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Researchers find huge weakness in European payment cards

The attack would allow a fraudster to use a chip-and-PIN card without knowing the PIN

By Jeremy Kirk, IDG News Service
February 12, 2010 09:46 AM ET

IDG News Service - Hundreds of millions of payment cards throughout Europe have a flaw that could allow criminals with a stolen card to enter any random PIN to complete a transaction, according to researchers from the University of Cambridge.

Updated Dutch payment card still vulnerable to relay attack

The findings, which will be presented at the IEEE Symposium on Security and Privacy in California in May, cast new doubts on chip-and-PIN or EMV cards. The cards contain a microchip that verifies a correct PIN in order to complete a transaction.

European banks hail the system as more secure, as U.S. cards do not have the microchip, which has so far prevented some types of card cloning.

But the Cambridge researchers have found a weakness in the complicated EMV protocol that allows for a man-in-the-middle attack. It essentially tricks the point-of-sale terminal into believing it has received a correct PIN no matter what digits are entered.

The card thinks that the transaction was authorized by a signature. In some instances, point-of-sale terminals may have trouble connecting back to a card's issuing bank but allow a transaction anyway if completed by a signature.

The attack requires high-level knowledge of the chip-and-PIN system and some external hardware as the researchers demonstrated on the BBC's Newsnight program on Thursday.

Nonetheless, "this flaw is really a popper," said Ross Anderson, professor of security engineering, on Newsnight.

On the program, Anderson's colleague, Saar Drimer, is shown illustrating the attack at the University of Cambridge's cafeteria. He wore a backpack containing a laptop computer and an FPGA (field programmable gate array) board. A dummy card is actually inserted into the point-of-sale device, which is wired to the stolen card.

For the demonstration, the researchers used a credit card from HSBC, one from the John Lewis department store, and debit cards from Barclays and The Cooperative Bank. Drimer is seen slyly inserting the dummy card -- which has a protruding wire -- into the point-of-sale terminal. The transaction is authorized even though Drimer enters an incorrect PIN of "0000."

The banking industry was informed about two months ago by the researchers of the attack. HSBC and Barclays referred comment to U.K. Payments, a banking trade association.

"We never said chip-and-PIN was completely infallible," a spokeswoman said Friday. "We firmly believe it [the attack] is not really plausible in a day-to-day environment. They've created a convoluted way of committing this fraud."

The equipment looks complicated but is doing something very simple and could be condensed, said Steven J. Murdoch, one of the researchers.

The PC, which does computational work, could be replaced with a tiny microprocessor. The FPGA, which is used to modify voltages and data rates between the PC and payment cards, could be replaced with much smaller technology. Both of the payment cards could also be modified to communicate wirelessly, which would eliminate the wire shown in their current demonstration, Murdoch said.

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