The Flashpoint Guide to Card Fraud: How Financial Institutions Can Better Detect, Mitigate, and Prevent Fraud

Introduction and key takeaways

Card Fraud, or carding, describes the process by which threat actors gain access to, and then leverage, stolen credentials or stolen credit card data in order to fraudulently purchase goods and services—or, to monetize ongoing fraud operations (or for sheer profit) by reselling them on the deep and dark web.  For threat actors, cybercrime is a lucrative if risky business to be in. And for the organizations, communities, and individuals they target, it can be costly to fall victim to their malicious schemes. According to IBM’s Cost of a Data Breach report, the global average cost of a data breach, inclusive of compromised credentials, was $4.24 million. In order to proactively combat cyber attacks, and mitigate the risk of card fraud rapidly and comprehensively, security teams at financial institutions must gain an understanding of the risks they’re facing—including data breaches that may occur due to an intentional or unintentional activity, such as an employee error—and the tools that can help them proactively and consistently combat their exposure to risk.  In this article we:

• Define card fraud and review the main types of card fraud that financial institutions, retailers, and other ancillary organizations commonly face;
• Outline how an organization’s sensitive data can become compromised;
• Review the tactics, techniques, and procedures (TTPs) threat actors use to steal card information; 
• Determine how threat actors leverage stolen card information—plus what motivates them;
• Outline best practices for organizations to identify card exposure, prevent card and payment fraud, and take action.

What is card fraud?

Card fraud, or “carding” is a criminal activity where threat actors—sometimes individuals, sometimes “collectives”—target an organization’s data, including compromised credentials, card numbers, zip codes, and other sensitive data that could put an organization’s assets, customers, stakeholders, and reputation at risk if leveraged by threat actors on the deep and dark web. This includes fraudulent purchases, identity fraud, account takeover (ATO), and reselling data in card shops, like the now-defunct Joker Stash and across other illicit marketplaces on the deep and dark web. 

Card fraud is the low-hanging fruit of cybercriminal activity because the barrier to entry is low, as many carding methods lack sophistication and do not require much technical acumen to execute. Plus, they can be lucrative for nearly every entity along the threat intelligence lifecycle.

Why threat actors steal, sell, and buy compromised credentials and card data

Most threat actors targeting the financial sector are financially motivated—many of them focus on card and payment fraud as a vehicle for their financial goals: to fund future operations or for sheer profit. However, financial motivation does not account for all cybercrime targeting the financial and retail sector. In addition to financial motivations, malicious actors have other aims that can also affect financial institutions, as well other organizations across the public and private sectors, well beyond credit card and payment fraud. These cyberattacks can be just as damaging.

Hacktivism

Some threat actors, known as “hacktivists,” are driven by a moral or ideological opposition to the products or services offered by organizations in both the public and private sectors. In order to raise fear, uncertainty, and doubt (FUD), hacktivists disseminate social or political ideologies either as individuals or as part of a greater hacktivist group. 

Disruption and damage

It’s possible for competitors to target organizations that they deem a threat to their business. Similarly, nation-state threat actors may aim to cause disruption or damage to companies or organizations that provide a critical service.

Attention, notoriety

Threat actors motivated by notoriety will target the organizations that will most likely result in getting attention, and allocate their resources away from smaller scale or opportunistic cyberattacks.

Insider threats

Insider threats refer to both the unintentional and malicious threats that employees pose to organizations. Malicious insiders leverage their privileged access to steal or exfiltrate data, most commonly via email. They then use this data as a blackmail or extortion device, or resell it in illicit threat actor communities. Insiders can also serve as a point of contact for threat actors looking to install or spre
ad card stealer and point-of-sale (POS) malware, and  sometimes offer out their service as an insider within illicit communities.  Employees can become inadvertent insiders by practicing poor cybersecurity hygiene, including clicking phishing emails or misconfiguring digital assets. 

How threat actors attack

Card-not-present

Card fraud generally falls into two categories: card-not-present and card-present. Card-not-present-related fraud relies on breached financial data that’s being sold and traded on dark web markets, illicit forums, and chat services.  Card-not-present fraud allows threat actors to be in possession of a large number of compromised cards and credentials in order to fund illegitimate purchases. Or, they can resell the stolen information to other carders who then leverage the exposed data most frequently via card cloning or digital shopping account linking.  This data generally is exposed when a threat actor obtains data that is inadvertently leaked, such as via a code repository or misconfigured network device; financial records and other personally identifiable information (PII) on poorly secured websites; and bank login credentials. Or, they employ targeted skimming and shimming attacks against ATMs, POS systems, and, occasionally at gas pumps where credit cards and debit card payments are accepted.

