapest policy possible.
It's how the civil court system and capitalism are supposed to work, anyway. It may just take time (and no freakin' governmental interference by passing "tort reform" limiting the banks' liability, otherwise there will be no financial incentive at all.)
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Re: (Score:3, Interesting)
I think you're not understanding the concept of phishing. Phishing is where scammers pretend to be a bank or whatever so someone will give them their bank account information. It has nothing whatsoever to do with the bank's security. It doesn't
Re:I say, "Yes. Yes they should." (Score:5, Insightful)
Should it really be possible to drain somebody's account using only their account number & routing number ? Both of those pieces of information are available to anybody you give a check to for a start. Now tell me this isn't a security issue.
Parent
Re:I say, "Yes. Yes they should." (Score:5, Insightful)
Of course it's a security issue. All I need to do to is get your account number and the banks routing number and I can initial an ACH electronic funds transfer against your account. There is no sort of security in place where you can whitelist banks/accounts for initiating an ACH against your account.
Now you might say it's the customers job to better protect their info. Well guess what. You're in line at the grocery store writing out your check. See me behind you in line talking on the cell phone? Guess what...I'm not actually on the phone. I just used my camera phone to snap a photo of your check, which contains ALL of the information I'd need to get the bank to do an ACH transfer out of your account.
Now tell me...does that still not sound like a security issue?
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Not much. When a bank calls, Caller ID should show bank's name rather than "Private Caller" from some call center in India. When a bank sends an e-mail it should be digitally signed. My credit card should generate (say, with a keypad and LCD) one time use authorization numbers based on the charge amount. As long as the bank doe
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Won't seek a refund for $200k loss???
Bill, is that you?
Re:I say, "Yes. Yes they should." (Score:4, Interesting)
Two factor would make phishing harder, but what we really need is better built-in browser support for two factor auth as an extension to the HTTPS protocol.
In an ideal world, the browser supports two factor auth for access to the website via http auth, but would put up a warning that says "WARNING: Your password is being sent insecurely. (Send Anyway) ((Cancel))" if the connection is not encrypted with a properly signed cert. This authentication should require you to key in your account name, pin number, and password in separate fields and should be displayed by the browser, not as a web page that can be faked. By so doing, you basically eliminate the possibility of a phishing attack using an unencrypted channel that looks like the encrypted channel enough to fool someone into giving up the needed information.
With that single change, you have a solution that will dramatically reduce phishing attacks, as it requires the phishers to have a legitimate signed SSL cert, which means there is (in theory) a solid paper trail leading back to them. Phishing expeditions that involve SSL are very, very rare by comparison to the unsecured versions, require a much greater financial investment, are much more likely to result in a successful arrest and prosecution (because of the paper trail from obtaining the cert and the requirement that such certs are tied to a valid domain name, both of which make it harder to use hijacked machines as servers).
Unfortunately, it's a chicken and egg problem. The browser vendors probably won't add such authentication mechanisms into the browsers unless sites want it, and banking sites aren't willing to spend money on two-factor devices unless they provide a tangible benefit (and without such browser support, they really don't).
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Fools and their Money 2.0 (Score:3, Insightful)
ID theft? Yes.
Fraud? Yes.
Phishing? Man, I dunno -- seems to me that if you get suckered into giving someone your account information, that's kind of your own problem. It's not Paypal's fault if you actually believed that the poorly-worded email you got was actually from them because it had their logo someplace on it.
On the other hand, this sort of thing could also seriously undermine the confidence that people have in online transactions and the like, so I can't help but wonder if maybe it isn't shortsighted not to just take the hit.
Re:Fools and their Money 2.0 (Score:5, Interesting)
I like that idea a lot! Use a sessionID-named folder for any URLs that have bank logos, and any requests for logos that use an expired session ID would return an image of a stopsign with the text: "STOP - ERASE ANY PERSONAL INFORMATION FROM THIS PAGE - THIS IS A FRAUDULENT WEBSITE!!! SOMEONE IS TRYING TO STEAL YOUR MONEY!!!"
