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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.

Take On Payments

October 15, 2018


An Ounce of Prevention

Benjamin Franklin coined the phrase "An ounce of prevention is worth a pound of cure," and after attending late September's FinovateFall 2018 Conference in New York City, I find this aphorism as relevant today as it was in 1735. The conference showcased 80 demonstrations of leading-edge financial technology over two days with presenters representing five continents. Demos touched on a wide range of technologies and solutions, including game-based marketing and financial education; "lifestyle" mobile banking applications that integrate social media, news, e-commerce, and financial management to deliver personalized recommendations; lending and home buying; and integration with intelligent personal assistants. What stood out to me most were the many possible technologies offered to authenticate users, cards, and mobile transactions, each with the potential to prevent payments fraud.

As card payments continue to dominate consumer transactions in the United States, usage is increasing in other countries, and remote purchases gather steam, the demand for fast, reliable identity and payment authentication has also grown. So has the even greater demand from consumers for frictionless payments. But how does technology reward the good guys, keep out the bad ones, and prevent cart abandonment or consumer frustration? Here are just a few examples of how some of the fintech companies at the conference propose to satisfy these competing priorities.

SMS—While one company proclaimed that SMS was designed for teenagers and never intended for use as a secure messaging means, another proposed a three-factor authentication method that combined the use of a PIN, Bluetooth communication, and facial recognition via SMS sent to account holders to identify a possible fraud event in real time. Enhancing this technology was artificial intelligence that analyzes facial characteristics such as smiling or frowning.

Biometrics—Developers demonstrated numerous biometrics options, including those using unique, multifactor, non-gesture-based biometric characteristics such as the speed and pressure we use to swipe our mobile devices. Also demonstrated was the process of linking facial recognition to cards for both in-person and e-commerce purchases, as well as "liveness" tests that access the mobile phone's gyroscope to detect slight physical movements not present when a bot is involved. Another liveness test demonstrated was one in which people use their mobile devices to shoot videos of themselves reciting a number or performing randomized movements. Video content is then checked against identity verification documents, such as driver's license photos, that account holders used at setup. The developers noted that using video for liveness testing helps prevent fraudsters from using stolen photos or IDs in the authentication process.

Passwords—Some developers declared that behavioral biometrics would bring about the death of the password, and others offered services that search the corners of the dark web for compromised credentials. Companies presented solutions including a single, unique identification across all platforms and single-use passwords generated automatically at each login. One of the most interesting password technologies displayed involved the use of colors, emojis, numbers, and logos. This password system, which could be as short as four characters, uses a behind-the-scenes "end code," where the definition of individual password characters is unique to each company employing the technology, rendering the password useless in the event of a data breach.

As I sat in the audience fascinated by so many of the demos, I wished I could go to my app store to download and use some of these technologies right away; the perceived security and convenience, combined with ease of use, tugged at the early adopter in me. Alas, most are white-labeled solutions to be deployed by financial institutions, card networks, and merchant acquirers rather than offered for direct consumer use. But I am buoyed by the fact that so many solutions are abiding by the words of Ben Franklin and seek to apply an ounce of prevention.

Photo of Ian Perry-Okara  By Nancy Donahue, project manager in the Retail Payments Risk Forum  at the Atlanta Fed

 

October 15, 2018 in biometrics , cards , cybersecurity , emerging payments , fintech , innovation | Permalink | Comments ( 0)

October 1, 2018


Safeguarding Things When They’re All Connected

In a July 6 post, I discussed the explosive growth of internet-of-things (IoT) devices in the consumer market. I expressed my concerns about how poor security practices with those devices could allow criminals to use them as gateways for fraudulent activity. At a recent technology event for Atlanta Fed employees, Ian Perry-Okpara of the Atlanta Fed’s Information Security Department led an information session on better ways to safeguard IoT devices against unauthorized access and usage. Ian and I have collaborated to provide some suggestions for you to secure your IoT device.

Prepurchase

  • Visit the manufacturer's website and get specific product information regarding security and privacy features. Is encryption being used and, if so, what level? What data is being collected, where and how long is it being stored, and is it shared with any other party? Does the product have firmware that you can update? Does it have a changeable password? (You should avoid devices that cannot receive updates or have their passwords changed.) What IoT standards have been adopted?
  • Check with reliable product review sites to see what others have to say about the product’s security features.
  • If your home network router supports a secondary "guest" network, create one for your IoT devices to separate them from your more secure devices such as desktop and laptop computers and printers.