Card present 

In contrast, card present fraud requires the threat actor to physically present a fake or stolen card to the merchants. This method has obvious pitfalls that card-not-present fraudsters are not subjected to—getting caught in person or the card being declined, for instance—making it much more difficult for the threat actor selling credentials or using them to make off with fraudulently purchased goods and services. Card present activity has been mostly overshadowed by card-not-present fraud, but it still presents risk to financial institutions and retailers alike.

Malware

Some types of malware are specifically built for data exfiltration or logging. These include remote access trojans (RATs) which allow an attacker to establish a remote connection to exfiltrate data—and stealers, which are trojans that can steal login credentials, cookies, credit card numbers, and other browser-stored information. 

Ransomware

Extortionist ransomware attacks threaten the victim organization with the sale of sensitive or private information in order to  get them to pay the ransom. Ransomware groups understand that retailers often store sensitive customer information including financial data, which could be valuable both in negotiations and in resale of the data on dark web marketplaces. 

Recommended: The Rise and Fall of Joker’s Stash, a Flashpoint report on Joker’s Stash, one of the largest and longest-standing in history.

DDoS

Distributed Denial of Service (DDoS) is primarily used to disrupt or completely shutdown a network’s availability, though increasingly, they pave the way for data breaches. DDoS attacks are used to mask other malicious behavior, like installing malware, and to occupy security and IT teams while other malicious activity is being performed on the network and threat actors gain a foothold. This foothold could enable threat actors to exfiltrate sensitive data from financial institutions, putting assets, executives, customers, and third parties at risk.

Social engineering

Social engineering is the art of psychologically manipulating humans into performing a desired action or revealing sensitive information.  Threat actors employ these methods to bypass corporate anti-fraud, security, and user verification procedures to facilitate financial fraud. Many of these methods involve employing social engineering tactics against customer service representatives either in-person, online, or over the phone in order to convince or persuade them to perform an action that would enable the fraud.  In almost every situation, customer service representatives are not aware that they are being used to facilitate the fraud.

Cloud

Most cloud computing-related vulnerabilities stem from misconfigurations, leaving data exposed to the internet and thus exposed to threat actors looking to steal or sell this information. Threat actors have been observed targeting the cloud backups of financial institutions, which can customer PII, code repositories, and other sensitive data that could put organizations at risk if exposed.

Third-party and supply chain

Financial institutions must be aware of supply chain risks of third party vendors, like cloud service providers, that offer digital solutions and data storage. A breach or cyberattack along any of these steps of the supply chain could not only affect business, but compromise sensitive customer data.  

Credential stuffing

Credential stuffing attacks, which includes brute force attacks, refer to various techniques relying on testing a large number of username: password combinations against login infrastructure. Threat actors who carry out this type of attacks typically do so to gain unauthorized entry to poorly secured bank, e-commerce or other type of account or to test the validity of compromised credentials before selling them. 

Card present: How threat actors leverage compromised credentials

Once they obtain stolen information, from credit card data and PII to login credentials, threat actors can leverage the data in a variety of ways, depending on their motivations. Threat actors will list their stolen information on card shops or account shops, depending on the nature of the compromised data. Credit card numbers and details are listed on card shops, and bank logs or retail site logins are more likely to be sold in account shops. 

Card present: Gift card fraud

Gift card fraud is unique to the retail sector and is the result of fraudsters using funds from stolen credit cards to purchase gift cards in order to cash out their compromised card as quickly as possible. Threat actors will generally buy high-priced gift cards to use for themselves at a later date. Some will also advertise a gift card service on deep and dark web forums where they promise to acquire goods at a discount, using the gift cards purchased with stolen funds.  Retailers can get out in front of holiday shopping related card fraud by implementing mitigation techniques like one time passwords (OTP), multi factor authentication, network segmentation if possible, and least privilege for employees to lessen exposure to financial information. Customers should also remain vigilant about their personal security practices surrounding their financial information and password hygiene.

