Category Archives: Cybercrime

Tracing stolen bitcoin

A new Computerphile video explains how we’ve worked out a much better way to track stolen bitcoin. Previous attempts to do this had got entangled in the problem of dealing with transactions that split bitcoin into change, or that consolidate smaller sums into larger ones, and with mining fees. The answer comes from an unexpected direction: a legal precedent in 1816. We discussed the technical details last week at the Security Protools Workshop; a preprint of our paper is here.

Previous attempts to track tainted coins had used either the “poison” or the “haircut” method. Suppose I open a new address and pay into it three stolen bitcoin followed by seven freshly-mined ones. Then under poison, the output is ten stolen bitcoin, while under haircut it’s ten bitcoin that are marked 30% stolen. After thousands of blocks, poison tainting will blacklist millions of addresses, while with haircut the taint gets diffused, so neither is very effective at tracking stolen property. Bitcoin due-diligence services supplant haircut taint tracking with AI/ML, but the results are still not satisfactory.

We discovered that, back in 1816, the High Court had to tackle this problem in Clayton’s case, which involved the assets and liabilities of a bank that had gone bust. The court ruled that money must be tracked through accounts on the basis of first-in, first out (FIFO); the first penny into an account goes to satisfy the first withdrawal, and so on.

Ilia Shumailov has written software that applies FIFO tainting to the blockchain and the results are impressive, with a massive improvement in precision. What’s more, FIFO taint tracking is lossless, unlike haircut; so in addition to tracking a stolen coin forward to find where it’s gone, you can start with any UTXO and trace it backwards to see its entire ancestry. It’s not just good law; it’s good computer science too.

We plan to make this software public, so that everybody can use it and everybody can see where the bad bitcoins are going.

I’m giving a further talk on Tuesday at a financial-risk conference in Paris.

We will make you like our research

This is the title of a paper that appeared today in PLOS One. It describes a tool we developed initially to assess the gullibility of cybercrime victims, and which we now present as a general-purpose psychometric of individual susceptibility to persuasion. An early version was described three years ago here and here. Since then we have developed it significantly and used it in experiments on cybercrime victims, Facebook users and IT security officers.

We investigated the effects on persuasion of a subject’s need for cognition, need for consistency, sensation seeking, self-control, consideration of future consequences, need for uniqueness, risk preferences and social influence. The strongest factor was consideration of future consequences, or “premeditation” for short.

We offer a full psychometric test in STP-II with 54 items spanning 10 subscales, and a shorter STP-II-B with 30 items to measure first-order factors, but that omits second-order constructs for brevity. The scale is here with the B items marked, and here is a live instance of the survey for you to play with. Once you complete it, there’s an on-the-fly interpretation at the end. You don’t have to give your name and we don’t record your IP address.

We invite everyone to use our STP-II scale – not just in security contexts, but also in consumer and marketing psychology and anywhere else it might possibly be helpful. Do let us know what you find!

Ethical issues in research using datasets of illicit origin

On Friday at IMC I presented our paper “Ethical issues in research using datasets of illicit origin” by Daniel R. Thomas, Sergio Pastrana, Alice Hutchings, Richard Clayton, and Alastair R. Beresford. We conducted this research after thinking about some of these issues in the context of our previous work on UDP reflection DDoS attacks.

Data of illicit origin is data obtained by illicit means such as exploiting a vulnerability or unauthorized disclosure, in our previous work this was leaked databases from booter services. We analysed existing guidance on ethics and papers that used data of illicit origin to see what issues researchers are encouraged to discuss and what issues they did discuss. We find wide variation in current practice. We encourage researchers using data of illicit origin to include an ethics section in their paper: to explain why the work was ethical so that the research community can learn from the work. At present in many cases positive benefits as well as potential harms of research, remain entirely unidentified. Few papers record explicit Research Ethics Board (REB) (aka IRB/Ethics Commitee) approval for the activity that is described and the justifications given for exemption from REB approval suggest deficiencies in the REB process. It is also important to focus on the “human participants” of research rather than the narrower “human subjects” definition as not all the humans that might be harmed by research are its direct subjects.

The paper and the slides are available.

Is the City force corrupt, or just clueless?

