Record-Setting Data Breach Highlights Corporate Security Risks

Businesses aren't doing enough to defend their systems against hackers, like the five men charged Thursday by the Justice Department with conspiring to steal data from corporate databases over a seven-year period, according to a San Diego State MIS professor. The Justice Department characterized the alleged criminal enterprise as the largest of its kind to be prosecuted in the United States.

The defendants, four Russians and a Ukrainian, are said to have stolen more than 160 million card numbers and to have inflicted hundreds of millions of dollars in financial harm to more than a dozen major companies. No audit of said costs or detailed breakdown was provided.

The indictment says that the men used a variety of hacking techniques, including SQL injection attacks, to place malware on networks, thereby obtaining login credentials and credit card numbers, known as "dumps," for sale. It also says that the men used network sniffer programs to capture credit card transaction data in real-time from payment networks.

One particular passage in the indictment is noteworthy, in light of recent reports about the extent to which U.S. law enforcement and intelligence agencies can monitor global communication channels, even ostensibly encrypted services like Skype. "After becoming aware that law enforcement tracked certain communications using known messaging services, the co-conspirators established private and encrypted communications channels to avoid detection. Fearing that even these encrypted communication channels could be monitored, several of the co-conspirators ultimately attempted to conduct their communications in person."

[ How deep can U.S. surveillance actually go? Read Can The NSA Really Track Turned-Off Cellphones? ]

Even technically savvy computer hackers, it seems, have doubts about their ability to operate computers securely.

Two of the men, Vladimir Drinkman, 32, of Syktyykar and Moscow, Russia, and Dmitriy Smilianets, 29, of Moscow, were arrested June 28, 2012, while traveling in the Netherlands, at the request of the United States. Smilianets was extradited in September 2012.

The three others, Alexandr Kalinin, 26, of St. Petersburg, Russia, Roman Kotov, 32, of Moscow, and Mikhail Rytikov, 26, of Odessa, Ukraine, remain at large.

The men are alleged to have targeted corporate financial transaction data from 7-Eleven, Carrefour, Commidea, Dexia, Diners Singapore, Dow Jones, Euronet, Global Payment, Hannaford, Heartland, Ingenicard, JCP, JetBlue, NASDAQ, Visa Jordan and Wet Seal.

Kalinin and Drinkman were previously charged in a 2009 indictment with Albert Gonzalez, 32, of Miami, in conjunction with five data breaches, including the 2008 breach of Heartland Payment Systems. Gonzalez is currently serving a 20-year sentence in federal prison sentence for his involvement in those incidents.

"Those who have the expertise and the inclination to break into our computer networks threaten our economic well-being, our privacy and our national security," said U.S. attorney Paul J. Fishman of the District of New Jersey, in a statement. "And this case shows, there is a real practical cost because these types of frauds increase the costs of doing business for every American consumer, every day. We cannot be too vigilant and we cannot be too careful."

However, San Diego State University MIS professor Murray Jennex suggests that companies believe they can be too vigilant and careful, at least in terms of security spending. Despite recent improvements in dealing with SQL injection attacks and other hacking techniques, made after the defendants were engaged in their alleged conspiracy, he said many companies are still susceptible because they don't test their systems adequately and they don't spend enough money on security.

"We've had economic issues so people haven't put as much money into security as they should," Jennex said in a phone interview. Computer security, he explained, doesn't generate revenue, so it's often not a priority, and risk assessments are only as good as the people who conduct them.

Both small and large companies could do more, Jennex argues. "We do audits in small companies and what we still find, over and over again, is that companies don't really understand the way hackers attack," he said.

And even in large companies with substantial IT resources, there's a tendency to do something less than due diligence. Many large companies, Jennex said, rely on open source software but fail to adequately examine the code they're implementing. "If you don't do your research and validate the code, you may overlook vulnerabilities," he said.