Card present: Card cloning

Card cloning refers to software that threat actors use to activate stolen financial information via a physical card. Threat actors will copy this stolen information onto a physical card, which can then be used to withdraw cash at ATMs.  Threat actors then bundle and sell these cloned cards and ship them, discreetly, to buyers.  Digital shop linking often enables threat actors to link stolen credit card information to various shopping applications to cash out the stolen credit card. One way they can do this is by purchasing gift cards. 

Card-not-present: How threat actors leverage compromised credentials

Fraudulent purchases

Perhaps most commonly, threat actors will leverage CNP fraud to fund illegitimate online purchases. This allows threat actors to quickly and digitally cash out of their stolen cards or accounts. In these situations, the onus of mitigation will fall on the affiliated financial institution or merchant, who will focus on rectifying the issue on the client-side, allowing the threat actor to make off with their fraudulently purchased items. 

Identify fraud

Card fraud is a version of identity fraud. Depending on the data purchased, card numbers can come with additional personally identifiable details like social security numbers, physical addresses, email addresses, and phone numbers. This additional information can possibly give threat actors access to bank accounts, or perhaps enough details in order to open fraudulent accounts or apply for fraudulent credit cards. A common mitigation employed by organizations (usually banks) that were the victim of a breach including financial information, is free credit and identity theft monitoring. 

Account takeover (ATO)

Account takeover (ATO) fraud is another form of identity theft, where threat actors leverage certain PII or other tactics like phishing in order to overtake a victim’s account. Once inside a bank account, fraudsters can transfer money, request new credit or bank cards, change passwords, and notification settings so that the account owner is not alerted to this fraudulent activity, at least right away. In an account takeover scheme, the threat actor tries to remain unnoticed as long as possible.

Reselling in card shops 

After credit or debit card information or bank logs have been harvested, threat actors generally have a limited amount of time to capitalize on the access that they have, before fraud is detected and the card or account is frozen. If a threat actor is in possession of a large number of card numbers or bank logs, it is common for them to offload the ones they may not be able to timely access to sell this information on card shops, account shops, or forums. Financial information especially is consistently valuable in these marketplaces, as the potential for financial reward is often much higher than the purchase price.

Solutions for fraud teams: How to identify threats, reduce risk, and take action after breaches

With responsibilities including combating data theft, safeguarding assets, and keeping up with threat actors’ ever-evolving tactics, financial institution CISOs and fraud teams require highly specific resources in order to identify cyber threats, reduce risk, and scale operations effectively.  Below are some best practices that SOC and CTI teams can employ to identify cyber threats and rectify them.

Minimize card fraud

• Understand and track data relating to your cards or your exposure in a timely basis. Flashpoint’s card fraud module provides high-level analytics designed to summarize your exposure, as well as granular shop and dump data to help you identify specific cards and accounts on which you need to take action.
• Participate in information exchanges with other institutions to maximize common point of purchase data and related context.
• Proactively use the data you receive by establishing fraud risk models, de-authorizing breached cards, and assigning fraud professionals to analyze and triage the data. 

Compromised Credentials Monitoring

• Identify accounts which have been compromised on a consistent basis in order to provide ongoing fraud monitoring without impacting user experience.
• Gain insight into the types of domains being targeted, as well as the most vulnerable passwords and cards that are most likely to be linked to unique breaches requiring further action.
• Integrate data within client’s existing business processes to make it immediately actionable.

Combat Account Takeover (ATO)

Search and monitor Flashpoint’s unique collections for compromised credentials belonging to their employees in order to flag accounts, reset passwords, and restrict permissions to prevent actors from accessing confidential or personally identifiable information (PII). Leverage our OCR technology, which enables fraud teams to identify text, logos, and objects from multimedia within Flashpoint collections. Monitor for compromised credentials belonging to your customers, enabling you to preempt fraudulent activity and protect your client base.

See Flashpoint’s Card Fraud Solutions in Action 

Flashpoint partners with financial institutions of all sizes to address card fraud threats, including many of the top global banks. Flashpoint’s Card Fraud solutions equip security teams with the tools, dashboards, alerts, and actionable intelligence they need to proactively identify threats, prevent card fraud, and take action to combat exposure to risk. Sign up for a demo or a free trial today.