Behold the modern automated teller machine, a tiny mechanical fortress in a world of soft targets. But even with all those video cameras, audit trails, and steel reinforced cash vaults, wily thieves armed with social engineering techniques and street technology are still making bank. Now the financial industry is working to close one more chink in the ATM's armor: the humble PIN pad.
Last year Visa International formally launched a 50-point security certification process for "PIN entry devices" (PEDs) on ATMs that accept Visa. The review is exhaustive: an independent laboratory opens up the PED and probes its innards; it examines the manufacturing process that produced the device; and it attacks the PED as an adversary might, monitoring it, for example, to ensure that no one can identify which buttons are being pressed by sound or electromagnetic emission. "If we are testing a product that is essentially compliant, we typically figure it's about a four week process," says Ken Kolstad, director of operations at California-based InfoGard, one of three certification labs approved by Visa International worldwide.
If that seems like a lot of trouble over a numeric keypad, you haven't cracked open an ATM lately. The modern PED is a physically and logically self contained tamper-resistant unit that encrypts a PIN within milliseconds of its entry, and within centimeters of the customer's fingertips. The plaintext PIN never leaves the unit, never travels over the bank network, isn't even available to the ATM's processor: malicious code running on a fully compromised Windows-based ATM machine might be able to access the cash dispenser and spit out twenties, but in theory it couldn't obtain a customer's unencrypted ATM code.
The credit card companies have played a large role in advancing the state of this obscure art. In additional to Visa's certification program, MasterCard has set an 1 April, 2005 deadline for ATMs that accept its card to switch their PIN encryption from DES to the more secure Triple DES algorithm (some large networks negotiated a more lenient deadline of December 2005). But despite these efforts, the financial sector continues to suffer massive losses to increasingly sophisticated ATM fraud artists, who take home some $50m a year in the U.S. alone, according to estimates by the Electronic Funds Transfer Association (EFTA). To make these mega withdrawals, swindlers have developed a variety of methods for cloning or stealing victim's ATM and credit cards.
Some techniques are low-tech. In one scam that Visa says is on the rise, a thief inserts a specially-constructed sleeve in an ATM's card reader that physically captures the customer's card. The con artist then lingers near the machine and watches as the frustrated cardholder tries to get his card back by entering his PIN. When the customer walks away, the crook removes the sleeve with the card in it, and makes a withdrawal.
At the more sophisticated end, police in Hong Kong and Brazil have found ATMs affixed with a hidden magstripe reader attached to mouth of the machine's real reader, expertly designed to look like part of the machine. The rogue reader skims each customer's card as it slides in. To get the PIN for the card, swindlers have used a wireless pinhole camera hidden in a pamphlet holder and trained on the PED, or attached fake PIN pads affixed over the real thing that store the keystrokes without interfering with the ATM's normal operation. "They'll create a phony card later and use that PIN," says Kurt Helwig, executive director of the EFTA. "They're getting pretty sophisticated on the hardware side, which is where the problem has been."
Visa's certification requirements try to address that hardware assisted fraud. Under the company's standards, each PED must provide "a means to deter the visual observation of PIN values as they are being entered by the cardholder". And the devices must be sufficiently resistant to physical penetration so that opening one up and bugging it would either cause obvious external damage, cost a thief at least $25,000, or require that the crook take the PIN pad home with him for at least 10 hours to carry out the modification.
"There are some mechanisms in place that help protect against some of these attacks... but there's no absolute security," says InfoGard's Kolstad. "We're doing the best we can to protect against it."
That balancing approach - accounting for the costs of cracking security, instead of aspiring to be unbreakable - runs the length and breadth of Visa's PED security standards. Under one requirement, any electronics utilizing the encryption key must be confined to a single integrated circuit with a geometry of one micron or less, or be encased in Stycast epoxy. Another requirement posits an attacker with a stolen PED, a cloned ATM card, and knowledge of the cyphertext PIN for that card. To be compliant, the PED must contain some mechanism to prevent this notional villain from brute forcing the PIN with an array of computer-controlled solenoid fingers programmed to try all possible codes while monitoring the output of the PED for the known cyphertext.
"In fact, these things are quite reasonable," says Hansup Kwon, CEO of Tranax Technologies, an ATM company that submitted three PEDs for approval to InfoGard. Before its PIN pads could be certified, Tranax had the change the design of the keycaps to eliminate nooks and crannies in which someone might hide a device capable of intercepting a cardholder's keystrokes. "We had to make the keypad completely visible from the outside, so if somebody attacks in between, it's complete visible," says Kwon.
Where Visa went wrong, Kwon says, is in setting an unrealistic timetable for certification. When Visa launched the independent testing program last November, it set a 1 July deadline: any ATMs rolling into service after that date would have to have laboratory certified PIN pads, or they simply couldn't accept Visa cards.
That put equipment makers in a tight spot, says Kwon. "It's almost a six months long process... If you make any design modification, it takes a minimum of three months or more to implement these changes," he says. "So there was not enough time to implement these things to meet the Visa deadline."
Visa International's official position is that they gave manufactures plenty of time - 1 July saw 31 manufacturers with 105 PIN pads listed on the company's webpage of approved PEDs. But in late June, with the deadline less than a week away, Visa suddenly dropped the certification deadline altogether. "I think what we realized was that it was important to work with the other industry players," says spokesperson Sabine Middlemass.
Visa says it's now working with rival MasterCard to develop an industry wide standard before setting a new deadline for mandatory compliance. In the meantime, the company is encouraging vendors to submit their PIN pads for certification under the old requirements anyway, voluntarily, for the sake of security.