Ramblings & ephemera

Stolen credit card data is cheaper than ever in the Underground

From Brian Krebs’ “Glut of Stolen Banking Data Trims Profits for Thieves” (The Washington Post: 15 April 2009):

A massive glut in the number of credit and debit cards stolen in data breaches at financial institutions last year has flooded criminal underground markets that trade in this material, driving prices for the illicit goods to the lowest levels seen in years, experts have found.

For a glimpse of just how many financial records were lost to hackers last year, consider the stats released this week by Verizon Business. The company said it responded to at least 90 confirmed data breaches last year involving roughly 285 million consumer records, a number that exceeded the combined total number of breached records from cases the company investigated from 2004 to 2007. Breaches at banks and financial institutions were responsible for 93 percent of all such records compromised last year, Verizon found.

As a result, the stolen identities and credit and debit cards for sale in the underground markets is outpacing demand for the product, said Bryan Sartin, director of investigative response at Verizon Business.

Verizon found that profit margins associated with selling stolen credit card data have dropped from $10 to $16 per record in mid-2007 to less than $0.50 per record today.

According to a study released last week by Symantec Corp., the price for each card can be sold for as low as 6 cents when they are purchased in bulk.

Lawrence Baldwin, a security consultant in Alpharetta, Ga., has been working with several financial institutions to help infiltrate illegal card-checking services. Baldwin estimates that at least 25,000 credit and debit cards are checked each day at three separate illegal card-checking Web sites he is monitoring. That translates to about 800,000 cards per month or nearly 10 million cards each year.

Baldwin said the checker sites take advantage of authentication weaknesses in the card processing system that allow merchants to conduct so-called “pre-authorization requests,” which merchants use to place a temporary charge on the account to make sure that the cardholder has sufficient funds to pay for the promised goods or services.

Pre-authorization requests are quite common. When a waiter at a restaurant swipes a customer’s card and brings the receipt to the table so the customer can add a tip, for example, that initial charge is essentially a pre-authorization.

With these card-checking services, however, in most cases the charge initiated by the pre-authorization check is never consummated. As a result, unless a consumer is monitoring their accounts online in real-time, they may never notice a pre-authorization initiated by a card-checking site against their card number, because that query won’t show up as a charge on the customer’s monthly statement.

The crooks have designed their card-checking sites so that each check is submitted into the card processing network using a legitimate, hijacked merchant account number combined with a completely unrelated merchant name, Baldwin discovered.

One of the many innocent companies caught up in one of these card-checking services is Wild Birds Unlimited, a franchise pet store outside of Buffalo, N.Y. Baldwin said a fraudulent card-checking service is running pre-authorization requests using Wild Bird’s store name and phone number in combination with another merchant’s ID number.

Danielle Pecoraro, the store’s manager, said the bogus charges started in January 2008. Since then, she said, her store has received an average of three to four phone calls each day from people who had never shopped there, wondering why small, $1-$10 charges from her store were showing up on their monthly statements. Some of the charges were for as little as 24 cents, and a few were for as much as $1,900.

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