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Risky Business #102 -- Washington spanks PCI DSS

Presented by

Patrick Gray
Patrick Gray

CEO and Publisher

Adam Boileau
Adam Boileau

Technology Editor

This week's Risky Business podcast is brought to you by MessageLabs, and hosted, as always, by Vigabyte virtual hosting.

On this week's show you'll hear some audio from a hearing in the US House of Representatives -- excerpts from the subcommittee on Emerging Threats, Cybersecurity, and Science and Technology Hearing. That hearing posed the question "Do the Payment Card Industry Data Standards Reduce Cybercrime?"

Apparently they don't.

In this week's sponsor interview we chat to Paul Wood from MessageLabs in the UK about some of the more innovative features in malware these days. Paul's up to his armpits in the stuff, so he has some interesting things to say.

Paul Craig from Security-Assessment.com is this week's news guest.

If you'd like to comment on anything you've heard on Risky Business, or suggest something you'd like to hear on the show, you can call Sydney 02 8569 1835 or USA +1 877 688 8417 (Toll free). We'd love to hear from you.

Risky Business #102 -- Washington spanks PCI DSS
0:00 / 53:05

I Heart... Windows?!

Presented by

Adam Boileau
Adam Boileau

Technology Editor

"They're making us roll out Active Directory," he whined, looking for sympathy from a fellow UNIXnerd. But the sad, awful truth is this: Windows infrastructure is actually usable -- and perhaps even securable -- in the enterprise.

Ugh. It pains me to say it, but really, are you trying to tell me that you'd prefer NIS, NFS and LPR over AD and SMB? Oh come on, even from a usability perspective, let alone security. To get any sort of kerberized auth for file sharing in UNIX, you're dispatched into the ebola-grade intestinal sloughing of AFS. And sure, CUPS kinda works, but when did you ever celebrate because your Windows printer worked?

To really gouge some salt into the wound, go count the number of security advisories in UNIX kerberos implementations. Now compare to Microsoft's.

Yeah, exactly.

What's funny here is that the age-old dichotomy -- Windows for games, UNIX for Serious Intertubes Bizness -- is actually ass-backwards for the enterprise. Your average home user Windows box is an awful, spyware ridden porn-popup carnival, and your average home UNIX box is a fully patched Ubuntu with a 190 day uptime.

But in the enterprise, people run fully patched Windows Server 2k3 domain controllers, and locked down desktops with nicely packaged software rollouts, reimaging procedures, patch management, endpoint security software and jolly corporate screensavers showing your fellow workmates grinning as they build brand value.

And the UNIX systems? Oh, God. Ancient Solaris boxes filled with awful, awful "Enterprise" UNIX software. BMC anything, Tivoli anything, anything that does backups or SNMP, or even worse, CA anything. Awful shellscripts written by well meaning admins, awful outsourced UNIX managment, awful root cronjobs running awful scripts off awful NFS shares. Never ever patched. Never up to date.

Let's face it, while the availability of UNIX systems might be great, for the other two corners of the CISSP triad -- integrity and confidentiality -- they're fucking awful.

Ask yourself - when was was the last time you saw a corporate UNIX environment that doesn't make you rub your temples and sob quietly into your audit worksheet? Or a Sol10 box that despite its ZFS and zones and all of Sun's engineering whizbangerry, wasn't adminned like it was 2.5.1? Now, what about when you last saw decent, competently run Windows infrastructure? Probably, what, last week?

This all came to me today as I audited a UNIX box. (Don't be shocked. I do have a beard.)

UNIX host configuration reviews are in our blood in this industry -- many of us grew up playing with, hacking, escalating privilege on UNIX boxen; our home 386 Slackware Linux, university Solaris machines, random HPUX or AIX or, ha ha ha, A/UX, Apple's UNIX from way, way before this whole ridiculous Mac OS X lark.

Reviewing a multiuser UNIX for config and local priv escalation, well, it feels like coming home. Grandma's warm apple crumble, coffee at dawn looking out your kitchen window, or finding that postcard from a holiday romance 15 years ago. It's probably how Rob T Morris Jr. feels every time he sees a sendmail MTA string in his headers.

