A team of Cambridge University researchers has recently discovered that a flaw in the way that the algorithms for generating unique numbers for each ATM or POS transaction are implemented makes it possible for attackers to authorize illegal transactions without ever having to clone the customers' card.
"The UN (unique number) appears to consist of a 17 bit fixed value and the low 15 bits are simply a counter that is incremented every few milliseconds, cycling every three minutes," they discovered.
"We wondered whether, if the 'unpredictable number' generated by an ATM is in fact predictable, this might create the opportunity for an attack in which a criminal with temporary access to a card (say, in a Mafia-owned shop) can compute the authorization codes needed to draw cash from that ATM at some time in the future for which the value of the UN can be predicted."
Their research led them to conclude that the number in question is predictable, and that such a "pre-play" attack - while not that easy to execute and possessing certain limitations - is possible and viable in practice through a number of approaches, which include malware-infected ATMs, supply chain attacks, terminal cut-out, UN modification in the network, and the cooperation of a merchant.
Selected banks, payment switches and major card companies have been informed of the vulnerability, but most refused to formally comment on the findings.
"We received some informal responses: the extent and size of the problem was a surprise to some, whereas others reported already being suspicious of the strength of unpredictable numbers or even said others had been explicitly aware of the problem for a number of years. If these assertions are true, it is further evidence that banks systematically suppress information about known vulnerabilities, with the result that fraud victims continue to be denied refunds," the researchers pointed out in the paper detailing the flaw and the attacks.
"We found flaws in widely-used ATMs from the largest manufacturers. We can now explain at least some of the increasing number of frauds in which victims are refused refunds by banks which claim that EMV cards cannot be cloned and that a customer involved in a dispute must therefore be mistaken or complicit."
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