Postpurchase

  • Especially if your device is used or refurbished or was a display model, immediately perform a factory reset if it’s equipped that way in case someone has modified the settings.
  • Download the most recent firmware available for the device. Often, a newer firmware will become available during the period the merchant held the device.
  • Use strong password techniques and change the user ID and password from the factory settings. Use different passwords for each one of your IoT devices.
  • Register your device with the manufacturer to be notified of security updates or recalls.
  • Add the device to your separate network if available.

If you adopt these suggestions, you will have a secure IoT network that will minimize your risk of attack. Criminals will be much less able to take over your IoT devices for bot attacks or for going through them to gain entry into other devices on your home network. You do not want the criminals to get at personal information like your credentials to your financial services applications.

We hope this information will be helpful. If you have other suggestions to better secure your IoT devices, we certainly would like to hear from you.

Photo of Ian Perry-Okara  By Ian Perry-Okpara, an information security architect in the Information Security Department at the Atlanta Fed

 

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

 

October 1, 2018 in account takeovers , cybercrime , cybersecurity , data security , identity theft , innovation | Permalink | Comments ( 0)

September 24, 2018


Racing Ahead in the Wireless Space

This past Sunday, Eliud Kipchoge smashed the marathon world record at the Berlin Marathon, with a time of 2:01:39, shaving 1 minute 22 seconds off the previous world record. Though some running experts claim a marathon under two hours will never happen, I think elite runners will continue to push the speed envelope and we will witness a sub-two-hour marathon one day.

The marathon isn’t the only area where the speed envelope is being pushed. Another area, and the focus of today’s blog, is in the wireless space.

It was in 2002 when the first commercial 3G network launched in the United States. 3G made it possible for our phones to run applications using a global positioning system (GPS) or using videoconferencing, among other things. The second half of 2010 marked the first commercial launch of 4G in the United States, with many of the mobile network operators launching this service. 4G expanded on the speed of 3G and made it possible for consumers to access the web with their mobile devices, stream high-definition video, and connect Internet of Things devices.

Now, as we approach the fourth quarter of 2018, we are on the cusp of 5G networks, which will be 10 times as fast as our 4G networks. According to a recent Wall Street Journal article on 5G that sparked my interest in the topic, the speed of 5G networks will allow the proliferation of applications such as self-driving cars, virtual reality, and remote surgery. And this got me thinking, what impact will 5G have on the future of commerce, payments, and security?

I haven’t spent any time researching that last question, but no doubt there will be significant benefits and risks that 5G networks will introduce into retail payments. I can draw inspiration from one of my favorite cartoons, the Jetsons, and think ahead to what a Jetson house might look like in 2025: one that is filled with connected devices that communicate with not only us but also each other. Close your eyes and imagine a house with a robotic vacuum that communicates with a virtual home assistant when it needs new bags—and zero human interaction is needed in the process. Or imagine a vehicle that drives itself to the nearest gas station when the low-fuel light appears. Undoubtedly, this new faster-speed wireless world will create security threats that we have yet to face.

So as we at the Risk Forum think about the possibilities and new risks of a 5G world and its impact on commerce, payments, and security, what should we be paying attention to?

Photo of Douglas King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 24, 2018 in data security , emerging payments , innovation | Permalink | Comments ( 0)

September 17, 2018


Insuring against Business Email Compromise Fraud

In July, an FBI public service announcement reported that global losses from business email compromise (BEC) fraud exceeded $12.5 billion in the four-and-a-half years from October 2013 to May 2018. Important to managing any fraud is a good risk management strategy, as my colleague recently discussed. The table lists some of the strategies you can use to protect yourself against BEC.

Risk Management Strategy Elements Description Example
Avoidance Implement policies and procedures to avoid risk. Accept no payment transaction instructions via email.
Mitigation Use controls and policies to reduce risk. Require dual authorization for large-value payments.
Transfer Transfer the losses associated with a fraudulent event. Purchase an insurance policy.
Acceptance Budget for fraud losses and litigation/fines related to security incident. Maintain funds in a reserve account.

This post will focus on risk transfer—specifically, it will discuss some appellate court legal developments on insurance policies and coverage related to BEC scams. This post is not intended to offer legal advice but rather, by highlighting rulings in three recent cases, to illustrate some of the challenges associated with BEC scams and transfer strategies using insurance policies. The question is whether or not the computer fraud coverage in a commercial crime policy covers losses from social engineering fraud such as BEC or payment instruction fraud. Judgments in three recent cases have been mixed, one in favor of the insurance company and two others in favor of the compromised businesses.