I heart UNIX.

This particular box is running some Serius Internets Bizness -- important stuff -- and after the UNIX ops team finish their kibitz, sucking their teeth at my request for the mighty root access to a production server, I finally sit down to start. I don't really have the heart to tell them that my asking for root is just professional courtesy.

After covering off the basics, I settle in for the enjoyable bit -- going through all the user and network service accounts, then figuring out how to get root from every single one.

It rarely gets as far as rpm -qa to figure out if they're patched up to date (they never are). I take perverse satisfaction in auditing UNIX filesystem permissions - there's something oh so sweet about the simplicity of it all. Oh, look! BMC Patrol runs at boot, gets started by that initscript as root, which sets its path to include /opt/patrol/bin before /bin, and oh dear that directory is owned by uid patrol. *Sigh* Oh look, suid root bins which include libraries writable another user. *Sigh*. Oh look, root writing files in directories that are world writable and aren't sticky. *Sigh*. And ohmigod, did you see that sudoers config? I actually laughed out loud at that one, and over the carpet cubicle wall I hear someone saying "uh, its not good when the beardy security consultant is giggling like a schoolgirl in his little blue culottes, is it?"

Well, yes and no. I mean, they did try. It was certainly no worse than any other enterprise UNIX box I've reviwed, and better than plenty. Sure, the umasks are crap, sure there's 87 different versions of the java runtime installed from 2003 to present, sure there's more suid binaries than the Suharto family has rupiah, sure there's world readable SSL private keys and cleartext passwords in bash_histories and X11 displays with xauth + and... oh my, those shellscripts, they make my eyes water with the mirth of it all.

But! None of this is unusual, or different, or even particularly worse than any other enterprise UNIX box. That's when it hit me. We really don't think about Windows as a multiuser OS like we do with UNIX. That gives it the advantage.

Because we can't trust individual Windows systems, we have to build resilient Windows networks with single sign on that's actually usable plus all the management tools that make it possible to actually run large-scale desktop computing infrastructure. God help the poor engineers at Novell tasked with doing this all with SuSE.

I hope never to be a corporate Windows admin. I'd take the corporate UNIX admin job any day of the week instead -- my pager would go off less often, I'd meet my KPIs better, and I'd be much, much happier than the poor Windows sod with his recurring MS Patch Tuesday nightmares. But would I believe that my shit was more secure than his?

Well, I present to you the Metlstorm Simple UNIX Examination (the 'MetlSUX' if you will):

# find / -path */bin/java | wc -l

0-5 Lucky you, you might make it to 21 mins
5-10 Write once, test everywhere
10-30 Serious Internet Business Production System
30+ Do you, like, work at Sun?

Metlstorm is a New Zealand-based freelance security consultant. He's created several tools including Hai2IVR, Winlockpwn and SSH Jack. He's also an organiser of the annual Kiwicon security conference in Wellington, New Zealand.

Fear Thy Name is Conficker

Presented by

Patrick Gray
Patrick Gray

CEO and Publisher

Over the last few weeks you may have read reports of a computer virus named Conficker. It's sophisticated and has infected millions of systems.

What you might not know is you actually funded its development.

The virus writers of old were trying to bring the pigopolist system down, man, but today, it's all business. Viruses make money for their creators by stealing credit card data from infected systems.

This type of fraud is the backbone of the cyber-criminal economy, and because merchants are generally forced to cover the cost of card fraud[1], they've already factored losses into the price you pay for that six-pack of beer or that new plasma screen telly. You're funding this crap, and it's the banks' fault.

Let's dig a little deeper.

Estimates of the number of computers Conficker has infected range from three million to 15 million. In anyone's language, that's a lot of computers. But Conficker is what many in the computer security field would consider a "garden variety" virus. Aside from its admittedly impressive distribution, it is sophisticated but unremarkable.

