Posted by Virus Bulletin on Jun 10, 2011
Security question considered second authentication factor.
A US court has declared that a combination of passwords and 'security questions' is an ample way for banks to protect their customers' online banking accounts.
In May 2009, Patco, a Maine-based construction company became infected with the 'Zeus' (or 'Zbot') trojan which stole the company's online banking credentials. Patco lost 350,000 US dollars plus interest and sued its bank, Ocean Bank, to recover its losses. It claimed that the bank did not live up to the terms in its contract by letting the user login with barely more than a username and a password.
The magistrate acknowledged that the bank's security could be improved upon, but said that, technically, it used 'multi-factor authentication' as outlined in 2005 by the Federal Financial Institutions Examination Council (FFIEC). It is unlikely, however, that many security experts will agree: all that was needed to transfer money to another account was a username, a password and the answer to a 'security question', all of which can easily be stolen by a keylogger. The judge ruled that Patco could not provide sufficient evidence to prove that a keylogger had indeed been used.
Ironically, it was a 'security enhancement' implemented by the bank in 2008 that made it easier for the crooks to obtain the answers to these security questions. Until then, the questions had only been asked for transfers that appeared 'suspicious'. Since 2008, customers have been required to answer the security question for every transfer.
The judge mentioned in his decision that there is zero case law on what constitutes reasonable security for banks; hence the recommendation by the magistrate, if followed by a US district court, could set an important precedent. The FFIEC was set to release an updated guidance last year which was supposed to clarify the multi-layered defences needed against contemporary banking malware. However, this update was never issued.