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Re:Fools and their Money 2.0 (Score:5, Interesting)
Another approach that I think would work well for financial institutions is to make it unequivocally clear that they will never never ever in a million years contact their customers by any method besides snail mail. The customer should be required to sign a sheet saying they understand this before they are allowed to open an account, and it should be the responsibility of the financial institution to make sure that the customer is TOLD this, not just handed a piece of fine print to sign. I have been using online banking at 3 different institutions for approximately 5 years, and I am absolutely sure that in that time I have never recieved any e-mail from them for any reason. Paypal on the other hand... I've gotten both legitimate email and phishers.... so I just blacklist anything with paypal in the subject or content. Sure, it means they have no way to get ahold of me besides snail mail, but they shouldn't need to.
But, perhaps I am a little too idealistic...
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Re: (Score:3, Informative)
Email alerts from banks can be very useful as well. Such as alerts of low balance or overdraft, or even unusual activity. If someone pulled a bunch of money out of my account and I don't hear about it till I get a letter in the mail days letter, by that
No (Score:3, Interesting)
No
If they did so, then all you'd have to do would be to set up a phishing site, be a victim of your own phishing and then be payed back by your bank.
That, and also, blah blah people blah blah stupid blah blah genetic pool blah.
"Can Banks Shift Phishing Losses to Customers?" (Score:5, Insightful)
"Can Banks Shift Phishing Losses to Customers?" asks the headline.
Of course. The customers are going to pay for all losses; the correct question is, will banks make the individual who made a foolish decision pay for his mistake, or will they make all of the customers (like me) pay, in the form of reduced interest payouts, higher lender rates, increased fees, etc.?
You don't really think the bank is going to create money to pay for the losses, do you? Make no mistake about it--banks, like every other convenient, abstract legal fiction--don't pay for anything. Individuals pay for things.
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Knowing my clients (Score:3, Interesting)
My $0.02 (no pun intended) (Score:4, Interesting)
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Damn - Here goes a wasted mod point, but I consider this point so insightful, I must reply.
I know people who, even in the current environment where banks bear the vast majority of the pain for most financial fraud, refuse to keep their money in the bank. They currently fall in the minority, but do exist. And not just fogies and Luddites - I know a 26YO EE who has no cre
Banks. (Score:5, Insightful)
By putting in place technology that doesn't sufficiently protect the reasonable person from fraud the banks bring the liabilty to themselves. The reason you put money into the bank and pay fees is to prevent unauthorized persons from accessing your money and to provide insurance against such a loss. It is the banks job to put in-place controls and cover the losses that arise from insufficient controls. It is a balancing act between what the consumer wants to put up with in security and what they want to pay for service. It is the banks job to find the equilibrium between the cost of increased controls and the cost of fraud. After all it is the bank not the consumer who is offering the service of withdrawl over the internet.
A good step in the right direction might be two factor authentication.
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Personally, Im all for banks charging phishing victims for the losses - many dont cover fraud resulting from the customer failing to take appropriate measures to protect their card details, how is failing to protect their login details any different?
incentives (Score:3, Insightful)
If you want to take away the incentive to fix the problem from the party that has the most control of the security system, the customer should pay.
Bands & Customers should exercise due diligenc (Score:4, Insightful)
Now, why aren't flags raised when $30,000 is taken out of a bank account electronically from an unusual location? A phone call to the account holder would be nice.
By analogy, if someone forges a check, and signs my name, and the bank cashes that check, the bank is on the hook for the cash. Also, if someone lies about their identity, and the bank doesn't verify their identity, they are also on the hook for the check. The same should be true with online transactions.
If European banks and governments wont protect customers from fraud, online purchases will be doomed.
Re:Bands & Customers should exercise due dilig (Score:3, Interesting)
I actually know someone who fell for a phishing email. The bank called him up the next day, and asked if he had authorized two $700.00 transfers to out-of-country accounts. He said "no." and they dutifully marked it as fraud. So apparently (some) banks do monitor transactions and flag anything that looks strange.
Similarly I've often had my
Its the Phisers who should pay! (Score:5, Insightful)
The rational answer should be that law enforcement should persue the criminals and put a freeze on their accounts and seek retribution in monetary and jailtime punishments.
Seriously, if we can find and freeze "terrorist" accounts, how hard is it to track where this money goes?
I mean Phishers have to get it from a bank or ATM somewhere.
Why don't the bank simply reverse the process and force other banks to freeze the accounts? What is preventing them?