So why all the media attention? Well, for starters it's due to "activate" on April 1, and there's nothing the media loves more than a good old-fashioned countdown. Consider it a mini-Y2k to feed the news cycle. And like Y2k, there'll be some fairly disappointed commentators and doomsayers when, on April 1, Conficker quietly upgrades itself on the computers it has infected and starts doing the rather mundane bidding of its masters.

No mushroom clouds. No power blackouts. No blood running through the streets.

The Conficker network -- all of the infected systems can be controlled by the creators of the virus -- will just do what similar nasties have done in the past and start sending spam and viruses to other computers, stealing the credit card numbers of the owners of infected systems via keystroke logging software, and attempting to overload the websites of grey-market Websites.

Those with most to fear from Conficker -- in the short term at least -- are online casinos and pornography sites. The network of Conficker-infected computers will be able to overload selected websites with bogus requests until the target falls over.

It's called a Denial of Service (DoS) attack and through blackmail, it pays. Want your Web site to work again? Give us $10,000 and we'll stop. For now, there are enough payers out there to make DoS attacks worth doing.

But the big money is in credit cards. In fact, if credit cards didn't exist, the size of the cyber "underground" -- the unholy alliance of computer criminals and more traditional fraudsters -- would be considerably smaller.

It works like this. Every time you make a purchase online, there's no way for the merchant to know if you are actually holding the card in your hand. They need the card number (16 digits), expiry date (4 digits), the name on the card and sometimes the three-digit "security" (ha!) code from the back.

So all anyone needs to make a credit card purchase from your Visa or Mastercard account is 23 digits and a name. Modern viruses like Conficker intercept this information from your computer as you type it into your keyboard. And we wonder why the bad guys are raking it in. Alternatively, skilled attackers may break into the systems of merchants or credit card processors and steal large databases containing your credit card data. This, in a nutshell, is how online credit card fraud works.

Card-not-present fraud in Australia has increased by 50 percent over the last 12 months, according to the Reserve Bank of Australia. You'd think this would have the banks scrambling to remedy the situation, but as the liability for most fraud rests with merchants, they have little motivation to invest in solutions.

In fact, a secure online transaction project named MAMBO, being developed by bank-owned payment services company BPay, has been postponed because (it's rumoured) there wasn't a strong enough business case for it to continue. If banks were forced to own the liability for card fraud, that business case would change instantly.

For their part, consumers are protected from fraud on their cards by the card issuers, so they don't have a reason to kick up much of a stink. So the merchants carry the can for the bulk of the fraud and, of course, they factor fraud losses into their prices.

You are funding criminal activity while the banks stall projects that could combat it.

Think of the "fraud premium" on prices (or the infamous "credit card surcharge") as a tax the merchants apply to everything you buy. That "tax" exists to recoup the money destined for large criminal syndicates, which use it to invest in better computer virus technology.[1]

This is what economists would call a market failure.

Over the last several years there have been token efforts to improve the card fraud situation. The Payment Card Industry Data Security Standard, or PCI DSS, forces merchants to make some effort in securing credit card data as it passes through their systems. It's expensive to implement and it's clearly not working. Merchants' systems are still being breached left, right and centre.

PCI DSS is a band-aid on a bullet wound, and governments are starting to notice. The United States House of Representatives Committee on Homeland Security has just held a hearing (today) into the effectiveness of PCI DSS. The Department of Homeland Security is concerned the proceeds of data breaches and credit card fraud are funding terrorist activity.

It's not such a paranoid notion. Last year an influential Egypt-based cleric is believed to have issued a fatwa encouraging young Muslims to engage in cyber and credit card fraud to fund anti-Western activities. (No one has actually found evidence of the fatwa, but on the Internet perception is reality, and the unconfirmed edict is held as truth.) Herein lies another reason to fix the broken credit card model.

So what can we do? Well, we need to make card not present fraud impractical to carry out. We can make a good start by introducing more robust forms of authentication to card not present transactions. SMS or voice biometric authentication would be a good start. Banks in Europe are experiencing some success with portable chip and pin readers.

