Financial Info On 100,000 Taxpayers Now In The Hands Of Criminals, Thanks To The IRS's Weak Authentication Processes

from the time-for-everyone-to-start-lying-about-their-first-pet's-name dept

The government that wants so badly to be the world's leading cyberwarfare force still seems largely unable to fence in its own backyard. In Yet Another Breach™, the sensitive financial information of thousands of Americans is now in the hands of criminals.

The IRS announced today that criminals used taxpayer-specific data acquired from non-IRS sources to gain unauthorized access to information on approximately 100,000 tax accounts through IRS’ “Get Transcript” application. This data included Social Security information, date of birth and street address.

These third parties gained sufficient information from an outside source before trying to access the IRS site, which allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer.
So, not actually "hacking," per se, as much as the gaming of system just begging to be gamed. The information criminals needed to obtain this data may have been "specific" to each registered taxpayer, but it was also information that rarely, if ever, changed.
This sort of authentication, called knowledge-based authentication, is highly vulnerable to fraud. It's based on information that never changes, and such data is widely available to anyone willing to pay for it from stolen financial information marketplaces. The transcripts that were fraudulently downloaded were likely made accessible due to leaked Social Security numbers and other personal data from any one of the many recent data breaches, including those at health insurers Anthem and CareFirst. In fact, security reporter Brian Krebs reported on the risks inherent in the IRS' transcript request system way back in March. He warned taxpayers to sign up for accounts on IRS.gov if only to prevent someone from creating a fraudulent account for their records first.
The IRS is reassuring Americans that its "core systems" remain secure, something of little comfort to the 100,000 taxpayers who will be receiving mea culpa letters (and free credit monitoring) from the agency over the next few weeks. What the IRS considers to be adequate protection is apparently not nearly adequate enough. Once the data is out there, verification information can be used to gain access to credit cards, bank accounts or anywhere else the same sort of canned questions are presented during the signup process. The 50% success rate suggests unique personally-identifiable information isn't necessarily all that unique.
In all, about 200,000 attempts were made from questionable email domains, with more than 100,000 of those attempts successfully clearing authentication hurdles.
The IRS is quick to add that 23 million records were "safely" downloaded during this same time period, which isn't really the comforting statement it means it to be. All this means is that millions of downloads weren't linked to "questionable" email domains. That's not the same thing as 23 million downloads going to the actual owners of that information.

The IRS is vowing to "strengthen its protocols" going forward. This is the only response it can offer, unfortunately. Stronger processes are needed, but additional steps and more obscure verification questions will manifest themselves as hurdles a certain percentage of taxpayers won't be willing to leap for online IRS access. Going paperless won't seem nearly as advantageous, not when a motherlode of financial information can be pulled out of the ether by cybercrooks armed with the fruits of years of financial breaches, both public and private.


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  1. icon
    sigalrm (profile), 26 May 2015 @ 5:17pm

    Re:

    The younger the individual, the higher the odds that the answers to most "common" security questions - Mothers Maiden Name, What street did you live on a a child, First/favorite pet, first boyfriend/girlfriend are readily available on Facebook.

    I know this to be true for myself, even if I didn't provide the information. And it's certainly true for both of my kids. And one of them doesn't have a Facebook account (yet).

    It's not a coincidence that for years now, when someone's webmail account is "hacked", the mechanism is almost always the password recovery feature. This is becoming less the case as Google, Yahoo, MS, etc catch on, but it still happens with depressing frequency.

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