UK Parliament on protecting consumers from economic crime

On Friday, the UK House of Commons Treasury Committee published their report on the consumer perspective of economic crime. I’ve frequently addressed this topic in my research, as well as here on Bentham’s Gaze, so I’m pleased to see several recommendations of the committee match what myself and colleagues have proposed. In other respects, the report could have gone further, so as well as discussing the positive aspects of the report, I would also like to suggest what more could be done to reduce economic crime and protect its victims.

Irrevocable payments are the wrong default

Transfers between UK bank accounts will generally use the Faster Payment System (FPS), where money will immediately show up in the recipient account. FPS transfers cannot be revoked, even in the case of fraud. This characteristic protects banks because if fraudulently obtained funds leave the banking system, the bank receiving the transfer has no obligation to reimburse the victim.

In contrast, the clearing system for paper cheques permits payments to be revoked for a few days after the funds appeared in the recipient account, should there have been a fraud. This period allows customers to quickly make use of funds they receive, while still giving a window of opportunity for banks and customers to identify and prevent fraud. There’s no reason why this same revocation window could not be applied to fully electronic payment systems like FPS.

In my submissions to consultations on how to prevent push payment scams, I argued that irrevocable payments are the wrong default, and transfers should be possible to reverse in cases of fraud. The same argument applies to consumer-oriented cryptocurrencies like Libra. I’m pleased to see that the Treasury Committee agrees and they have recommended that when a customer sends money to an account for the first time, that transfer be revocable for 24 hours.

Introducing Confirmation of Payee, finally

The banking industry has been planning on launching the Confirmation of Payee system to check if the name of the recipient of a transfer matches what the customer sending money thinks. The committee is clearly frustrated with delays on deploying this system, first promised for September 2018 but since slipped to March 2020. Confirmation of Payee will be a helpful tool for customers to help avoid certain frauds. Still, I’m pleased the committee also recognise it’s limitations and that the “onus will always be on financial firms to develop further methods and technologies to keep up with fraudsters.” It is for this reason that I argued that a bank showing a customer a Confirmation of Payee mismatch should not be a sufficient condition to hold customers liable for fraud, and the push-payment scam reimbursement scheme is wrong to do so. It doesn’t look like the committee is asking for the situation to be changed though.

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Beyond Regulators’ Concerns, Facebook’s Libra Cryptocurrency Faces another Big Challenge: The Risk of Fraud

Facebook has attracted attention through the announcement of their blockchain-based payment network, Libra. This won’t be the first payment system Facebook has launched, but what makes Facebook’s Libra distinctive is that rather than transferring Euros or dollars, the network is designed for a new cryptocurrency, also called Libra. This currency is backed by a reserve of nationally-issued currencies, and so Facebook hopes it will avoid the high volatility of cryptocurrencies like Bitcoin. As a result, Libra won’t be attractive to currency speculators, but Facebook hopes that it will, therefore, be useful for its stated goal – to be a “simple global currency and financial infrastructure that empowers billions of people.”

Reducing currency volatility is only one step towards meeting this goal of scaling cryptocurrencies to billions of users. The Libra blockchain design addresses how the network can maintain the high throughput and low transaction fees needed to compete with existing payment networks like Visa or MasterCard. However, a question that is equally important but as yet unanswered is how Facebook will develop a secure authentication and fraud prevention system that can scale to billions of users while maintaining good usability and low cost.

Facebook designed the Libra network, but in contrast to traditional payment networks, the Libra network is open. Anyone can send transactions through the network, and anyone can write programs (known as “smart contracts”) that control how, and under what conditions, funds can move between Libra accounts. To comply with anti-money-laundering regulations, Know Your Customer (KYC) checks will be performed, but only when Libra enters or leaves the network through exchanges. Transactions moving funds within the network should be accepted if they meet the criteria set out in the applicable smart contract, regardless of who sent them.

The Libra network isn’t even restricted to transactions transferring the Libra currency. Facebook has explicitly designed the Libra blockchain to make it easy for anyone to implement their own currency and benefit from the same technical facilities that Facebook designed for its currency. Other blockchains have tried this. For example, Ethereum has spawned hundreds of special-purpose currencies. But programming a smart contract to implement a new currency is difficult, and errors can be costly. The programming language for smart contracts within the Libra network is designed to help developers avoid some of the most common mistakes.