In April, the Ninth Circuit Court of Appeals ruled that Aqua Star's losses stemming from payment instruction fraud, a type of BEC scam, were not covered under its computer crime insurance policy. In this case, a criminal posing as a vendor of Aqua Star duped an employee through email to change the vendor's bank account information. More than $700,000 was wired from the company to the criminal's account. The court found that, even though the criminal used electronic means to dupe the employee, the Aqua Star insurance policy did not cover the loss because an authorized employee accessed the company's systems and changed the wiring instructions.

In contrast, in July, appellate courts ruled in favor of two businesses that sought coverage from loss of funds to a BEC scam. In the first, a BEC scheme victimized Mediadata to the tune of nearly $4.8 million. An accounts payable clerk was tricked into wiring money into a criminal's account with an email that appeared to be from the company's president and a spoofed phone call that seemed to be from a Mediadata attorney. The Second Circuit Court of Appeals concluded that, in this instance, Mediadata was covered by its computer fraud policy because the fraudster used a computer code to alter a series of email messages to make them appear legitimate—even though Mediadata computers weren't directly hacked.

Then one week later, the Sixth Circuit Court of Appeals ruled in favor of American Tooling Center (ATC). This company was also victimized by a BEC scheme and lost more than $800,000. In this case, the money was wired to a criminal's bank account after the perpetrator intercepted emails between ATC and a vendor and then began impersonating the vendor. The court rejected the insurance company's argument that the losses were excluded because an ATC employee caused the loss by changing the payment instructions. Instead, the court determined that computer fraud does not require unauthorized access to a company's computer systems and that a company can claim a direct loss as a result of an employee being duped.

These cases show the difficulty in understanding what types of fraud losses might be specifically covered under your insurance policy since the courts do not always agree. Some insurance companies now offer separate BEC riders, which could prove valuable in the event you are a victim of this fraud. Because the crimes can result in significant losses, it is also important to know how much coverage is available under commercial crime policies, and imperative to ensure that the coverage is sufficient for losses that can arise from this type of fraud. Are you insuring your company from BEC fraud?

Photo of Douglas King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 17, 2018 in risk management | Permalink | Comments ( 0)

September 10, 2018


The Case of the Disappearing ATM

The longtime distribution goal of a major soft drink company is to have their product "within an arm's reach of desire." This goal might also be applied to ATMs—the United States has one of the highest concentration of ATMs per adult. In a recent post, I highlighted some of the findings from an ATM locational study conducted by a team of economics professors from the University of North Florida. Among their findings, for example, was that of the approximately 470,000 ATMs and cash dispensers in the United States, about 59 percent have been placed and are operated by independent entrepreneurs. Further, these independently owned ATMs "tend to be located in areas with less population, lower population density, lower median and average income (household and disposable), lower labor force participation rate, less college-educated population, higher unemployment rate, and lower home values."

This finding directly relates to the issue of financial inclusion, an issue that is a concern of the Federal Reserve's. A 2016 study by Accenture pointed "to the ATM as one of the most important channels, which can be leveraged for the provision of basic financial services to the underserved." I think most would agree that the majority of the unbanked and underbanked population is likely to reside in the demographic areas described above. One could conclude that the independent ATM operators are fulfilling a demand of people in these areas for access to cash, their primary method of payment.

Unfortunately for these communities, a number of independent operators are having to shut down and remove their ATMs because their banking relationships are being terminated. These closures started in late 2014, but a larger wave of account closures has been occurring over the last several months. In many cases, the operators are given no reason for the sudden termination. Some operators believe their settlement bank views them as a high-risk business related to money laundering, since the primary product of the ATM is cash. Financial institutions may incorrectly group these operators with money service businesses (MSB), even though state regulators do not consider them to be MSBs. Earlier this year, the U.S. House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing over concerns that this de-risking could be blocking consumers' (and small businesses') access to financial products and services. You can watch the hearing on video (the hearing actually begins at 16:40).

While a financial institution should certainly monitor its customer accounts to ensure compliance with its risk tolerance and compliance policies, we have to ask if the independent ATM operators are being painted with a risk brush that is too broad. The reality is that it is extremely difficult for an ATM operator to funnel "dirty money" through an ATM. First, to gain access to the various ATM networks, the operator has to be sponsored by a financial institution (FI). In the sponsorship process, the FI rigorously reviews the operator's financial stability and other business operations as well as compliance with BSA/AML because the FI sponsor is ultimately responsible for any network violations. Second, the networks handling the transaction are completely independent from the ATM owners. They produce financial reports that show the amount of funds that an ATM dispenses in any given period and generate the settlement transactions. These networks maintain controls that clearly document the funds flowing through the ATM, and a review of the settlement account activity would quickly identify any suspicious activity.

