Target hackers stole encrypted bank PINs

The hackers who attacked Target Corp and compromised up to 40 million credit cards and
debit cards also managed to steal encrypted personal identification numbers (PINs),
according to a senior payments executive familiar with the situation.
One major U.S. bank fears that the thieves would be able to crack the encryption code and
make fraudulent withdrawals from consumer bank accounts, said the executive, who spoke
on the condition of anonymity because the data breach is still under investigation.
Target spokeswoman Molly Snyder said “no unencrypted PIN data was accessed” and there
was no evidence that PIN data has been “compromised.” She confirmed that some “encrypted
data” was stolen, but declined to say if that included encrypted PINs.
“We continue to have no reason to believe that PIN data, whether encrypted or unencrypted,
was compromised. And we have not been made aware of any such issue in communications
with financial institutions to date,” Snyder said by email. “We are very early in an ongoing
forensic and criminal investigation.”
The No. 3 U.S. retailer said last week that hackers stole data from as many as 40 million
cards used at Target stores during the first three weeks of the holiday shopping season,
making it the second-largest data breach in U.S. retail history.
Target has not said how its systems were compromised, though it described the operation
as “sophisticated.” The U.S. Secret Service and the Justice Department are investigating.
Officials with both agencies have declined comment on the investigations.
The attack could end up costing hundreds of millions of dollars, but it is unclear so far who
will bear the expense.
While bank customers are typically not liable for losses because of fraudulent activity on
their credit and debit cards, JPMorgan Chase & Co and Santander Bank said they have
lowered limits on how much cash customers can take out of teller machines and spend at
stores.
The unprecedented move has led to complaints from consumer advocates about the
inconvenience it caused from the late November Thanksgiving holiday into the run-up to
Christmas. But sorting out account activity after a fraudulent withdrawal could take a lot
more time and be worse for customers.
JPMorgan has said it was able to reduce inconvenience by giving customers new debit cards
printed quickly at many of its branches, and by keeping branches open for extended hours. A
Santander spokeswoman was not available for comment on Tuesday.
Security experts said it is highly unusual for banks to reduce caps on withdrawals, and the
move likely reflects worries that PINs have fallen into criminal hands, even if they are
encrypted.
“That’s a really extreme measure to take,” said Avivah Litan, a Gartner analyst who
specializes in cyber security and fraud detection. “They definitely found something in the
data that showed there was something happening with cash withdrawals.”
BREAKING THE CODE
While the use of encryption codes may prevent amateur hackers from obtaining the digital
keys to customer bank deposits, the concern is the coding cannot stop the kind of
sophisticated cyber criminal who was able to infiltrate Target for three weeks.
Daniel Clemens, CEO of Packet Ninjas, a cyber security consulting firm, said banks were
prudent to lower debit card limits because they will not know for sure if Target’s PIN
encryption was infallible until the investigation is completed.
As an example of potential vulnerabilities in PIN encryption, Clemens said he once worked
for a retailer who hired his firm to hack into its network to find security vulnerabilities. He
was able to access the closely guarded digital “key” used to unscramble encrypted PINs,
which he said surprised his client, who thought the data was secure.
In other cases, hackers can get PINs by using a tool known as a “RAM scraper,” which
captures the PINs while they are temporarily stored in memory, Clemens said.
The attack on Target began on Nov. 27, the day before the Thanksgiving holiday and
continued until Dec. 15. Banks that issue debit and credit cards learned about the breach on
Dec. 18, and Target publicly disclosed the loss of personal account data on Dec. 19.
On Dec. 21, JPMorgan, the largest U.S. bank, alerted 2 million of its debit cardholders that it
was lowering the daily limits on ATM withdrawals to $100 and capping store purchases with
their cards at $500.
On Monday, the bank partly eased the limits it had imposed on Saturday, setting them at
$250 a day for ATM withdrawals and $1,000 a day for purchases. (The usual debit card daily
limits are $200 to $500 for cash withdrawals and $500 for purchases, a bank spokeswoman
said last week.)
On Monday, Santander – a unit of Spain’s Banco Santander – followed suit, lowering the
daily limits on cash withdrawals and purchases on Santander and Sovereign branded debit
and credit cards of customers who used them at Target when the breach occurred. Santander
did not disclose the new limits, but said it was monitoring the accounts and issuing new
cards to customers who were affected.
The largest breach against a U.S. retailer, uncovered in 2007 at TJX Cos Inc, led to the theft
of data from more than 90 million credit cards over about 18 months.