Banks shouldn't rely on mobile SMS passcodes, security firm says

As mobile banking grows, malicious Android applications are increasingly intercepting one-time passcodes

A widely used security feature intended to protect access to online bank accounts is becoming increasingly ineffective, as cybercriminals develop advanced malicious software for Android devices, according to a report released Wednesday.

Many banks offer their customers two-factor authentication, which involves sending an SMS message with a code that's entered into a Web-based form. The code expires in a few minutes and is intended to thwart cybercriminals who have a person's login credentials.

But there are now multiple mobile malware suites that work in tandem with desktop malware to defeat one-time passcodes, wrote Ken Baylor, research vice president for NSS Labs.

"Do not rely on SMS-based authentication," the report said. "It has been thoroughly compromised."

Nearly all mobile malware is written for the open-source Android OS, which allows users to install any application, the report said. iOS mobile malware is rare since Apple forbids downloading applications that haven't been vetted by the company.

Cybercriminals use a one-two punch. Once a PC is compromised, the malware injects new fields or pop-up menus into the screen, asking a person's phone number and their mobile operating system type and phone model.

A link is sent to the phone, which if clicked prompts for the installation of malware that sends one-time passcodes to another phone, allowing someone to log into a person's bank account, the report said.

Much of the PC and mobile phone malware originates from countries that were part of the former Soviet Union. The malware developers focus on Android since it is widely used, and there appear to be few iOS specialists in those nations, the report said.

Well-known desktop banking malware programs such as SpyEye, Citadel, Zeus and Carberp all have a mobile Android component. Although Google patrols its Play store for malicious applications "a significant amount of malware escapes detection," the report said.

Financial institutions have been slow to keep up. As mobile banking continues to grow, their applications have security weaknesses.

"Many banks still operate mobile applications that are merely HTML wrappers rather than secure native apps," the report said.

The applications should be revised to "include a combinations of hardened browsers, certificate-based identification, unique install keys, in-app encryption, geolocation and device fingerprinting," it added.

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