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German Court Rules That Clients Responsible For Phishing Losses
benfrog writes "A German court has ruled that clients, not banks, are responsible for losses in phishing scams. The German Federal Court of Justice (the country's highest civil court) ruled in the case of a German retiree who lost €5,000 ($6,608) in a bank transfer fraudulently sent to Greece. According to The Local, a German news site, the man entered 10 transaction codes into a site designed to look like his bank's web site and his bank is not liable as it specifically warned against such phishing attacks."
Theses sort of cases are really hurting the customer, banks have no reason to invest in a serious authentication scheme for online banking. It's a joke, my bank uses a password and some random question about me. At the very least they need to offer a true two factor solution, preferably token or certificate based.
Why? How should a bank discover the fraud, if everything is authenticated correctly?
Is a bank also responsible for your losses if a guy comes to your front door, poses as a bank clerk and you cut him a cheque?
I do kind of agree with this; beyond a certain point of security measures, information campaigns and automated fraud-protection mechanisms it starts getting unreasonable to expect the banks to take financial responsibility for their customers' stupidity.
Now I agree that the bar should be set very high, but at some point you have to accept that there are very stupid people out there who will do everything in their power to circumvent the things you put in place to protect them from themselves and it's not really fair that the rest of us should have to pay to bail them out (which is essentially what happens, the banks inevitably pass on the costs of fraud to their customers).
What? Read the article. The person who committed the act of stupidity is the person paying for it. This is the way it has to be.
If the banks payed for the stupidity of this man there'd be no incentive not to be stupid.
Why ?
The judge is right, there's no real viable way the bank can protect against this, even more modern protection schemes involving SMS messages still involve the enduser, and if he happily provides the received code to www.illtakeyourmoneythanks.ru despite numerous warnings from the bank (I have a similar bank, they clearly try to educate their users but as always most users are rather lazy than informed.) well, then there's really no way you can still blame the bank.
I know a large amount of users here are from the US and used to credit payments (as opposed to debit, which is the case here). Credit cards generally involve some (at first glance) better customer protection by laying all the risk at the seller, but debit cards almost never do this (and there's no need really).
I wouldnt go so far as to call the victim in this case an idiot, i don't know the guy, and it sounds like something that 1 in every 5 people who operate a computer would fall for at some point or another. But not following safety instructions from your bank, when they're clearly displayed EVERYWHERE, and get send to you in both real letters and as regular email updates, well i'd say the bank tried. My bank even gives free financial and online security seminars for people who aren't sure they understand what all the fuss is about.
Phishing, as we all know (at least those of us who frequent sites like /.) is a scam - and we also know that we should be responsible for our own action, however stupid it might turn out to be
But there are people who will never want to be responsible for any of their own action, and they will tell you that it's all the fault of that "1%" --- including those "banksters", and those "judge"
Muchas Gracias, Señor Edward Snowden !
... for which the bank still is liable. In this case, the customer grossly exceeded that level IMO.
However, what I am wondering is why the Greek bank (that could not identify where the money had gone to) is not liable. That is the real problem I see here. AFAIK, a bank has to be able to cancel a transfer up to 6 weeks after the transfer at the sending bank's request. So either the customer not only gave away 10 TANs despite being warned, he also failed to notice the transfer for quite some time, or something else is amiss here that the news story does not tell.
Most ACs are not even worth the keystrokes to insult them. Be generically insulted by this and ignored otherwise.
The problem with this ruling is that the customer hardly had a chance. The bank offers an authentication protocol that is vulnerable to a widespread and difficult to defend against type of attack. The bank knew that the protocol isn't secure and even warned about the vulnerability. All this despite the availability of protocols which are much more secure.
Suppose a credit card company told you to keep your credit card number secret and declined responsibility for fraudulent transactions because you once handed your credit card to a waiter. Would that be OK? If the bank offers a vulnerable protocol, it should bear the damage.
since noone here seems to bother to actually find out what was going on:
german banks do use a two factor authentication scheme:
- to log in you need your account number and a five digit pin
- to authorize a transaction after logging in, you need one out of 100 one-time-use 4 digit pins; The bank issues you 100 of those at a time, and then chooses one of them randomly when you enter a transaction ("Please enter pin number 17").