This week brought an announcement from a banking association that “identity fraud” is soaring to new levels, with 89,000 cases reported in the first six months of 2017 and 56% of all fraud reported by its members now classed as “identity fraud”.

So what is “identity fraud”? The announcement helpfully clarifies the concept:

“The vast majority of identity fraud happens when a fraudster pretends to be an innocent individual to buy a product or take out a loan in their name. Often victims do not even realise that they have been targeted until a bill arrives for something they did not buy or they experience problems with their credit rating. To carry out this kind of fraud successfully, fraudsters need access to their victim’s personal information such as name, date of birth, address, their bank and who they hold accounts with. Fraudsters get hold of this in a variety of ways, from stealing mail through to hacking; obtaining data on the ‘dark web’; exploiting personal information on social media, or though ‘social engineering’ where innocent parties are persuaded to give up personal information to someone pretending to be from their bank, the police or a trusted retailer.”

Now back when I worked in banking, if someone went to Barclays, pretended to be me, borrowed £10,000 and legged it, that was “impersonation”, and it was the bank’s money that had been stolen, not my identity. How did things change?

The members of this association are banks and credit card issuers. In their narrative, those impersonated are treated as targets, when the targets are actually those banks on whom the impersonation is practised. This is a precursor to refusing bank customers a “remedy” for “their loss” because “they failed to protect themselves.”
Now “dishonestly making a false representation” is an offence under s2 Fraud Act 2006. Yet what is the police response?

The Head of the City of London Police’s Economic Crime Directorate does not see the banks’ narrative as dishonest. Instead he goes along with it: “It has become normal for people to publish personal details about themselves on social media and on other online platforms which makes it easier than ever for a fraudster to steal someone’s identity.” He continues: “Be careful who you give your information to, always consider whether it is necessary to part with those details.” This is reinforced with a link to a police website with supposedly scary statistics: 55% of people use open public wifi and 40% of people don’t have antivirus software (like many security researchers, I’m guilty on both counts). This police website has a quote from the Head’s own boss, a Commander who is the National Police Coordinator for Economic Crime.

How are we to rate their conduct? Given that the costs of the City force’s Dedicated Card and Payment Crime Unit are borne by the banks, perhaps they feel obliged to sing from the banks’ hymn sheet. Just as the MacPherson report criticised the Met for being institutionally racist, we might perhaps describe the City force as institutionally corrupt. There is a wide literature on regulatory capture, and many other examples of regulators keen to do the banks’ bidding. And it’s not just the City force. There are disgraceful examples of the Metropolitan Police Commissioner and GCHQ endorsing the banks’ false narrative. However people are starting to notice, including the National Audit Office.

Or perhaps the police are just clueless?

AlphaBay and Hansa Market takedowns

Yesterday the FBI announced the takedown of the AlphaBay marketplace, a hidden service facilitating the sale of drugs, as well as other illicit products and services. The takedown had actually occurred weeks earlier, and had been staged to appear like an exit scam, where the operators take off with the money.

What was particularly interesting about the FBI’s takedown was that it was coordinated with the activities of the Dutch police, who had previously taken over the Hansa Market, another leading blackmarket. As the investigators were then controlling this marketplace they were able to monitor the activities of traders who had been using AlphaBay and then moved to Hansa Market.

I’ve been interested in online blackmarkets for some time, particularly those that relate to the stolen data economy. In fact, last year a paper written by Professor Thomas Holt and I was published. This paper outlines a number of intervention approaches, including disrupting the actual marketplaces where trade takes place.

Among our numerous suggestions are three that have been used, in combination, by this international police effort. We suggest that law enforcement promote distrust, which they did by making AlphaBay appear to have been an exit scam. We also suggest that law enforcement take over and take down marketplaces. Neither of these police approaches are new, and we point to previous examples where this has happened. In our conclusion, we stated:

Multiple interventions coordinated across different guardians, nationally and internationally, incorporating different bodies (investigative, regulatory, strategic, non-government organisations and the private sector) that have ownership of the crime prevention problem may reduce duplication of effort, as well as provide a more systematic approach with the greatest disruption effect.

The Hansa Market and AlphaBay approach demonstrates how this can be achieved. By co-ordinating the approaches, and working together, the disruptive effects of their work is likely to be much greater than if they had acted alone. It’s likely we’ll see arrests of traders and further disruption to the online drug trade.