Facebook’s Libra and Securing the Calibra Wallet

There’s more to setting up an effective currency than just the technology: regulatory compliance, a network of exchanges, and monetary policy are essential. Facebook, through setting up the Libra Association, is focusing its efforts here solely on the Libra currency. The widespread expectation is, therefore, at least initially, the Libra cryptocurrency will be the dominant usage of the network, and most users will send and receive funds through the Calibra wallet smartphone app, developed by a Facebook subsidiary. From the perspective of the vast majority of the world, the Calibra wallet will be synonymous with Facebook’s Libra, and so damage to trust in Calibra will damage the reputation of Libra as a whole.

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Next version of Android might introduce new security risks for online banking, 2FA, and more

Google is preparing new functionality for Android that will allow apps to retrieve and auto-fill security codes from SMS. Last year Apple introduced a similar feature to iOS and macOS, for which we discovered security risks for online banking, two-factor authentication, and other services. Will Google come up with a better design? In this post, we analyse what we know about this feature so far. 


The latest developer beta of Google Play Services (18.7.13 beta) contains code fragments that show a new Android permission to automatically retrieve verification codes from text messages. This feature has not yet been fully implemented, but the available code allows for some analysis and early evaluation for possible security risks, akin to similar risks we demonstrated in 2018 for the Security Code AutoFill feature in iOS and macOS.

Background

It seems that Google is updating the “Autofill Framework”, introduced with Android 8.0 in 2017, to include the new functionality. Previously, this framework’s sole purpose was to support the autofill functionality of password managers in Android apps and websites. The code fragments of this new feature reveal the names and descriptions of the associated system setting and corresponding runtime permission requests, shown below.

A screenshot of an Android phone.
The likely UI of the new setting in Android to enable/disable SMS Code Auto-fill.
The picture of an Android runtime permission request.
The likely UI of the new runtime permission request in Android to deny or allow an application’s access to the SMS Code Auto-fill feature.

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Confirmation of Payee is coming, but will it protect bank customers from fraud?

The Payment System Regulator (PSR) has just announced that the UK’s six largest banks must check whether the name of the recipient of a transfer matches what the sender thinks. This new feature should help address a security loophole in online payments: the name of the recipient of transfers is ignored, contrary to expectations and unlike cheques. This improved security should make some fraud more difficult, but banks must be prevented from exploiting the change to unfairly shift the liability of the remaining crime to the victims.

The PSR’s target is for checks to be fully implemented by March 2020, somewhat later than their initial promise to Parliament of September 2018 and subsequent target of July 2019. The new proposal, known as Confirmation of Payee, also only covers the six largest banking groups, but this should cover 90% of transfers. Its goal is to defend against criminals who trick victims into transferring funds under the false pretence that the money is going to the victim’s new account, whereas it is really going to the criminal. The losses from such fraud, known as push payment scams, are often life-changing, resulting in misery for the victims.

Checks on the recipient name will make this particular scam harder, so while unlikely to prevent all types of push payment scams they will hopefully force criminals to adopt strategies that are easier to prevent. The risk that consumer representatives and regulators will need to watch out for is that these new security measures could result in victims being unfairly held liable. This scenario is, unfortunately, likely because the voluntary consumer protection code for push payment scams excuses the bank from liability if they show the customer a Confirmation of Payee warning.

Warning fatigue and misaligned incentives

In my response to the consultation over this consumer protection code, I raised the issue of “warning fatigue” – that customers will be shown many irrelevant warnings while they do online banking and this reduces the likelihood that customers will notice important ones. Even Confirmation of Payee warnings will frequently be wrong, such as if the recipient’s bank account is under a different name to what the sender expects. If the two names are very dissimilar, the sender won’t be given more details but if the name entered is close to the name in bank records the sender should be told what the correct one is and asked to compare.

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How Accidental Data Breaches can be Facilitated by Windows 10 and macOS Mojave

Inadequate user interface designs in Windows 10 and macOS Mojave can cause accidental data breaches through inconsistent language, insecure default options, and unclear or incomprehensible information. Users could accidentally leak sensitive personal data. Data controllers in companies might be unknowingly non-compliant with the GDPR’s legal obligations for data erasure.

