Digital Identity Blog

Thought leadership for cybersecurity, fraud and digital channel professionals

You Know the EMV Chip That’s Supposed to Make It Nearly Impossible to Fraudulently Use Credit/Debit Cards — Guess What? There Are Flaws.

By ThreatMetrix
ThreatMetrix®, The Digital Identity Company®, is the market-leading cloud solution for authenticating digital personas and transactions on the Internet. Verifying more than 20 billion annual transactions supporting 30,000 websites and 4,000 customers globally through the ThreatMetrix Digital Identity Network®, ThreatMetrix secures businesses and end users against account takeover, payment fraud and fraudulent account registrations resulting from malware and data breaches.
Follow ThreatMetrix ThreatMetrix's Most Recent Posts:

If you like movies, you likely already heard the classic movie tagline for the sequel to Jaws,Just when you thought it was safe to go back in the water…” (Incidentally a great tagline for a lousy movie)

In any case, with a little massaging, the line works for flaws discovered in the EMV chip protocol for credit and debit cards, i.e., “Just when you thought the EMV chip was the solution to most credit and debit card fraud…”

In his piece on, Matthew Schwartz, InformationWeek information security reporter, writes about the flaws that Cambridge University computer security researchers warned about at the IEEE Symposium on Privacy and Security in San Jose, California. The following has been edited to fit our format. You will find the complete article by clicking this link.

[The Cambridge researchers] detailed two major problems with the EuroPay, MasterCard, and Visa (EMV) standard now used to secure more than 1.6 billion cards worldwide.

[The problems came to light after a] British bank, HSBC, refused to refund a series of transactions to a customer [Mr. Gambin] based in Malta…. During related disputed-transaction negotiations, HSBC shared detailed ATM log data with Gambin, which included the date, time, as well as an “unpredictable number” (UN), or “nonce,” generated by the ATM to validate the transactions.

Reviewing the unpredictable number, however, the researchers found that it was, in fact, often predictable. “Some EMV implementers have merely used counters, timestamps or home-grown algorithms to supply this nonce [which] exposes them to a ‘pre-play’ attack. [This] is indistinguishable from card cloning from the standpoint of the logs available to the card-issuing bank, and…can be carried out even if it is impossible to clone a card physically.”

In some cases, obtaining a legitimate ATM nonce on which to base an attack would also be easy. According to the researchers, for example, the UN is printed on all receipts generated in Italy.

Digging further, the researchers also spotted a deeper flaw in the protocol that attackers could use to compromise transactions, even when an ATM generated a cryptographically strong random number. That flaw is due to the ability of attackers to intercept the unpredictable number via a man-in-the-middle attack and replace it with a different pre-computed one, which would likely pass muster with the authorizing bank. Such an attack could be executed via malware installed on POS devices, even if those devices include tamper-resistant EMV modules.

To date, some of the random-number-generator flaws spotted by the researchers have now been patched. But the EMV alliance has yet to address the deeper flaw in the protocol itself. [Researchers said, “The banks appear to have ignored this, perhaps reasoning that it is difficult to scale up an attack that involves access to specific physical cards and also the installation of malware or wiretaps on specific terminals. We disagree. The Target compromise shows that criminals can deploy malware on merchant terminals widely and exploit it to earn serious money.”

The researchers added that they know of at least one “likely case” of a related skimming attack in the wild, and warned that “the spread of ATM and POS malware is making it ever more of a threat.”

[A] liability shift — scheduled to begin in October 2015, although not until October 2017 for gas station terminals — by Visa seeks to drive more EMV uptake. “The liability shift encourages chip transactions because any chip-on-chip transaction — i.e., a chip card read by a chip terminal — provides dynamic authentication data, which helps to better protect all parties,” Visa explained.

According to the new research, however, that dynamic authentication system is vulnerable to spoofing. Any related liability, however, would rest with the consumer, unless he or she can prove that attackers subverted the EMV security system.

In their paper, the researchers expressed frustration at the EMV alliance failing to address the flaws they exposed more than one year after receiving related security disclosures. “We are now publishing the results of our research so that customers whose claims for refund have been wrongly denied have the evidence to pursue them, and so that the crypto, security, and bank regulation communities can learn [related] lessons.” [The researchers have] also called on banking regulators in the United States and abroad to use their muscle to force merchants, banks, and vendors to put related fixes in place.

[The] researchers called on the payment card industry to take responsibility for keeping the EMV system secure. “Again and again, customers have complained of fraud and been told by the banks that as EMV is secure; they must be mistaken or lying when they dispute card transactions. Again and again, the banks have turned out to be wrong.”

By ThreatMetrix Posted