What are the social costs of contactless fraud?

Contactless payments are in the news again: in the UK the spending limit has been increased from £20 to £30 per transaction, and in Australia the Victoria Police has argued that contactless payments are to blame for an extra 100 cases of credit card fraud per week. These frauds are where multiple transactions are put through, keeping each under the AUS $100 (about £45) limit. UK news coverage has instead focussed on the potential for cross-channel fraud: where card details are skimmed from contactless cards then used for fraudulent online purchases. In a demonstration, Which? skimmed volunteers cards at a distance then bought a £3,000 TV with the card numbers and expiry dates recorded.

The media have been presenting contactless payments are insecure; the response from the banking industry is to point out that customers are not liable for the fraudulent transactions. Both are in some ways correct, but in other ways are missing the point.

The law in the UK (Payment Services Regulations (PSR) 2009, Regulation 62) indeed does say that the customers are entitled to a refund for fraudulent transactions. However a bank will only do this if they are convinced the customer has not authorised the transaction, and was not negligent. In my experience, a customer who is unable to clearly, concisely and confidently explain why they are entitled to a refund runs a high risk of not getting one. This fact will disproportionately disadvantage the more vulnerable members of society.

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Banks undermine chip and PIN security because they see profits rise faster than fraud

The Chip and PIN card payment system has been mandatory in the UK since 2006, but only now is it being slowly introduced in the US. In western Europe more than 96% of card transactions in the last quarter of 2014 used chipped credit or debit cards, compared to just 0.03% in the US.

Yet at the same time, in the UK and elsewhere a new generation of Chip and PIN cards have arrived that allow contactless payments – transactions that don’t require a PIN code. Why would card issuers offer a means to circumvent the security Chip and PIN offers?

Chip and Problems

Chip and PIN is supposed to reduce two main types of fraud. Counterfeit fraud, where a fake card is manufactured based on stolen card data, cost the UK £47.8m in 2014 according to figures just released by Financial Fraud Action. The cryptographic key embedded in chip cards tackles counterfeit fraud by allowing the card to prove its identity. Extracting this key should be very difficult, while copying the details embedded in a card’s magnetic stripe from one card to another is simple.

The second type of fraud is where a genuine card is used, but by the wrong person. Chip and PIN makes this more difficult by requiring users to enter a PIN code, one (hopefully) not known to the criminal who took the card. Financial Fraud Action separates this into those cards stolen before reaching their owner (at a cost of £10.1m in 2014) and after (£59.7m).

Unfortunately Chip and PIN doesn’t work as well as was hoped. My research has shown how it’s possible to trick cards into accepting the wrong PIN and produce cloned cards that terminals won’t detect as being fake. Nevertheless, the widespread introduction of Chip and PIN has succeeded in forcing criminals to change tactics – £331.5m of UK card fraud (69% of the total) in 2014 is now through telephone, internet and mail order purchases (known as “cardholder not present” fraud) that don’t involve the chip at all. That’s why there’s some surprise over the introduction of less secure contactless cards.

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Why Bentham’s Gaze?

Why is this blog called “Bentham’s Gaze”? Jeremy Bentham (1748-1832) was an philosopher, jurist and social reformer. Although he took no direct role in the creation of UCL (despite the myth), Bentham can be considered its spiritual founder, with his ideas being embodied in the institution. Notably, UCL went a long way to fulfilling Bentham’s desire of widening access to education, through it being the first English university to admit students regardless of class, race or religion, and to welcome women on equal terms with men.

Bentham’s Gaze refers not just to his vision of education but also to the Panopticon – a design proposed for a prison where all inmates in the circular building are potentially under continual observation from a central inspection house. Importantly, inmates would not be able to tell whether they were actively being observed and so the hope was that good behaviour would be encouraged without the high cost of actually monitoring everyone. Although no prison was created exactly to Bentham’s design, some (e.g. Presidio Modelo in Cuba) have notable similarities and pervasive CCTV can be seen as a modern instantiation of the same principles.

Finally, the more corporeal aspect to the blog name is that UCL hosts Bentham’s Auto-Icon – a case containing his preserved skeleton with wax head, seated in a chair, and dressed in his own clothes. The construction of the Auto-Icon was specified in Bentham’s will and since 1850 has been cared for by UCL. His head was also preserved but judged unsuitable for public display and so is stored by UCL Museums. Many of the staff and students at UCL will walk in view of Bentham while crossing the campus.

You too can now enjoy Bentham’s Gaze thanks to the UCL PanoptiCam – a webcam attached to the top of the Auto-Icon, as you can see below from my photo of it (and its photo of me). Footage from the camera is both on Twitter and YouTube, with highlights and discussion on @Panopticam.

UCL Panopticam

View from PanoptiCam (2015-02-19)

Tor: the last bastion of online anonymity, but is it still secure after Silk Road?

The Silk Road trial has concluded, with Ross Ulbricht found guilty of running the anonymous online marketplace for illegal goods. But questions remain over how the FBI found its way through Tor, the software that allows anonymous, untraceable use of the web, to gather the evidence against him.

The development of anonymising software such as Tor and Bitcoin has forced law enforcement to develop the expertise needed to identify those using them. But if anything, what we know about the FBI’s case suggests it was tip-offs, inside men, confessions, and Ulbricht’s own errors that were responsible for his conviction.

This is the main problem with these systems: breaking or circumventing anonymity software is hard, but it’s easy to build up evidence against an individual once you can target surveillance, and wait for them to slip up.

The problem

A design decision in the early days of the internet led to a problem: every message sent is tagged with the numerical Internet Protocol (IP) addresses that identify the source and destination computers. The network address indicates how and where to route the message, but there is no equivalent indicating the identity of the sender or intended recipient.

This conflation of addressing and identity is bad for privacy. Any internet traffic you send or receive will have your IP address attached to it. Typically a computer will only have one public IP address at a time, which means your online activity can be linked together using that address. Whether you like it or not, marketers, criminals or investigators use this sort of profiling without consent all the time. The way IP addresses are allocated is geographically and on a per-organisation basis, so it’s even possible to pinpoint a surprisingly accurate location.

This conflation of addressing and identity is also bad for security. The routing protocols which establish the best route between two points on the internet are not secure, and have been exploited by attackers to take control of (hijack) IP addresses they don’t legitimately own. Such attackers then have access to network traffic destined for the hijacked IP addresses, and also to anything the legitimate owner of the IP addresses should have access to.

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