At the upcoming Annual Privacy Forum 2019 in Rome, I will be presenting the results of a recent study conducted with my colleague Mark Warner, exploring the inadequate design of user interfaces (UI) as a contributing factor in accidental data breaches from USB memory sticks. The paper titled “Fight to be Forgotten: Exploring the Efficacy of Data Erasure in Popular Operating Systems” will be published in the conference proceedings at a later date but the accepted version is available now.

Privacy and security risks from decommissioned memory chips

The process of decommissioning memory chips (e.g. USB sticks, hard drives, and memory cards) can create risks for data protection. Researchers have repeatedly found sensitive data on devices they acquired from second-hand markets. Sometimes this data was from the previous owners, other times from third persons. In some cases, highly sensitive data from vulnerable people were found, e.g. Jones et al. found videos of children at a high school in the UK on a second-hand USB stick.

Data found this way had frequently been deleted but not erased, creating the risk that any tech-savvy future owner could access it using legally available, free to download software (e.g., FTK Imager Lite 3.4.3.3). Findings from these studies also indicate the previous owners’ intentions to erase these files and prevent future access by unauthorised individuals, and their failure to sufficiently do so. Moreover, these risks likely extend from the second-hand market to recycled memory chips – a practice encouraged under Directive 2012/19/EU on ‘waste electrical and electronic equipment’.

The implications for data security and data protection are substantial. End-users and companies alike could accidentally cause breaches of sensitive personal data of themselves or their customers. The protection of personal data is enshrined in Article 8 of the Charter of Fundamental Rights of the European Union, and the General Data Protection Regulation (GDPR) lays down rules and regulation for the protection of this fundamental right. For example, data processors could find themselves inadvertently in violation of Article 17 GDPR Right to Erasure (‘right to be forgotten’) despite their best intentions if they failed to erase a customer’s personal data – independent of whether that data was breached or not.

Seemingly minor design choices, the potential for major implications

The indication that people might fail to properly erase files from storage, despite their apparent intention to do so, is a strong sign of system failure. We know since more than twenty years that unintentional failure of users at a task is often caused by the way in which [these] mechanisms are implemented, and users’ lack of knowledge. In our case, these mechanisms are – for most users – the UI of Windows and macOS. When investigating these mechanisms, we found seemingly minor design choices that might facilitate unintentional data breaches. A few examples are shown below and are expanded upon in the full publication of our work.

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UK Faster Payment System Prompts Changes to Fraud Regulation

Banking transactions are rapidly moving online, offering convenience to customers and allowing banks to close branches and re-focus on marketing more profitable financial products. At the same time, new payment methods, like the UK’s Faster Payment System, make transactions irrevocable within hours, not days, and so let recipients make use of funds immediately.

However, these changes have also created a new opportunity for fraud schemes that trick victims into performing a transaction under false pretences. For example, a criminal might call a bank customer, tell them that their account has been compromised, and help them to transfer money to a supposedly safe account that is actually under the criminal’s control. Losses in the UK from this type of fraud were £145.4 million during the first half of 2018 but importantly for the public, such frauds fall outside of existing consumer protection rules, leaving the customer liable for sometimes life-changing amounts.

The human cost behind this epidemic has persuaded regulators to do more to protect customers and create incentives for banks to do a better job at preventing the fraud. These measures are coming sooner than UK Finance – the trade association for UK based banking payments and cards businesses – would like, but during questioning by the House of Commons Treasury Committee, their Chief Executive conceded that change is coming. They now focus on who will reimburse customers who have been defrauded through no fault of their own. Who picks up the bill will depend not just on how good fraud prevention measures are, but how effectively banks can demonstrate this fact.

UK Faster Payment Creates an Opportunity for Social Engineering Attacks

One factor that contributed to the new type of fraud is that online interactions lack the usual cues that help customers tell whether a bank is genuine. Criminals use sophisticated social engineering attacks that create a sense of urgency, combined with information gathered about the customer through illicit means, to convince even diligent victims that it could only be their own bank calling. These techniques, combined with the newly irrevocable payment system, create an ideal situation for criminals.