How Phishing Works (Score:3, Interesting)
You underestimate the problem. Phishing is actually a two-pronged attack -- or at least this is my experience in Australia. (Not that I've fallen victim, but I've conversed quite a bit with those that have.) The first prong of the attack is the fake bank message and website that we all know and loathe. The second prong doesn't even look remotely related: it's usually an employment scam, like the Norway Consulting Employment Scam [wa.gov.au] which is arriving in my inbox with tedious regularity.
This is how it works. Ph
not true: "morons get what they deserve" (Score:5, Insightful)
so yes, the people who fall for phishing schemes are stupid. but no: they do not deserve what happened to them. the punishment they receive (losing all of their funds) is not commensurate with the mistake they made. if i get in the car with a drunk driver, i am stupid. but do i deserve to get paralyzed for life in the accident that happens for my mistake? no. so do you laugh and call me a moron or grieve at my infirmity?
whether you laugh or grieve at me is more revelatory about your own immaturity. because god forbid you ever make a little mistake in your life and suffer drastically for the consequences, right? that can never happen to you, right? yes: stupid mistakes have negative consequences. but if the negative consequences are way out of proportion to the error, you should not be so dismissive, you should demonstrate some compassion, or justice really isn't your motivation. if drastic punishment from a simple mistake happens to you, you're just going to suck it up and move on without complaining one bit, right?
well... experience teaches me that those laughing hardest at those horribly punished for simple mistakes are also those who whine the loudest when they become victimized the same way. so yes, banks should pay for phishing schemes, and everyone here shouting "you get what you deserve" are not speaking from a position of concern for justice. they are speaking from just sort of a smug hypocritical contempt for simple human fallibility. which they apparently imagine themselves immune from, out of simple ignorance at how cruel crime can be, and how fickle fate can be
Of COURSE the banks should make good (Score:5, Insightful)
(1) Somebody gets your account information. (Possibly through phishing, possibly just by rummaging through your mail).
(2) They wire money out of your account.
(3) They move the money someplace where it cannot be retrieved.
The problem is in step 2. The banks make absolutely no verification that a transfer is authorized. When I walk into a branch, I can't just pull money out of my account without first verifying who I am. When I write a check, the bank (at least in theory) is supposed to verify that the signature on the check matches the one they have on file. But, there is no similar verification when my account is electronically drafted.
The banks are basically betting that they'll lose less money through fraud than it would cost them to implement security on the back end. It's a calculated risk on their end. If their customers had to pay for the fraud, there would be NO incentive for them to improve security.
Incidently, the comment that "the customers pay for it anyway" is only partially right -- customers pay for part of it through reduced interest rates and so on, but some of it also comes out of the bank's profits. Banks are generally in a competitive market and as long as there are alternatives for savings (e.g. brokerage houses), the market dictates the interest rates paid by the bank.
Bank of Ireland has extremely bad security! (Score:3, Informative)
Bank of Ireland, on the other hand, uses just a lame 6-digit password, your contact phone number and a 6-digit account number. Very lousy security there. I definitely don't feel safe using their internet banking facilities. Even 8 years ago my Dutch bank modem service already used 2-factor auth.
So, yes, I feel that in this case BOI is completely to blame for this.
Advertising (Score:3, Funny)
yes, it's the bank's problem (Score:4, Insightful)
If someone forged your driver's license and went to the bank to withdraw your money in person, it's the bank's fault for giving it to them. Same principle should hold for online transactions. If the bank gives the wrong person your money, it's not your problem.
If the liability moves to customers, the banks won't have any incentive to improve security. Worse, the bank will start blaming you for breeches that are completely their fault. The bank will claim you didn't protect your password when their systems are comprised and your account is drained.
The bank is in a better position to do something (Score:5, Insightful)
For example, the company I work for is concerned about phishers stealing user accounts, by emailing links to pages that look like our corporate signin page (used for many properties in many locations, so commonly encountered on various sites by our employees.) As individual users, it was extremely difficult to tell whether the page being logged into was legitimate or not; so, the company now uses a cookie to identify you as an employee, and embed your picture (from the company's internal records) into the login page. If there's no picture of you, it's not legitimate.
Is that foolproof? No, because other employees could get your photo and fake the login page. It certainly narrows it down to internal employees and contractors, however, and it's a step that individual employees could never have taken on their own.
