What legacy technologies are still vulnerable to carding?

[Mutt]

Carding is a type of fraud in which criminals use stolen bank card data to make unauthorized transactions, purchases, or withdrawals. Legacy technologies such as magnetic stripes, SS7 protocol, and non-EMV terminals remain vulnerable to carding due to their weak protection against modern attack methods. Below is a detailed educational analysis of these technologies, their vulnerabilities in the context of carding, examples of attacks, and measures that banks and payment systems are taking to mitigate the risks.

1. Magnetic stripes​

What are magnetic stripes?​

Magnetic stripes are a technology used on bank cards since the 1960s. They contain static data such as:

• Card number (PAN — Primary Account Number);
• Card validity period;
• Owner's name (in some cases);
• Service code and CVV1 (not to be confused with CVV2, which is indicated on the back of the card).

This data is recorded in magnetic format on three tracks (Track 1, Track 2, Track 3) and is read by devices such as ATMs or POS terminals.

Magnetic stripe vulnerabilities in the context of carding​

1. Ease of copying (skimming):
   • Skimmers are small devices that are installed on ATMs, POS terminals, or even handheld readers in stores. They read the magnetic stripe data, which is then written onto a counterfeit card (called a “clone”).
   • Example: An attacker installs a skimmer on an ATM that looks like part of the device. The user inserts the card, the data is read, and the PIN code can be intercepted via an overhead keypad or hidden camera.
2. No encryption:
   • The data on the magnetic stripe is not protected by encryption. If an attacker gains access to this data (for example, through a skimmer or compromise of the terminal), he can use it without additional obstacles.
   • Example: In 2013, hackers attacked Target stores in the US, infecting POS terminals with malware that collected magnetic stripe data. This resulted in the leak of data from 40 million cards.
3. Offline transactions:
   • In some countries or legacy systems, terminals may accept magnetic stripe data without online verification, allowing cloned cards to be used for purchases.
   • Example: In developing countries, fraudsters may use cloned cards in stores where terminals do not verify the authenticity of the card through online authentication.
4. Social engineering:
   • Attackers can use stolen magnetic stripe data in combination with social engineering, such as posing as a bank employee, to obtain the PIN or CVV2.

How do carders exploit magnetic stripes?​

• Skimming in the real world: Installing skimmers at ATMs, gas stations, or in small stores where controls on the devices are weak.
• Darknet carding: Stolen magnetic stripe data (called “dumps”) is sold on the darknet. Buyers write it onto counterfeit cards and use it to make purchases.
• Physical purchases: Fraudsters use cloned cards in places where a PIN or signature is not required, such as stores with low verification rates.
• Online carding: If the card data includes CVV2 (eg obtained through phishing), it can be used for online purchases where 3D-Secure is not required.

How do banks eliminate risks?​

1. Transition to EMV (chips):
   • Chip cards (EMV - Europay, Mastercard, Visa) use dynamic authentication. The chip generates a unique cryptographic code for each transaction, making cloning useless.
   • Example: In Europe, after the widespread implementation of EMV in the 2000s, skimming levels dropped sharply.
2. Magnetic stripe transaction limit:
   • Banks are disabling the ability to use magnetic stripes in countries where EMV is widely used. For example, in the EU, magnetic stripe transactions are often blocked.
   • In some cases, the magnetic stripe is used only as a fallback option for terminals that do not support chips.
3. Anti-skimming measures:
   • Installing anti-skimming devices on ATMs that detect foreign devices.
   • Regular checks of ATMs and terminals by bank employees.
   • Example: In the 2020s, banks in the US began using vibration sensors on ATMs to detect skimmers.
4. Monitoring and analytics:
   • Machine learning systems analyze transactions in real time, identifying suspicious transactions (such as purchases in another country or large amounts).
   • Example: If a card is used in Thailand and its owner has previously made purchases only in Russia, the bank may temporarily block the card and request confirmation.
5. Customer Education:
   • Banks are educating users on how to recognize skimmers (for example, checking an ATM for suspicious attachments) and avoiding using cards in unsafe places.

2. SS7 Protocol​

What is SS7?​

Signaling System 7 (SS7) is a protocol developed in the 1970s to manage calls and messages in telecommunications networks. It is used by telecom operators to route calls, transmit SMS, and exchange metadata between networks.

SS7 Vulnerabilities in the Context of Carding​

1. SMS interception for two-factor authentication (2FA):
   • SS7 does not have built-in encryption or strong authentication, allowing attackers with network access to intercept SMS. This is especially dangerous if a bank uses SMS to send one-time passwords (OTPs) to log into online banking or confirm transactions.
   • Example: In 2017, hackers in Germany exploited SS7 vulnerabilities to intercept SMS with OTP, allowing them to access victims' bank accounts and withdraw funds.
2. Access to metadata:
   • Through SS7, attackers can obtain information about the subscriber's location, calls or messages, which can be used for social engineering or planning attacks.
   • Example: Knowing that the victim is in a certain location, fraudsters may call, posing as a bank employee, and request card details.
3. Number substitution:
   • Attackers can spoof Caller ID over SS7 to impersonate a bank or other trusted organization.
4. Access to SS7:
   • Access to SS7 networks is possible through corrupt employees of telecom operators, vulnerable points in the network, or illegal services on the darknet that provide access to SS7 for a fee.

How do carders exploit SS7?​

• OTP interception for online banking: Carders use stolen card details (e.g. through phishing or skimming) and intercept the SMS with the OTP to log into the victim's bank account.
• Social Engineering: Using metadata from SS7, fraudsters can create convincing scenarios to trick victims into providing additional data (such as CVV2 or PIN).
• Combination attacks: SS7 can be used in conjunction with other methods such as phishing or malware to gain full access to the victim's account.