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When Convenience Creates Risk: Taking a Deeper Look at Security Code AutoFill on iOS 12 and macOS Mojave

A flaw in Apple’s Security Code AutoFill feature can affect a wide range of services, from online banking to instant messaging.

In June 2018, we reported a problem in the iOS 12 beta. In the previous post, we discussed the associated risks the problem creates for transaction authentication technology used in online banking and elsewhere. We described the underlying issue and that the risk will carry over to macOS Mojave. Since our initial reports, Apple has modified the Security Code AutoFill feature, but the problem is not yet solved.

In this blog post, we publish the results of our extended analysis and demonstrate that the changes made by Apple mitigated one symptom of the problem, but did not address the cause. Security Code AutoFill could leave Apple users in a vulnerable position after upgrading to iOS 12 and macOS Mojave, exposing them to risks beyond the scope of our initial reports.

We describe four example attacks that are intended to demonstrate the risks stemming from the flawed Security Code AutoFill, but intentionally omit the detail necessary to execute them against live systems. Note that supporting screenshots and videos in this article may identify companies whose services we’ve used to test our attacks. We do not infer that those companies’ systems would be affected any more or any less than their competitors.

Flaws in Security Code AutoFill

The Security Code AutoFill feature extracts short security codes (e.g., a one-time password or OTP) from an incoming SMS and allows the user to autofill that code into a web form, webpage, or app when authenticating. This feature is meant to provide convenience, as the user no longer needs to memorize and re-enter a code in order to authenticate. However, this convenience could create risks for the user.

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Stronger Password, Longer Lifetime: Studying UCL’s password policy

In October 2016, UCL’s Information Services Division (ISD) implemented a new password policy to encourage users to choose stronger passwords. The policy links password lifetime (the time before the password expires) to password strength: The stronger the password, the longer the lifetime.

We (Ingolf Becker, Simon Parkin and M. Angela Sasse) decided to collaborate with the Information Services Division to study the effect of this policy change, and the results were published at USENIX Security this week. We find that users appreciate the choice and respond to the policy by choosing stronger passwords when changing passwords. Even after 16 months the mean password lifetime at UCL continues to increase, yet stronger passwords also lead to more password resets.

The new policy

In the new policy, passwords with Shannon Information Entropy of 50 bits receive a lifetime of 100 days, and passwords with 120 bits receive a lifetime of 350 days:

Password expiry by entropy

Additionally, the new policy penalises the lifetime of passwords containing words from a large dictionary.

Users play the game

We analysed the password lifetime – what we will refer to from here on in as the ‘password strength’ – of all password change and reset events of all pseudonymised users at UCL. The following figure shows the mean password expiration of all users over time, smoothed by 31-day moving averages:

Password expiration over time for all users and new users.

A small drop in password strength was observed between November ’16 and February ’17, as users were moved on to and generally became accustomed to the new system; the kinds of passwords they would have been used to using were at that point not getting them as many days as before (hence the drop). After February ’17, the mean strength increases from 145 days to 170 days in 12 months – an increase of 6.9 bits of entropy. This strongly suggests that users have generally adapted slowly to the new password policy, and eventually make use of the relatively new ability to increase password lifetime by expanding and strengthening their passwords.

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Will new UK rules reduce the harm of push-payment fraud?

On Friday’s Rip off Britain I’ll be talking about new attempts by UK banks to prevent fraud, and the upcoming scheme for reimbursing the victims. While these developments have the potential to better protect customers, the changes could equally leave customers in a more vulnerable situation than before. What will decide between these two extremes is how well designed will be the rules surrounding these new schemes.

The beginning of this story is September 2016, when the consumer association – Which? – submitted a super-complaint to the UK Payment System Regulator (PSR) regarding push payment fraud – where a customer is tricked into transferring money into a criminal’s account. Such bank transfers are known as push payments because they are initiated by the bank sending the money, as opposed to pull payments, like credit and debit cards, where it is the receiving bank that starts the process. Banks claim that since the customer was involved in the process, they “authorised” the transaction, and so under UK and EU law, the customer is not entitled to a refund. I’ve argued that this interpretation doesn’t match any reasonable definition of the word “authorised” but nevertheless the term “authorised push payment scams” seems to have stuck as the commonly used terminology for this type of fraud, I’m sure much to the banks’ delight.