Alternatively we could move to a completely different transaction model in which your sensitive information is never handed to the merchant, such as in a direct deposit via your online banking. It's a much more sensible way of doing things.

The fact is we are moving toward a more secure online environment, but the progress to date has been glacial. Let's hope that in a few years advancements in transaction security will rob criminals' motivation to create computer viruses like Conficker. Until then, we've just got to ride it out.

[1] Some credit card companies offer schemes that allow merchants to shift liability back on to the card issuer, but they also come at a cost, as does chargeback insurance.

Patrick Gray is the host of the Risky Business security podcast and the managing editor of Risky.Biz, an information security news outlet.

RB2: Consolidation is coming, an interview with Palo Alto CEO Lane Bess

Presented by

Patrick Gray
Patrick Gray

CEO and Publisher

Today on Risky Business 2 we speak with Lane Bess, the CEO of Palo Alto Networks. Founded by firewall pioneer Nir Zuk, Palo Alto makes what it calls a next generation firewall.

We don't normally talk to suits like Lane on Risky Business, but hey, that's what this second podcast feed is all about. We thought it would be interesting to get his take on movements in the security market given everything that's happening in world markets.

RB2: Consolidation is coming, an interview with Palo Alto CEO Lane Bess
0:00 / 8:15

Risky Business 101 -- DECT hacking plus special guest Paul Asadoorian

Presented by

Patrick Gray
Patrick Gray

CEO and Publisher

Adam Boileau
Adam Boileau

Technology Editor

This week's episode is sponsored by Microsoft and hosted, as always, by Vigabyte virtual hosting.

We're shifting focus a little bit in this week's feature and taking a look at DECT hacking. DECT is the Digital Enhanced Cordless Telecommunications standard, and as you'll hear, it's not always implemented correctly. That can be a lot of fun for the evil guys out there.

Blair Strang will be joining us to talk about that.

Also on this week's show we'll catch up with the host of the PaulDotCom security podcast, Paul Asadoorian. He's popping by to do this week's news segment, and boy, what a week for news it's been.

Microsoft's Internet Explorer product manager, James Pratt, pops by to discuss the new security-related features in the browser in this week's sponsor interview.

If you'd like to comment on anything you've heard on Risky Business, or suggest something you'd like to hear on the show, you can call Sydney 02 8569 1835 or USA +1 877 688 8417 (Toll free).

Risky Business 101 -- DECT hacking plus special guest Paul Asadoorian
0:00 / 51:02

Quality, Opacity, and the Wiseass Business Model

Presented by

Adam Boileau
Adam Boileau

Technology Editor

Normally at these sorts of events protocol dictates that I have a sales department chaperone present at all times to make sure I use the correct fork for the shrimp cocktail, etc, and this was no exception.

My technical colleague and I riffed away, deftly interspersing witty-yet-topical infosec anecdotes with sales patter and doomsaying while we charmed the gathered CIOs with our analysis of the threat insiders posed to their organisations.

Now, you and I know that any sort of insider access is game-fuckin-over, but for the purposes of making the presentation more sales-friendly than a singe powerpoint slide saying, "you're all fucked, plz give us some money while you're still in business," we humoured them.

As I drew to a close, I looked around the audience, fruit platters on the table, a few shunned greasy pastries (they did have bacon, at least) and stewed coffee. I went for my concluding slide -- the last bit of useful information to be shared with the room before the sales drones would activate and attack.

When my sales-chaperone guy saw it he started twitching up the back -- it was off topic and he knows how I roll.

"People sometimes ask me 'Adam, if you were in a room with two dozen CIOs and you could tell them one thing, what would it be?'," I began.

They don't, by the way, but hey -- I get to use any sort of shabby segue I like when I'm clucking on my particular nest. So here's what I'd say.

