This chapter discusses the latest developments in the shifting threat landscape and their impact on the world of information security. It describes how we are now moving into a “third wave” of cybercrime, where sophisticated criminals are applying relatively “soft” techniques that are more pervasive in their execution. It argues that, as a consequence, information security countermeasures based on the latest information intelligence technologies will need to be complemented by softer, more pervasive techniques drawn from disciplines such as process engineering, policy development, behavioral science, psychology and benefit management. The chapter also considers how these countermeasures can be fully realized in today’s business environment and concludes by discussing future directions such as the growth in complexity and the rise of the surveillance society. The author hopes that by understanding these new imperatives, information security practitioners will be in a stronger position to protect their organizations from today’s threats — and those of tomorrow.
The Rise of the Cybercriminal
With the industrial and mobility revolutions of the 19th and 20th centuries behind us, we now find ourselves in the grip of the 21st century digital revolution. The widespread diffusion of telecommunications and computer technology is now having a profound effect on the way we live. From online banking and shopping through to social networking, the digital revolution is creating entirely new ways of working and socializing as well as challenging, and even destroying, many others.
The world of the financial criminal is evolving in a similar way. To put today’s and tomorrow’s threats in context, let us begin with the recent past. A couple of decades ago the techniques used were relatively “hard” — high on violence and low on intellect — and focused in execution, such as armed robbery and mugging. Traditional security countermeasures comprised of guards, dogs, fences and locks. As the digital revolution gathered pace in the late 1980s, criminals (both existing and newcomers) graduated into cybercrime, where the techniques used were “softer”, requiring more intellect, less muscle and involved a broader range of execution. The new threats included hacking, virus attacks and various forms of electronic fraud involving credit cards, ATMs, checks, mortgages and insurance.
A range of preventative countermeasures similarly involved, such as access control systems comprising firewalls, website/e-mail content scanners and the like. Detection systems based on a body of rules (often wrapped up inside behavioral scorecards) that define the way that fraudsters and money launderers typically carry out their activities were also deployed. These rule-based systems are often founded on the “three Vs” of profiling — the volume, value and velocity (timing) of transactions. Countermeasures also included process controls such as recruitment screening, segregation, supervision and training. In the case of money laundering, much of this centered on the principle of “know your customer”: training front office staff to verify the identity of customers opening new accounts and spot suspicious deposits or withdrawals. Last, but not least, information security standards have been deployed such as ISO17799.
Over the past few years, and into the present, we have seen a “second wave” of cybercrime, where criminals have moved further into “softer” and more sophisticated techniques that are more pervasive in their execution. This has been clearly demonstrated by the significant growth in:
the Internet as a general vehicle for committing all kinds of frauds;
Card Not Present (CNP) fraud as a result of the move from magnetic stripe to Chip-and-PIN credit cards;
identity fraud (application fraud and account takeover) as a result of the significant increase in remote online banking and shopping as well as the indiscriminate publication and sharing of personal information on blogs, instant messaging, wiki pages, file sharing and social networking websites;
sleeper fraud in which organized criminals imitate the behavior of genuine customers over an extended period of time, gain as much unsecured credit as possible and then default. This type of fraud is specifically designed to exploit the limitations of traditional record-matching technologies. The perpetrators are experts at distorting information to remain undiscovered until it is too late;
insider fraud, where the perpetrators range from temporary contractors to permanent staff and all the way up to the most senior executives. All are in positions of trust and exploit inadequate processes, systems and internal controls. The original “opportunity takers”, or people who exploit gaps in the system through temptation, incentive or pressure, have been joined by “opportunity makers” or professional criminals who have infiltrated a company and are immune to, and will indeed exploit, an organizational culture of trust and caring. Businesses where there are high levels of organizational or process change have been particularly vulnerable as well as those where there is unchecked staff authority, high staff turnover or low staff morale.
A “second wave” of cybercrime countermeasures have been, and are being, developed as a result:
multi-factor authentication technologies such as one-shot password generators and biometrics based on voiceprints and fingerprints;
insider fraud detection systems that use advanced clustering techniques and supermarket-style loyalty scoring to identify lone individuals that stand out from larger employee clusters because of anomalous behavior that is consistent with classic insider fraud psychology. They are fed by audit trails from key systems such as financial transaction logs, call centre logs, telephone logs, building entry logs, web server logs and print server logs. These are supplemented with records from Human Resources and Finance systems;
detection systems based on “unsupervised” data mining methods that analyze large amounts of data in order to work out for themselves what is suspicious without having to refer to a checklist of rules. The output from these systems can then be turned into rule-based form in order to catch the criminals. These have helped banks begin to move closer towards “what we don’t know we don’t know”;
cross-industry data sharing to identify criminals before they have a chance to strike, the most significant example being the UK’s Insurance Fraud Bureau;
case management systems that are more closely integrated with detection systems and can handle a greater variety of multimedia such as scanned-in images, audio recordings, still images and moving images;
e-Discovery, or the process of collecting and searching electronic documents for information relevant to civil litigation;
revised information security standards such as ISO27001.
Key Terms in this Chapter
Digital Revolution: The widespread diffusion of telecommunications and computer technology that is creating entirely new ways of working and socializing as well as challenging, and even destroying, many others.
Social Network Analysis: An analytical tool used by investigators to identify, understand and evaluate networks of collaborating individuals across disparate and often unconnected sources of data.
Financial Criminal: A term used to describe thieves, fraudsters, money launderers and other criminals who steal money, usually by deception, from financial institutions and other organizations or alternatively use them to launder the proceeds of serious crime.
Business Resilience: The move to a level of security more normally associated with critical national infrastructure which involves integrating business, technical physical security systems into a single holistic framework.
Identity Fraud: Where someone knowingly assumes a false identity (fictitious, living or dead), with or without consent, in order to apply fraudulently for some kind of credit, service, asset or benefit, or else masquerade as the legitimate holder of an account and steals the account funds.
Social engineering: A collection of techniques used to manipulate people, often via a computer or telephone, into performing acts or divulging confidential information to facilitate the execution of a fraud.
Networked Operational Risk Model: The move to a level of operational risk management that addresses an increasingly complex operational environment through the deployment of a network of interconnected, mutually-reinforcing defenses that utilize advanced information intelligence analytics to detect previously unknown patterns of potentially suspicious activity.
Benefits Realization Management: The process of identifying, recording, tracking and delivering benefits to ensure the ultimate success of a project.
Information Intelligence: The technique of turning large volumes of complex data into relevant and actionable intelligence in order to better manage risk and increase profitability.