The Which? super-complaint asked for banks to be held liable for such frauds, and so reimburse the victims unless the bank can demonstrate the customer has acted with gross negligence. Which? argued that this approach would protect the customers from a fraud that exists as a consequence of bank design decisions, and provides banks with both a short-term incentive to prevent frauds that they can stop, as well as a medium-to-long term incentive for the banks to enhance payment systems to be resistant to fraud. The response from the PSR was disappointing, recognising that banks should do more, but rejecting the recommendation to hold banks liable for this fraud and requesting only that the banks collect more data. Nevertheless, the data collected proved useful in understanding the scale of the problem – £236 million stolen from over 42,000 victims in 2017, with banks only being able to recover 26% of the losses. This revelation led to Parliament asking difficult questions of the PSR.

The PSR’s alternative to holding banks liable for push payment fraud is for victims to be reimbursed if they can demonstrate they have acted with an appropriate level of care and that the bank has not. The precise definition of each level of care was a subject of consultation, and will now be decided by a steering group consisting of representatives of the banking industry and consumers. In my response to this consultation, I explained my reasons for recommending that banks be liable for fraud, including that fairly deciding whether customers met a level of care is a process fraught with difficulties. This is particularly the case due to the inequality in power between a bank and its customer, and that taking a banking dispute to court is ruinously expensive for most people since the option of customers spreading the cost through collective actions was removed from the Financial Services Act. More generally, banks – as the designers of payment systems and having real-world understanding of their use – have the greatest capacity to mitigate the risks these systems introduce.

Nevertheless, if the rules for the reimbursement scheme are set up well, it would be a substantial improvement over the current situation. On the other hand, if the process is bad then it could entrench the worst of current practices. Because the PSR has decided that reimbursement should depend on compliance to a level of care, my response also included what should be the process for defining these levels, and for adjudicating disputes.

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Security code AutoFill: is this new iOS feature a security risk for online banking?

A new feature for iPhones in iOS 12 – Security Code AutoFill – is supposed to improve the usability of Two Factor Authentication but could place users at risk of falling victim to online banking fraud.

Two Factor Authentication (2FA), which is often referred to as Two Step Verification, is an essential element for many security systems, especially those online and accessed remotely. In most cases, it provides extended security by checking if the user has access to a device. In SMS-based 2FA, for example, a user registers their phone number with an online service. When this service sees a login attempt for the corresponding user account, it sends a One Time Password (OTP), e.g. four to six digits, to the registered phone number. The legitimate user then receives this code and is able to quote it during the login process, but an impersonator won’t.

In a recent development by Apple, announced at its developer conference WWDC18, they are set to automate this last step to improve user experience with 2FA with a new feature that is set to be introduced to iOS in version 12. The Security Code AutoFill feature, currently available to developers in a beta version, will allow the mobile device to scan incoming SMS messages for such codes and suggest them at the top of the default keyboard.

Description of new iOS 12 Security Code AutoFill feature (source: Apple)

Currently, these SMS codes rely on the user actively switching apps and memorising the code, which can take a couple of seconds. Some users deploy alternative try strategies such as memorising the code from the preview banner and hastily typing it down. Apple’s new iOS feature will require only a single tap from the user. This will make the login process faster and less error prone, a significant improvement to the usability of 2FA. It could also translate into an increased uptake of 2FA among iPhone users.

Example of Security Code AutoFill feature in operation on iPhone (source: Apple)

If users synchronise SMS with their MacBook or iMac, the existing Text Message Forwarding feature will push codes from their iPhone and enable Security Code AutoFill in Safari.

Example of Security Code AutoFill feature synchronised with macOS Mojave (source: Apple)

Reducing friction in user interaction to improve technology uptake for new users, and increase the usability and satisfaction for existing users, is not a new concept. It has not only been discussed in academia at length but is also a common goal within industry, e.g. in banking. This is evident in how the financial and payment industry has encouraged contactless (Near Field Communication – NFC) payments, which makes transactions below a certain threshold much quicker than traditional Chip and PIN payments.

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