The industry groups representing the independent ATM operators appear to have gained a sympathetic ear from legislators and, to some degree, regulators. But the sympathy hasn't extended to those financial institutions that are accelerating account closures in some areas. We will continue to monitor this issue and report any major developments. Please let us know your thoughts.

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

September 10, 2018 in banks and banking , consumer protection , financial services , money laundering , regulations , regulators , third-party service provider | Permalink | Comments ( 0)

September 4, 2018


The First Step in Risk Management

One of the main objectives of information security is having a solid risk management strategy, which involves several areas: policy, compliance, third-party risk management, continuous improvement, and security automation and assessment, to name a few. This diagram illustrates at a high level the full cycle of a risk management strategy: adopting and implementing a framework or standards, which leads to conducting effective risk assessments, which then leads to maintaining continuous improvement.

Chart-image

One of the main objectives of information security is having a solid risk management strategy, which involves several areas: policy, compliance, third-party risk management, continuous improvement, and security automation and assessment, to name a few. This diagram illustrates at a high level the full cycle of a risk management strategy: adopting and implementing a framework or standards, which leads to conducting effective risk assessments, which then leads to maintaining continuous improvement.

There are more than 250 different security frameworks globally. Examples include the National Institute of Standards and Technology's (NIST) Framework for Improving Critical Infrastructure Cybersecurity, the Capability Maturity Model Integration (CMMI)®, and the Center for Information Security's Critical Security Controls. (In addition, many industries have industry-specific standards and laws, such as health care's HIPAA, created by the Health Insurance Portability and Accountability Act.) Each framework is essentially a set of best practices that enables organizations to improve performance, important capabilities, and critical business processes surrounding information technology security.

But the bad news is that, on average, 4 percent of people in any given phishing campaign open an attachment or click a link—and it takes only one person to put a company or even an industry at risk. Does your overall strategy address that 4 percent and have a plan in place for their clicks? The report also found that the more phishing emails someone has clicked, the more they are likely to click in the future.

So, outside of complying with legal and regulatory requirements, how do you determine which framework or frameworks to adopt?

It depends! A Tenable Network Security report, Trends in Security Framework Adoption, provides insight into commonly adopted frameworks as well as the reasons companies have adopted them and how fully. Typically, organizations first consider security frameworks that have a strong reputation in their industries or for specific activities. They then look at compliance with regulations or mandates made by business relationships.

This chart shows reasons organizations have adopted the popular NIST Cybersecurity Framework.

Improving-critical-infrasture-cybersecurity-graph

The study found that there is no single security framework that the majority of companies use. Only 40 percent of respondents reported using a single security framework; many reported plans to adopt additional frameworks in the short term. Close to half of organizations (44 percent) reported they are using multiple frameworks in their security program; 15 percent of these are using three or more.

This year, the Federal Reserve System's Secure Payments Taskforce released Payment Lifecycles and Security Profiles, an informative resource that provides an overview of payments. Each payment type accompanies a list of applicable legal, regulatory, and industry-specific standards or frameworks. Spoiler alert: the lists are long and complex!

Let me point out a subsection appearing with each payment type that is of particular interest to this blog: "Challenges and Improvement Opportunities." Scroll through these subsections to see specific examples calling for more work on standards or frameworks.

Organizations need choices. But having too many frameworks to choose from, coupled with their constantly changing nature and the fluid payments environment, can complicate the implementation of a risk management strategy. With so many choices and so much in flux, how did you manage with step one of your risk management strategy?

Photo of Jessica Washington By Jessica Washington, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 4, 2018 in consumer protection , cybercrime , cybersecurity , payments risk , risk management | Permalink | Comments ( 0)

August 27, 2018


Who Owns Your ATM?

Counting the number of ATMs in the United States has been a challenge since 1996, when independent operators (nonfinancial institutions) started deploying ATMs/cash dispensers. That was when Visa and MasterCard dropped their prohibition against surcharges. But a recent study sponsored by the National ATM Council largely overcame that challenge while also gathering some interesting results about the locational aspects of the independently owned ATMs compared to machines owned by financial institutions (FI).

