I have been monitoring the case of Plainscapital Bank and Hillary Machinery since the news broke in November that more than $800K was apparently stolen from Hillary via the fraudulent initiation of wire transfers by criminals probably in Eastern Europe. Brian Krebs recently posted a nice update article, which provides the necessary background. In an ironic twist the bank has actually filed a suit against its customer, Hillary Machinery. What the bank is looking for from the court is a “judgment that its security procedures are commercially reasonable” and thus it should not be held responsible for the remaining unrecoverable monies. While I certainly can’t pretend to sit in judgment on this particular case, since likely only some facts are on the table, the case provides a good framework to discuss the key issue of what is a commercially reasonable level of security and who is primarily responsible for online security.
Some points I would like to make around this from a security professional’s point of view are:
- The primary responsibility for security should fall on the provider of the application or service, in this case Plainscapital Bank. Any security system whose function hinges on the user doing the right thing, is broken. The security system should always presume that the user will lose what should not be lost and will do and say what should not be done and said. Any important system, whether a spaceship, car, or security system, must start with the presumption that humans are unreliable.
- Was the bank in compliance with the FFIEC (a banking regulator) guidance published nearly 5 years ago that specifically addressed the security of online banking transactions? Quoting from this FFIEC report: “The agencies consider single-factor authentication, as the only control mechanism, to be inadequate in the case of high-risk transactions involving access to customer information or the movement of funds to other parties.” If the bank was only using single-factor authentication complemented by other compensating controls that totally depended on the user doing the right thing, then I think the conclusion on reasonableness becomes obvious.
- Multiple-factors of authentication – using an authentication factor that the user can’t wittingly or unwittingly “give away” – has been commercially available for many years. It doesn’t sound like the bank was using a more reliable system of user authentication. While there was some discussion in the article around having customers “register” their computer’s Internet address, presumably to act as another authentication factor, apparently this request was sent via email, which is not the most reliable system of communication. This approach also ignores the fact that Internet addresses can be easily spoofed and thus should not be significantly relied upon as a factor of user authentication. Security practitioners know that there are forms of multi-factor authentication that can be deployed without the user even knowing that it is happening.
- Risk-based authentication. Beyond multi-factor authentication discussed above many financial organizations use what is known as risk-based authentication to weigh the risk of certain on-line transactions (such as wiring large amounts of money) as measured by looking at certain factors, such as whether the customer is using his normal computer, the geographical location of the requester, how strongly the user has been authenticated, whether the financial counterparty is a new one or a long standing one for this particular customer, etc.
Based on what I have written above you can probably guess how I would rule if I were the judge on the case and the facts were as I assumed. The fact of life is that there are serious criminals out there trying to steal money from all of us. It is imperative that organizations remain vigilant and not rely on the users as their primary line of defense.