Four years ago, about a dozen credit cards equipped with chip-and-PIN technology were stolen in France. In May 2011, a banking group noticed that those stolen cards were being used in Belgium, something that should have been impossible without the card holders inputting their PINs. That’s when the police got involved.

The police obtained the international mobile subscriber identity (IMSI) numbers present at the locations where the cards were used and at the times they were used, and then they correlated those IMSI numbers to SIM cards.

Using that information, the police were able to arrest a 25-year-old woman carrying a large number of cigarette packs and scratchers, which were apparently intended for resale on the black market. After her arrest, four more members of the fraud ring were identified and arrested. That number included the engineer who was able to put together the chip card hacking scheme that a group of French researchers call "the most sophisticated smart card fraud encountered to date.”

25 stolen cards, specialized equipment, and €5,000 (approximately $5,660) in cash was seized. Ultimately police said about €600,000 (or $680,000) was stolen as a result of the card fraud scheme, spanning 7,000 transactions using 40 cards.

As the US is finally beginning its transition from magnetic stripe cards to these so-called EMV cards, interested parties are watching Europe to see how hackers have taken advantage of the system there. While smart cards are supposed to be more resistant to fraud than the magnetic stripe cards the US has been using, that doesn’t mean they’re hack-proof. In fact, most banks in the US are currently only requiring a signature for transaction verification, rather than a PIN. Clearly, a signature is much more easily forged than a PIN, but the fraud scheme in France and Belgium shows that a PIN spoof was possible for a time, even if EMVCo, the consortium that manages the standard, says the problems that created the hack have now been fixed.

Accepting any PIN

Researchers from France’s École Normale Supérieure as well as the Centre Microélectronique de Provence were commissioned to do a forensic analysis on the evidence from the 2011 arrests and seizures to figure out how the scheme worked. The researchers published their paper last week (PDF).

The stolen cards were still considered evidence, so the researchers couldn’t do a full tear-down or run any tests that would alter the data on the card, so they used X-ray scans to look at where the chip cards had been tampered with. They also analyzed the way the chips distributed electricity when in use and used read-only programs to see what information the cards sent to a Point of Sale (POS) terminal.

According to the paper, the fraudsters were able to perform a man-in-the-middle attack by programming a second hobbyist chip called a FUN card to accept any PIN entry, and soldering that chip onto the card’s original chip. This increased the thickness of the chip from 0.4mm to 0.7mm, "making insertion into a PoS somewhat uneasy but perfectly feasible,” the researchers write.

The hackers took advantage of the fact that PIN authentication was, at least at the time, decoupled from transaction verification on EMV cards in Europe.

The researchers explain that a typical EMV transaction involves three steps: card authentication, cardholder verification, and then transaction authorization. During a transaction using one of the altered cards, the original chip was allowed to respond with the card authentication as normal. Then, during card holder authentication, the POS system would ask for a user’s PIN, the thief would respond with any PIN, and the FUN card would step in and send the POS the code indicating that it was ok to proceed with the transaction because the PIN checked out. During the final transaction authentication phase, the FUN card would relay the transaction data between the POS and the original chip, sending the issuing bank an authorization request cryptogram which the card issuer uses to tell the POS system whether to accept the transaction or not.

The new normal

In their paper, the researchers note that the forged chip cards looked similar to a scheme put forward in 2010 by researchers at Cambridge University. At the time, the Cambridge researchers were able to show that they could complete a transaction using a similar man-in-the-middle attack, but they weren’t able to get the form factor down to credit card size. The French researchers who did the forensic analysis of the cards noted that "producing the forgery required patience, skill and craftsmanship.”

Professor Ross Anderson, one of the researchers who contributed to the Cambridge research, told Ars in an e-mail that he’d been following the case for about three years, since just after the members of the fraud ring had been arrested. In fact, he said, the expert witness for the prosecution discussed the case with him, so he has had a bit of an inside view.

But Anderson doesn’t think that the engineer who made the forged cards relied on the research that he and his partners at Cambridge did at all. "My own suspicion is that the French criminals worked out the attack independently,” Anderson told Ars in an e-mail. "If they didn't, somebody else did! The reason we started our research was that people came to us again and again claiming that their cards had been stolen and used in store transactions which the banks swore proved that they'd been negligent with their PINs, while the customers were certain they could not have been.”

"Once you meet a number of such victims who are credible witnesses, it makes you start to think,” Anderson added.

That suggests a concerning dynamic between the card holder and the bank that could be jarring for American users in the near future—if banks see the EMV standard as impervious to fraud, it will be difficult or impossible for the cardholder to get the bank to accept liability for legitimate hacks.

Listing image by Houda Ferradi, Rémi Géraud, David Naccache, and Assia Tria