The study was conducted earlier this year by a team of economics professors from the Department of Economics and Geography in the University of North Florida's Coggin School of Business. The study's primary objective was to determine whether the locations of independently owned ATMs and FI-owned ATMs were different in terms of demographics and socioeconomic status.

Using a database from Infogroup, the team identified 470,135 ATMs operating in 2016. About 41 percent of these were FI-owned, and the rest were independently owned. The majority of the independent ATMs are in retail establishments, with heavy concentrations in convenience stores, pharmacies, and casual dining locations.

FI owned ATMs Duval Median Household Income 2016 Independently owned ATMs Duval Median Household Income 2016
(Click on the images to enlarge.)

The research team plotted the locations of all the ATMs, overlaying demographic and socioeconomic data they obtained from the U.S. Census Bureau and its American Community Survey. Among the 10 main elements the researchers used were median age, unemployment rate, education level, household income, disposable income, and average home values.

They concluded that the independent ATMs "tend to be located in areas with less population, lower population density, lower median and average income (household and disposable), lower labor force participation rate, less college-educated population, higher unemployment rate and lower home values."

So what does this mean?

Well, it means that the independently owned ATMs are providing a vital service in rural and inner-city areas. Other studies—such as the Federal Reserve's Diary of Consumer Payment Choice—have shown that lower-income households (those earning less than $50,000) use cash as their primary method of payment. Therefore, these independent ATM owners are giving these households access to financial services that would otherwise be limited.

A post from December 2014 highlighted some of the challenges the independent operators were facing. Stand by for a future post that will provide an update on this part of our country's payment ecosystem.

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

August 27, 2018 in banks and banking , financial services | Permalink | Comments ( 0)

August 20, 2018


With Social Engineering, It Takes Only One

I recently wrote a post about the time I spent job shadowing in my employer's Information Security Department (ISD). One of the main objectives of the job shadow program is to allow ISD to introduce their communication, education, and outreach efforts to employees. This department works constantly to make employees aware of trending security threats, especially social engineering, and they have to do it in a way that gets the employees' attention. Creating a security-aware culture is critical because it takes just one employee, just one time, to cause a significant risk event. ISD has found that if they deliver messages in a fun way—such as an annual chili cook-off—more ears are open to hear them.

The Retail Payments Risk Forum follows social engineering trends closely since social engineering presents a major security risk and it directly affects payments. These attacks can easily open a gateway for criminals to access payment systems or any protected information system. Here's a quick review of social engineering: it relies on manipulating human behaviors through direct or indirect communication, and it does not necessarily involve technology. As computer security grows increasingly sophisticated, some criminals have found it can be easier to manipulate an individual than to game a machine. Some reports say that social engineering schemes have cost U.S. businesses nearly $3 billion since 2013. It's no wonder that social engineering is a growing concern.

A common social engineering attack is phishing, which is when the criminal uses an email that appears to be from a legitimate company to get people to respond with personal information such as account credentials. According to one company's report, phishing and pretexting in 2017 represented 98 percent of social incidents and 93 percent of breaches. (Pretexting often involves a scam whereby one individual lies to get personal information from another individual. A pretexter, for example, might pretend to be conducting a survey.) At 96 percent, email continues to be the most common vector. The good news is that 78 percent of people who were phished last year didn't open a single email, according to the same report.

But the bad news is that, on average, 4 percent of people in any given phishing campaign open an attachment or click a link—and it takes only one person to put a company or even an industry at risk. Does your overall strategy address that 4 percent and have a plan in place for their clicks? The report also found that the more phishing emails someone has clicked, the more they are likely to click in the future.

Psychological manipulation is a powerful tool to try to influence someone to divulge sensitive information. Since social engineer fraudsters need to reel in just one victim, we need to ensure that every single employee hears the message. Promoting security awareness scratches the surface in fighting social engineering, but it needs to be fun and creative constantly.

Look for one more post in this series describing my time in the job shadowing program in my employer's Information Security Department.

Photo of Jessica Washington By Jessica Washington, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

August 20, 2018 in cybercrime , cybersecurity | Permalink | Comments ( 0)

August 13, 2018


Protecting Our Senior Citizens from Financial Abuse

By all accounts, elder financial abuse appears to be a multi-billion-dollar problem. A 2011 New York State study found that, for every documented case of elder financial exploitation, more than 43 other cases went unreported. A 2015 report from True Link Financial estimates that nearly $17 billion is lost to financial exploitation, defined as the use of misleading or confusing language, often in conjunction with social pressure and tactics, to obtain a senior’s consent to take his or her money. According to the same report, another $6.7 billion is lost to caregiver abuse, which is deceit or theft by someone who has a trusting relationship with the victim, such as a family member, paid caregiver, attorney, or financial manager.