Work by Soska and Christin found that after the Silk Road takedown, more online blackmarkets emerged and evolved. I think this evolution will continue, but perhaps marketplace administrators will have to work harder in order to earn the trust of their users.

National Audit Office confirms that police, banks, Home Office pass the buck on fraud

The National Audit Office has found as follows:

“For too long, as a low value but high volume crime, online fraud has been overlooked by government, law enforcement and industry. It is now the most commonly experienced crime in England and Wales and demands an urgent response. While the Department is not solely responsible for reducing and preventing online fraud, it is the only body that can oversee the system and lead change. The launch of the Joint Fraud Taskforce in February 2016 was a positive step, but there is still much work to be done. At this stage it is hard to judge that the response to online fraud is proportionate, efficient or effective.”

Our regular readers will recall that over ten years ago the government got the banks to agree with the police that fraud would be reported to the bank first. This ensured that the police and the government could boast of falling fraud figures, while the banks could direct such fraud investigations as did happen. This was roundly criticized by the Science and Technology Committee (here and here) but the government held firm. Over the succeeding decade, dissident criminologists started pointing out that fraud was not falling, just going online like everything else, and the online stuff was being ignored. Successive governments just didn’t want to know; for most of the period in question the Home Secretary was one Theresa May, who so impressed her party by “cutting crime” even though she’d cut 20,000 police jobs that she got a promotion.

But pigeons come home to roost eventually, and over the last two years the Office of National Statistics has been moving to more honest crime figures. The NAO report bears close study by anyone interested in cybercrime, in crime generally, and in how politicians game the crime figures. It makes clear that the Home Office doesn’t know what’s going on (or doesn’t really want to) and hopes that other people (such as banks and the IT industry) will solve the problem.

Government has made one or two token gestures such as setting up Action Fraud, and the NAO piously hopes that the latest such (the Joint Fraud Taskforce) could be beefed up to do some good.

I’m afraid that the NAO’s recommendations are less impressive. Let me give an example. The main online fraud bothering Cambridge University relates to bogus accommodation; about fifty times a year, a new employee or research student turns up to find that the apartment they rented doesn’t exist. This is an organised scam, run by crooks in Germany, that affects students elsewhere in the UK (mostly in London) and is netting £5-10m a year. The cybercrime guy in the Cambridgeshire Constabulary can’t do anything about this as only the National Crime Agency in London is allowed to talk to the German police; but he can’t talk to the NCA directly. He has to go through the Regional Organised Crime Unit in Bedford, who don’t care. The NCA would rather do sexier stuff; they seem to have planned to take over the Serious Fraud Office, as that was in the Conservative manifesto for this year’s election.

Every time we look at why some scam persists, it’s down to the institutional economics – to the way that government and the police forces have arranged their targets, their responsibilities and their reporting lines so as to make problems into somebody else’s problems. The same applies in the private sector; if you complain about fraud on your bank account the bank may simply reply that as their systems are secure, it’s your fault. If they record it at all, it may be as a fraud you attempted to commit against them. And it’s remarkable how high a proportion of people prosecuted under the Computer Misuse Act appear to have annoyed authority, for example by hacking police websites. Why do we civilians not get protected with this level of enthusiasm?

Many people have lobbied for change; LBT readers will recall numerous articles over the last ten years. Which? made a supercomplaint to the Payment Services Regulator, and got the usual bland non-reassurance. Other members of the old establishment were less courteous; the Commissioner of the Met said that fraud was the victims’ fault and GCHQ agreed. Such attitudes hit the poor and minorities the hardest.

The NAO is just as reluctant to engage. At p34 it says of the Home Office “The Department … has to influence partners to take responsibility in the absence of more formal legal or contractual levers.” But we already have the Payment Services Regulations; the FCA explained in response to the Tesco Bank hack that the banks it regulates should make fraud victims good. And it has always been the common-law position that in the absence of gross negligence a banker could not debit his customer’s account without the customer’s mandate. What’s lacking is enforcement. Nobody, from the Home Office through the FCA to the NAO, seems to want to face down the banks. Rather than insisting that they obey the law, the Home Office will spend another £500,000 on a publicity campaign, no doubt to tell us that it’s all our fault really.