Report: Target Missed Many Warning Signs Leading to Breach

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Senate Judiciary Committee Holds Hearing On Digital Data Privacy In Wake Of Target Store Breaches
Win McNamee/Getty ImagesJohn Mulligan, Target's chief financial officer, is to testify before a Senate committee Thursday.
By Doina Chiacu

WASHINGTON -- Target (TGT) missed multiple opportunities to thwart the hackers responsible for the unprecedented holiday shopping season data breach, U.S. Senate staffers charged in a committee report released Tuesday.

There was no indication the No. 3 U.S. retailer responded to warnings that malware was being installed on Target's system. Other automated warnings the company ignored revealed how the attackers would carry data out of Target's network, according to the report.

"This analysis suggests that Target missed a number of opportunities along the kill chain to stop the attackers and prevent the massive data breach," according to the Commerce, Science and Transportation Committee report.

The staff report, "A 'Kill Chain' Analysis of the 2013 Target Data Breach," looked at previously reported information and used an analytical tool called an "intrusion kill chain" framework used widely by information security field.

It was released on the eve of a committee hearing on how to protect personal consumer information from cyber attack. Witnesses will include John Mulligan, Target's executive vice president and chief financial officer, and Edith Ramirez, chairwoman of the Federal Trade Commission.

Target spokeswoman Molly Snyder declined committee on the staff report, saying the company did not want to discuss the breach before Wednesday's testimony by Mulligan.

The staff report said Target "failed to respond to multiple automated warnings from the company's anti-intrusion software" that the attackers were installing malicious software and were also planning escape routes for the information they planned to steal from the retailer's network.

It also said Target gave access to its network to a third-party vendor that didn't follow accepted information security practices.

Target also didn't isolate its most sensitive network assets, %VIRTUAL-article-sponsoredlinks%enabling the attackers to move from less sensitive areas to the places where Target stored consumer information.

The Minneapolis-based company admitted this month that security software detected potentially malicious activity during last year's massive data breach, but its staff decided not to take immediate action.

It also said that last year's massive security breach could have been more extensive than reported so far, leading to further losses at the company.

The company has said so far that some 40 million payment card records were stolen along with 70 million other customer records during a cyber attack over the holiday shopping season.

Congress is investigating the breach along with lapses at other retailers, and credit card companies are pushing for better security.

Target also faces dozens of potential class-action lawsuits and action from banks that could seek reimbursement for millions of dollars in losses due to fraud and the cost of card replacements.

-Additional reporting by Mark Hosenball in Washington and Jim Finkle in Boston.

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Why Your Bank Thinks Someone Stole Your Credit Card
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Report: Target Missed Many Warning Signs Leading to Breach

One reason why Marquis' gas purchases might have triggered a fraud lockdown? Filling their tank is a common first move for credit card thieves.

"Some of the things they look at are small-dollar transactions at gas stations, followed by an attempt to make a larger purchase," explains Adam Levin of Identity Theft 911.

The idea is that thieves want to confirm that the card actually works before going on a buying spree, so they'll make a small purchase that wouldn't catch the attention of the cardholder. Popular methods include buying gas or making a small donation to charity, so banks have started scrutinizing those transactions.

Of course, it's not a simple matter of buying gas or giving to charity -- if those tasks triggered alerts constantly, no one would do either with a credit card. But Levin points to another possible explanation: Purchases made in a high-crime area are going to be held to a higher standard by the bank.

"It's almost a form of redlining," he says. "If there are certain [neighborhoods] where they've experienced an enormous amount of fraud, then anytime they see a transaction in the neighborhood, it sends an alert."

(Indeed, Erin tells me that one of the gas purchases that triggered an alert took place in a rough part of Detroit, which she visited specifically for the cheap gas.)

People who steal credit cards and credit card numbers usually aren't doing it so they can outfit their home with electronics and appliances. They don't want the actual products they're fraudulently buying; they're just in it to make money. So banks are always on the lookout for purchases of items that can easily be re-sold.

"Anytime a product can be turned around quickly for cash value, those are going to be the items that you would probably assume that, if you were a thief, you would want to get to first," says Karisse Hendrick of the Merchant Risk Council, which helps online merchants cut down on fraud. Levin says electronics are common choices for fraudsters, as are precious metals and jewelry.

Many thieves don't want to go through the rigmarole of buying laptops and jewelry, then selling them online or at pawnshops. They'd much prefer to just turn your stolen card directly into cold, hard cash.

There are a few ways that they can do that, and all of them will raise red flags at your bank or credit union. Using a credit card to buy a pricey gift card or load a bunch of money on a prepaid debit card is a fast way to attract the suspicions of your credit card issuer. Levin adds that some identity thieves also use stolen or cloned credit cards to buy chips at a casino, which they can then cash out (or, if they're feeling lucky, gamble away).
 

When assessing whether a purchase might be fraudulent, banks aren't just looking at what you bought and where you bought it. They're also asking if it's something you usually buy.

"The issuers know the buying patterns of a cardholder," says Hendrick. "They know the typical dollar amount of transaction and the type of purchase they put on a credit card."

Your bank sees a fairly high percentage of your purchases, so it knows if one is out of character for you. A thrifty individual who suddenly drops $500 on designer clothes should expect to get a call -- or have to make one when the bank flags the transaction. If you rarely travel and your card is suddenly used to purchase a flight to Europe, that's going to raise some red flags.

Speaking of Europe, the other big factor in banks' risk equations is whether you're making a purchase in a new area. I bought a computer just days after moving from Boston to New York, and had to confirm to the bank that I was indeed trying to make the purchase. Levin likewise says that making purchases in two different cities over a short period of time raises suspicions.

"I go from New York to California a lot, and invariably someone will call me [from the bank], " he says. Since one person can't go shopping in New York and California at the same time, any time a bank sees multiple purchases in multiple locations in a short period, it's going to be suspicious.

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