Login procedures exploited by crooks to steal tens of millions of dollars from the Internal Revenue Service are also used by HealthCare.gov, the Social Security Administration, and the U.S. Citizenship and Immigration Services to help administer benefits.
And that’s raising questions about once tried-and-true identity-protection measures.
First, let’s explain how the IRS caper played out, according to the tax agency's disclosure Tuesday. ID thieves used previously stolen Social Security numbers and other, likely public, personal information on 100,000 taxpayers to access the IRS' “Get Transcript" service.
The transcripts displayed for the criminals each victim's previous tax filings. Data from the filings was then used to submit roughly 15,000 fraudulent applications for tax refunds totaling under $50 million, IRS officials said.
Now, here's the problem with IRS' layered security, according to experts: "Get Transcript" relies on an ID-verification process that requires entering a Social Security number, date of birth and street address, as well as answering “challenge questions,” such as, “Which of the following streets have you lived on?” The former can be bought on the underground “Dark Web.” The latter often can be found on free or fee-based databases and social media sites.
What was once private information is now available for public consumption on the World Wide Web.
The Q&A procedure is known as "knowledge-based authentication," or KBA. Crooks with purloined credentials and the right knowledge faked out the IRS and could likewise skirt access controls on other government benefits sites that depend on Q&As, some security researchers say.
It’s unclear what other ID checks, if any, are used by HealthCare.gov and USCIS in addition to Q&A method. Officials at those agencies were not immediately able to comment.
A difficulty with KBA is that the quality of the challenge questions varies wildly.
"There are no standards today that allow the effectiveness of different KBA solutions to be measured against each other – and without it, it’s hard for KBA customers to know exactly what kind of quality they are buying," said Jeremy Grant, the recently departed senior executive adviser for identity management at the National Institute of Standards and Technology.
"KBA is not perfect, but, to date, it’s been the best the market has had to offer when it comes to remote identity proofing – meaning solutions that give people the ability to prove their identity without the hassle of having to show up in person someplace," said Grant, who stepped down one month ago.
This sort of authentication is used on HealthCare.gov, mySSA and USCIS.gov to file for health insurance subsidies, access one's Social Security history and legal immigrant status, respectively.
A criminal can buy user IDs, passwords and KBA answers on the underground black market, said Chenxi Wang, a vice president at security firm CipherCloud. The puzzle pieces needed to put together a personality "are often available as a bundle," she said.
IRS officials said that’s likely what happened with the “Get Transcript” breach. The tax refund crooks already had taken, from "non-IRS sources,” the Social Security numbers, dates of birth and street addresses necessary to access the online feature. The bad guys also exploited "an outside source" to gain enough information to answer "several personal verification questions that typically are only known by the taxpayer."
Over the past few years, there have been many data breaches that compromised individuals' Social Security numbers and other personal details. They include attacks on, among other organizations, hospitals nationwide, several health care insurers, Lexis Nexis and Sony.
A safer mechanism for taxpayer registration would have been a two-step sign-on process that also required, for instance, a one-time pass code sent to the user's smartphone, many analysts said. Two-factor authentication "is more secure than KBA, but is also more cumbersome a user experience," Wang said.
On Thursday, Social Security officials said KBA questions are utilized in conjunction with personal records to confirm users are who they claim to be, but the agency also offers people optional two-factor authentication.
“We use knowledge-based questions as another layer of protection and work regularly with an external service provider to enhance our approach for using these types of out-of-wallet questions,” Social Security spokeswoman Nicole Tiggemann said. “We work hard to ensure our online services are safe and the public’s privacy is protected.”
The IRS had the opportunity to switch to a more secure authentication arrangement but decided against it. A 2013 study that IRS officials helped author with NIST illustrated that using outside, governmentwide ID-check services, like those offered by Verizon or Symantec, could have saved them up to $305 million a year compared with the cost of maintaining their own in-house ID-proofing system.
The governmentwide ID companies also use KBA, but those providers must undergo a stringent certification process before they can sell to agencies.
"Even without considering any reduction in fraud from improved authentication of taxpayers, the adoption of improved online identity management would result in a net benefit of $74 million to $305 million annually, relative to continuing current operations," NIST National Strategy for Trusted Identities in Cyberspace officials said in July 2013.
The savings would come "primarily from eliminating the need for the IRS to pay to identity proof all users individually. Under an NSTIC-aligned authentication system, the IRS could instead accept third-party trusted credentials already strengthened by identity proofing. These third parties would be able to spread out the identity proofing costs across many relying parties at which the credential would be accepted."
The IRS decided not to make this ID security change.
Alternatively, the study recommended expanding the number of challenge questions and requiring every taxpayer to have a PIN number.
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