In this particular case the victim had:
- fallen for a phising website / trojan / keylogger, even after all the warnings in the german IT press (how else would the crooks get his account number and superpin)
- entered at least ten different PINs on one page, which the banksspecifically tell customers to NEVER do. all the bank pages have a big fat "We NEVER ask you for more than one pin" warning labels.
In other news: man drank nitroglycerine then went to jump around on a trampoline, widow sues maker of nitroglycerine.
Lets just hope that it doesn't become European law. Actually I hope the judge loses a million
I'm not sure that I agree with that. Most phishing scams are rather obvious, and people really ought to look before they jump.
What feel is missing is that banks and other take it more serious and clean up their practises. Like, I have on a few occasions had my bank call me about something related to security (eg. an unusual transaction) - and bizarrely, the guy calling is reluctant or even refuses to give information about why he calls or which department he calls from - which makes it feel like yet another scam, even if it is genuine.
Ideally, they should give you a call, then let you call back on a security number posted prominently on their web-site (so that it is well-known). This ought to be basic routine.
It has irked me for quite a while how lacking internet banking is in terms of security. That is not to say that the measures they have implemented are ineffective, but rather that they miss out on entire classes of security. It's as though they stick a bunch of locks on the front door, but leave the bathroom window wide open.
The most obvious one: bi-directional authentication. Banks require you to prove you are who you say you are. This is done by a variety of methods from passwords to hardware card reading gizmos which spew out a limited time code. What they neglect to do is prove that they are who they say they are.
If the first step in authenticating your identity was one which authenticated the bank's then it would be a lot harder for phishers to pretend to be your bank.
#1: this happend in 2008. Since October 2009, there is new legislation in place that, that shifts liability to the bank (except in cases of gross negligence on the side of the customer) It's the bank that save money by offering online banking instead of traditional counters, so they are responsible for making that process secure.
#2: There is not a single bank anymore that uses plain one-time transaction codes anymore.
#3: A few months ago another german court ruled that it's enough for a customer to have up to date virus software for due diligence. That's all a bank can expect from customers with typical, average computer knowledge.
#4. On the other hand (and that's what's the actual rationale behind this story here), a bank can expect customers to understand and remember a security advice along the lines of "We will never ask you for more than one transaction code in a row and we will never ask you for a transaction code at all unless you want to make a transaction in the first place"
So there is not much relevance to this story.
bickerdyke
That security protocol isn't in use anymore.
The bank specifically issued a warning against exactly the type of attack the customer fell for.
That ruling is in line with the laws in place 2008, when that happend, Laws have been changed since then.
bickerdyke
Banks could also require people to show up in person at a designated branch, present five different forms of identification, sign fifteen release forms, and swear a blood oath to Odin before agreeing to any transaction whatsoever.
My point is very simple: it is not the bank's fault that the client acted in a manner contrary to his own financial interest. Society as a whole operates on the principle that services are generally tailored to the majority. The majority isn't suffering from these issues. If the minority affected by these issues so desires, they're more than welcome to resume good old fashioned "drive down to the bank" methods.
What you're advocating is just another step toward a total nanny state where everyone walks around in government-mandated plastic bubbles. Have fun with that; I won't be attending your party.
Write failed: Broken pipe
Why? How should a bank discover the fraud, if everything is authenticated correctly?
Because they (possibly) enabled the fraud to take place. Quoting from the artcle:
According to the Süddeutsche Zeitung, the transfer occurred three months after he entered ten transaction numbers, or TAN codes, on what turned out to be an illegally manipulated version of his bank’s website.
So, how was the site manipulated? Did the attacker actually modify the bank's server? ==> In that case, bank clearly bears the responsibility, as they have a duty to keep their service secure.
