Sources in the financial industry tell KrebsOnSecurity they have traced a pattern of fraud on customer credit and debit cards suggesting that hackers have tapped into cash registers at Natural Grocers locations across the country. The grocery chain says it is investigating “a potential data security incident involving an unauthorized intrusion targeting limited customer payment card data.”

In response to questions from KrebsOnSecurity about a possible security breach, Lakewood, Colo. based Natural Grocers by Vitamin Cottage Inc. said it has hired a third-party data forensics firm, and that law enforcement is investigating the matter.

Natural Grocers emphasized that it “has received no reports of any fraudulent use of payment cards from any customer, credit card brand or financial institution.”

“In addition, there is no evidence that PIN numbers or card verification codes were accessed,” the company’s statement continued. “Finally, no personally identifiable information, such as names, addresses or Social Security numbers, was involved, as the company does not collect that data as part of its payment processing system.”

Perhaps they aren’t reporting the fraud to Natural Grocer, but banking sources have told this author about a pattern of card fraud indicating cards stolen from the retailer are already on sale in the cybercrime underground.

According to a source with inside knowledge of the breach, the attackers broke in just before Christmas 2014, by attacking weaknesses in the company’s database servers. From there, the attackers moved laterally with Natural Grocers’ internal network, eventually planting card-snooping malware on point-of-sale systems.

Natural Grocers said that while its investigation is ongoing, the company has accelerated plans to upgrade the point-of-sale system in all of its store locations with a new PCI-compliant system that provides point-to-point encryption and new PIN pads that accept secure “chip and PIN” cards.

“These upgrades provide multiple layers of protection for cardholder data,” Natural Grocer’s emailed statement concludes. “The company is in the process of installing this new system at all 93 Natural Grocers stores in 15 states. The company takes data security very seriously and is committed to protecting its customers’ information. This is all the information the company is able to provide at this time, as the investigation into the incident is ongoing.”

Tags: Natural Grocers breach, Natural Grocers by Vitamin Cottage Inc.