Similarly, imagine if ATM cards didn't have PINs, and possession of the card was enough to withdraw money from remote locations. Individual users couldn't do much about this, other than hold onto their card for dear life, but the banks could easily implement PIN codes so that theft of the card did not automatically enable theft of account monies.
Again, is that foolproof? No, because some people write their PINs on their cards (duh) and some people manage to set up "fake" ATMs to collect card swipes and PINs. However, banks now use the unique identifier on the card to access the customer's name and display it before the PIN is punched -- no name means you probably shouldn't use the machine. Again, another step (still not foolproof) that individual users couldn't enact on their own.
If a bank makes a service available, they are the ones in good position to improve the security of that service, and at some point the bank actually hands over the money based on their own assurance that the person using the service is who they say they are, using whatever method the bank provides. All of this is up to the bank, not the user, and so they should carry the liability -- if not, they can always opt to avoid providing those services that they cannot successfully protect.
Does this absolve the users of all responsibility? No, but there are still lots of stupid things users can do -- and shouldn't -- that cause them to lose money that the bank doesn't -- and shouldn't -- have to reimburse.
I guess you can think of it like this: if a bank's machine gives out money to the wrong person, it's the bank's fault -- and if the bank's machine gives out money to the right person, who is then mugged within half a second of the transaction, it's the user's fault.
We ALL have to take responsibility (Score:3, Interesting)
Financial institutions have the responsibility to protect us from unauthorized access to our accounts. It should then be the burden of the institution to show that the account holder was at fault.
However, We ALL have to take responsibility
As a consumer,
1) never enter personal information in response to e-mail initiated requests, etc. 2) report suspicious emails, websites, etc. 3) Use common sense (nevermind, that'll never work)
As for the banks,
1) Provide security measures to reduce chances of phising losses; while authentication is not perfect, it's a decent start (althoug I find it pretty annoying) 2) Educate their customers 3) Need to offer an easy, user-friendly way to report phishing (PayPal does a good job of this) 4) Make their policies clear; if they won't cover losses due to phishing attacks, we should know before putting our money in their hands 5) If they can't sustain the losses, then they need a new business model; what do banks do with those $30 fees that they love to ambush everyone with
Now the Government,
1) NEEDS TO PROSECUTE OFFENDERS by enforcing existing laws; it's amazing how apathetic the authorities are towards identity theft, etc. 2) Ensure laws are adequate for protecting consumers and prosecuting offenders 3) Educate the people
Bruce Schneier gets it right again... (Score:5, Insightful)
In a Wired article from last year [wired.com], Bruce Schneier said some very sensible things on this subject:
I think this is absolutely right. Faced with the financial losses of phishing, banks will simply institute procedures, technologies and processes to protect against fraudulent financial TRANSACTIONS. Doubtless, banks will gripe and complain about their new liability. But it was exactly this same liability that made personal credit cards viable - and gave birth to a multi-billion dollar industry.
-Sean
Bruce Schneier obviously isn't in financial IT. (Score:3, Insightful)
As most of you probably know, banks make money by earning a small amount of money on each of a lot of transactions. $3 million worth of loss takes a LOT of transactions.
Every time some fraud scheme comes up on Slashdot, eve
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Re:Maybe... (Score:5, Interesting)
Well, I can think of some. For example, a friend of mine got his debit card copied. He couldn't have prevented it, Arco got their computer systems compromised and all the debit-card numbers and PINs used at their at-the-pump readers stolen, and he happened to have used his card at an affected Arco station. But the bank could've easily stopped his account from being emptied. He'd made a card-present, ID-presented, signature-obtained transaction in San Jose, CA. 4 hours later, his card was used at an ATM in Thailand and his account emptied in $100-200 increments, it took quite a few transactions to completely drain his account. Now, any basic security profiling should've raised red flags: he's never used his card outside the US, these are cash withdrawals in a country that's known as a source of financial fraud, and it's physically not possible for a person to have gotten from San Jose to Thailand in 4 hours. All the bank would've had to do is refuse that first ATM withdrawal with a message to contact his bank and that would've been the end of the theft before it began. But they allowed all those transactions without questioning them. That's definitely not reasonable care on the part of the bank.
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