Or did the attacker take advantage of a fault in the user's OS or browser. ==> in that case, at first glance, the user would be responsible to run such shoddy software where this is possible. However, in the past, and possibly even now, many banks forced/are forcing their users to use such vulnerable software. If this is the case, again the bank should be responsible. The user would be well advised to go through the "General Conditions" for the web service of the last ten years, and search for any clauses such as "the user agrees to only use Windows and/or Internet Explorer to access the service". If any are found, he should clearly get his money back.
Is a bank also responsible for your losses if a guy comes to your front door, poses as a bank clerk and you cut him a cheque?
Yes, if the bank habitually conducts its business in such a fashion.
My bank authenticates itself in two ways:
1) Using an Extended Validation certificate, so it shows up in green in the browser (instead of blue) and lists the full name of the bank.
2) By showing me an image and phrase I chose on the login page.
I can't really think of how they can do more to prove it is them, without really getting annoying. They also allow me to use two factor authentication (which I have elected to use) and require it when any change is being made to the account like adding a payee or the like.
Is it perfect? No but I'm not seeing a whole lot more they can do and still keep things easy.
To be fair, the banks do not allow you to opt in to security features or opt-out of security liabilities.
I'd love if my bank would allow me to secure my checking account to restrict outgoing payments to a list of accounts/payees confirrmed by the branch.
I'd love to opt-in to a second factor token authentication and 2nd bank card pin that has a lower withdrawl limit or one time pin that I can use in sketchy ATMs POS systems.
I pay the bank dearly to protect my money and deliver service. They have had years to spend on R&D. Luckily, I have not been affected by the lack of security or insurance from my bank.
120 characters ought to be enough for anyone
Mod Parent up, that post is spot on. In fact, the law has been changed 2009 (if I remember rightly) to shift the liability towards the bank unless the customer acts grossly negligent (grob fahrlässig). The court did NOT decide whether the customer would have been liable according to the laws in place today.
Plus many banks in Germany phased out the iTAN system in favor of SMS-codes or TAN-generators that require the debit card to operate and are only valid for the transaction that was entered to generate the TAN (amount, target account etc...).
"the banks are responsible for the stupidity of individuals"
No, the banks are responsible for their lack of transaction security.
TAN (by now replaced by far more sensible techniques) worked like this:
You got a sealed numbered list of 100 six or eight digit codes. Whenever you wanted to transfer money you had to enter one of the numbers (later a specific one, like #74). This authorized the transfer and you crossed out the number on your list. When around 90% of the list was used up, you got a new on by mail.
The first version (unnumbered) had the obvious drawback of X numbers stolen = x transfers up the the preset transfer limit (you had to show up in person to change that one). Numbered list had the advantage that one never new in advance which number would be asked for, and a potential thief had to get his hand on the whole list.
Of course all that stuff is outdated now and replaced by code generators that work in connection with your bank card or sms codes. Both of these create codes that only work for the specific transaction (amount, receiving account number, etc which is displayed in advance) and only for a very limited time frame (15 minutes).
I often leave my car unlocked. Why?
Thief breaks in, I lose maybe $5 in change form the console and some 15-year old CDs. If my car were locked, I'd lose that, PLUS a $200 car window they smashed to get said items. It is not worth locking my car.
I've built up so much character I have an alter-ego
Shouldn't the criminal phisher be responsible? So I leave my car unlocked and someone steals it. You could say "you idiot you deserve that". Does the thief gain legal rights to my car now?
You mix up things.
Of course the one stealing your car commits theft, as does the one stealling the 5000 Euro from this person's bank account. And those criminals, when caught, will be held responsible.
The question here is who's liable for the damage incurred by the theft. In case of your car being stolen, you will not be able to get any damages from the car manufacturer arguing, say, not good enough locks on the doors. Just like in case of the money stolen from the bank account, the bank is not liable, and the judge ruled that the locks the bank put in place were good enough, and that the bank client should have taken better care.
And even if the criminal gets caught, that doesn't mean the victim will get their money or car back. So they still lose out.