How do banks and operators eliminate risks?​

1. SMS-2FA alternatives:
   • Banks are moving to more secure two-factor authentication methods, such as push notifications in banking apps, biometrics (fingerprints, facial recognition) or hardware tokens.
   • Example: Apps like Google Authenticator or banking apps generate OTP locally, eliminating the reliance on SMS.
2. SS7 Security Improvements:
   • Telecom operators are implementing filters to block suspicious requests in the SS7 network. For example, GSMA (Global Mobile Association) has developed recommendations for protecting SS7.
   • Monitor traffic to identify anomalies such as requests from unauthorized sources.
3. Encryption and tokenization:
   • Banks use tokenization to protect card details during online transactions, reducing the value of intercepted data.
   • Example: Apple Pay or Google Pay replace the card number with a unique token that is useless without additional authentication.
4. Cooperation with telecom operators:
   • Banks and telecoms are working together to upgrade networks and implement more secure protocols such as Diameter (the successor to SS7), although it also has vulnerabilities.
5. Customer Education:
   • Banks inform users about the risks of SMS-2FA and recommend using more secure authentication methods.

3. Terminals without EMV​

What are non-EMV terminals?​

POS terminals without EMV (chip card) support rely on magnetic stripe reading. Such terminals are common in small stores, developing countries or legacy systems.

Vulnerabilities of non-EMV terminals in the context of carding​

1. Magnetic stripe dependence:
   • Non-EMV terminals cannot process chip cards, forcing users to use a magnetic stripe, which is vulnerable to skimming.
   • Example: In small stores in Southeast Asia, older terminals can only accept magnetic stripes, making them a target for carders.
2. No dynamic authentication:
   • EMV terminals generate a unique code for each transaction, rendering stolen data useless. Non-EMV terminals do not, allowing cloned cards to be used.
3. Weak check:
   • Some older terminals do not require a PIN or signature, making it easier to use stolen cards.
   • Example: In the US, until 2015, many terminals accepted cards without a PIN code, which contributed to the growth of carding.
4. Terminal compromise:
   • Attackers can infect non-EMV terminals with malware that collects magnetic stripe data.
   • Example: The 2014 Home Depot attack resulted in the leak of 56 million card details due to outdated terminals.

How do carders exploit non-EMV terminals?​

• Using cloned cards: Carders buy dumps on the dark web and use them on non-EMV terminals to make purchases.
• Card testing: Fraudsters test stolen data on old terminals to check its validity before using it in online stores.
• Attacks on merchants: Attackers specifically target stores with outdated terminals where checks are minimal.

How do banks and payment systems eliminate risks?​

1. Terminal upgrades:
   • Payment systems (Visa, Mastercard) set deadlines for mandatory transition to EMV terminals. For example, in the US after 2015, merchants who have not implemented EMV are liable for fraudulent transactions.
   • Example: In Europe, by 2010, most terminals had switched to EMV, which dramatically reduced skimming.
2. Financial incentives:
   • Banks and payment systems offer subsidies or preferential terms for merchants who upgrade their terminals.
3. Transaction Limit:
   • Banks may block transactions at non-EMV terminals in areas with a high risk of fraud.
   • Example: Some banks automatically reject transactions in countries where EMV is not widely implemented.
4. PCI DSS standards:
   • Merchants are required to comply with PCI DSS security standards, which include protecting card data and regularly updating equipment.
5. Traders' education:
   • Payment systems are running campaigns to inform merchants about the risks of older terminals and the benefits of EMV.

General measures against carding​

1. Tokenization:
   • Services like Apple Pay, Google Pay and Samsung Pay replace card details with unique tokens that are useless if intercepted.
   • Example: Even if the card data is stolen, the token cannot be used without device authentication.
2. Multi-Factor Authentication (MFA):
   • Banks are implementing biometrics, push notifications and hardware tokens to improve security.
   • Example: Sberbank in Russia uses biometric authentication in its application.
3. Fraud Detection Systems:
   • Machine learning algorithms analyze transactions in real time, identifying anomalies such as unusual geographic locations or amounts.
   • Example: If the card is suddenly used in another country, the bank may send a confirmation request through the app.
4. 3D-Secure:
   • Protocols such as Verified by Visa or Mastercard SecureCode require additional authentication for online transactions, reducing the risk of stolen data being used.
5. Customer Education:
   • Banks are educating users to avoid suspicious ATMs, check terminals for skimmers, and use secure 2FA methods.

Examples of real attacks​

1. Target (2013):
   • Attackers infected POS terminals with malware that harvested magnetic stripe data. The leak affected 40 million cards and cost hundreds of millions of dollars in losses.
2. SS7 Attack (2017):
   • In Germany, hackers used SS7 to intercept SMS with OTP, gaining access to victims' bank accounts. This exposed the vulnerability of SMS-2FA.
3. Skimming in tourist areas:
   • In popular tourist destinations such as Thailand or Mexico, skimmers are often installed on ATMs where tourists use magnetic stripe cards.

Conclusion​

Legacy technologies such as magnetic stripes, SS7 protocol, and non-EMV terminals remain easy targets for carders due to the lack of encryption, dynamic authentication, and modern security standards. Carders exploit these vulnerabilities through skimming, SMS interception, social engineering, and the use of cloned cards. Banks and payment systems are actively addressing these risks by implementing EMV, tokenization, MFA, and monitoring systems, but completely eradicating vulnerabilities takes time, especially in regions with outdated infrastructure. It is important for users to be vigilant, avoid suspicious terminals, and use modern authentication methods.

If you want to dive deeper into a specific aspect (e.g. technical details of SS7 or attack examples), write and I will provide additional information!