Over the last several months, Risk Forum members have had several conversations with boards and members of different regional payment associations. The topic of elder financial abuse and exploitation came up often. It has been over seven years since Take On Payments last explored the topic, so we are overdue for a post on the subject given both the interest from some of our constituents and new legislation around elder financial abuse recently signed into law.

With an aging baby boomer population representing the fasting growing segment of the population, awareness of the magnitude of elder financial abuse and an understanding of ways to identify and prevent it are critical to the well-being of our senior citizens. And that is exactly the intent of the Senior SAFE Act that on May 24 was passed by Congress and signed into law under Section 303 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Briefly, the act extends immunity from liability to certain individuals employed at financial institutions (and other covered entities) who, in good faith and with reasonable care, disclose the suspected exploitation of a senior citizen to a regulatory or law enforcement agency. The employing financial institutions are also immune from liability with respect to disclosures that these employees make. Before they were afforded immunity, banks and other financial-related institutions had privacy-violation concerns over disclosing financial information to other authorities. The new immunities are contingent on the financial institution developing and conducting employee training related to suspected financial exploitation of a senior citizen. The act also includes guidance regarding the content, timing, and record-keeping requirements of the training.

Massive underreporting of elder financial abuse and exploitation makes it difficult to estimate the amount of money lost. While the law does not require financial institutions to report suspected financial abuse and exploitation, it definitely encourages them to create employee educational programs by offering immunity. And those who know the Risk Forum well know that we are strong advocates of education. Elder financial abuse is a growing problem that must be tackled. How is this law changing your approach to reporting suspected cases of elder financial abuse and related employee education?

Photo of Douglas King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

August 13, 2018 in consumer fraud , consumer protection | Permalink | Comments ( 0)

August 6, 2018


The FBI Is on the Case

I recently took advantage of a job shadow program in our Information Security Department (ISD). I joked with our chief information security officer that I was ready to "ride along" with his detectives for our own version of the television drama series Crime Scene Investigations (better known as CSI).

All jokes aside, I enjoyed working with ISD as part of the team rather than as an auditor, a role I have played in the past. We spent a good part of the day walking through layered security programs, vulnerability management, and data loss prevention. Underneath these efforts is an important principle for threat management: you can't defend against what you don't know.

Threat investigations absolutely must uncover, enumerate, and prioritize threats in a timely manner. Digging into each vulnerability hinges on information sharing through adaptable reporting mechanisms that allow ISD to react quickly. ISD also greatly depends on knowledge of high-level threat trends and what could be at stake.

It turns out that many payments professionals and law enforcement agencies also spend a large part of their time investigating threats in the payments system. After my job shadowing, I realized even more how important it is for our payments detectives to have access to efficient, modern information-sharing and threat-reporting tools to understand specific threat trends and loss potential.

One such tool is the Internet Crime Complaint Center (IC3). The FBI, which is the lead federal agency for investigating cyberattacks, established the center in May 2000 to receive complaints of internet crime. The mission of the IC3 is two-fold: to provide the public with a reliable and convenient reporting mechanism that captures suspected internet-facilitated criminal activity and to develop effective alliances with industry partners. The agency analyzes and disseminates the information, which contributes to law enforcement work and helps keep the public informed.

The annual IC3 report aggregates and highlights data provided by the general public. The IC3 staff analyze the data to identify trends in internet-facilitated crimes and what those trends may represent. This past year, the most prevalent crime types reported by victims were:

  • Nonpayment/Nondelivery
  • Personal data breach
  • Phishing

The top three crime types with the highest reported losses were:

  • Business email compromise
  • Confidence/Romance fraud
  • Nonpayment/Nondelivery

The report includes threat definitions, how these threats relate to payments businesses, what states are at the highest risk for breaches, and what dollar amounts correspond to each crime type. This is one tool available to uncover, enumerate, and prioritize threats to the payment ecosystem. Do you have other system layers in place to help you start your investigations? If you don't know, it might be time for you to take a "ride along" with your detectives.

Photo of Jessica Washington By Jessica Washington, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

August 6, 2018 in consumer fraud , consumer protection , cybercrime , cybersecurity , data security , fraud , identity theft , risk management | Permalink | Comments ( 0)

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