"Security is hard. It's hard to buy and it's even harder to know if you've bought it. But you have to care, so you hire experts in this arcane field, just as you would any other technical niche. And if the expert says 'your stuff is broken,' then you know where you are. But if they say 'your stuff is great,' then you've got a problem. \t

"Is it really great, or are they awful? Did your expert have a bad day? Is he covering for the fact they just lost half their tech team to a competitor? Did they give you a junior guy, or a box ticker, or even worse, are they out to sell you kit? You don't know, because quality is opaque to someone who isn't an expert here.

"If you take one thing away from today, its that this stuff is hard, and the quality of my work is opaque to you. The only rational choice is not to trust me. So don't hire us. Hire Deloitte, or IBM or whoever you want. But next quarter, pick someone different. Rotate your audit providers. Use one now, another for the audit next quarter, maybe even two different parallel providers on a critical project. Pit us against each other and make us compete. Then at least you have relative quality metrics, which is more than you have at the moment."

Its true, you know -- I'd much rather be going into a pen test or an audit knowing that some high-priced big-5er has already been through with Nessus and Impact, picking off all the dumb shit that just wastes everyone's time to write up. There's no joy in savaging the poor fish in their nesting barrels. (Of course this assumes that the big-5er actually did spot all the low-hangers, which is, uhhh, Not My Experience.)

Yes, your domain controller is still vulnerable to MS06_040. No, you've never patched, your passwords are crap and you have 100,000 clear-text credit cards in /tmp on your RHEL3 box. I'd much rather write up a report about some point of entry that forced me to write a python script to exploit it -- at least then I get to use the Courier font non-ironically.

That's actually the best bit of advice I could ever give a CIO. Please, for the love of God, don't just pick one security supplier. Don't let them cut and paste you the same report every quarter. Get someone else in. Compare the reports, the findings, the quality of the write-ups and mitigation advice and ./sploit.py scripts attached.

Please. Please? I mean, we worked real hard writing them up for you. I know you've only got a 40-minute project meeting, and best to just glance at the summary-table and cross out everything rated less than 'ohmigod'. But please. Get someone else. Don't make me write the same report twice. Let me write a report that I know is going to make some big-5 infosec team look like the boxtickers they are. Please. Let me at them. You know I'm going to find their report on your \\\\fileserver anyway after I MS06_040 your win2k domain controller and have to resist the urge to open it up for the epic lulz that will be within.

Do it for the good of your shareholders. You owe it to them to get a second opinion on something as important as your security. Currently you may not know who is doing the quality work, but it wont take you long to find out -- all you have to do is shop around. You can't tell if you're getting quality, so make us all work to show you.

Hell, maybe we should give discounts to customers who provide us with their previous provider's reports after we've written ours. The lulz would be so worth it. I'll suggest it to salesguy. Well, I would if he wasn't too busy talking scoping with the douche bag who called me a wiseass.

Metlstorm is a New Zealand-based freelance security consultant. He's created several tools including Hai2IVR, Winlockpwn and SSH_Jack. He's also an organiser of the annual Kiwicon security conference in Wellington, New Zealand.

NEWS: Linux Gets New Firewall

Presented by

Patrick Gray
Patrick Gray

CEO and Publisher

Announced with little fanfare last week by iptables developer Patrick McHardy, the launch of the nftables alpha has barely been mentioned by the press.

That's somewhat surprising, considering the new software will represent the biggest change to Linux firewalling since the introduction of iptables in 2001.

Gordon 'Fyodor' Lyon, the creator of the nmap security scanning tool, says he's excited by the alpha release.

"I'm... looking forward to its general release in the mainstream Linux kernel," he told Risky.Biz. "The previous transitions from ipfwadm to ipchains and then to netfilter (iptables) each brought a new, more powerful firewall interfaces to the user. I expect nftables to do the same."

Administrators who learn the nftables syntax will find it much more expressive and easier to read, Lyon added.

Melbourne-based CSO Adam Pointon says he's surprised the announcement hasn't made more of a splash.

"It's the next generation Linux firewall," he says. "It's a significant milestone and people should pay attention to it."

However, it's not great news for everyone. Iptables and netfilter will be phased out as nftables becomes the norm, Pointon says, which could create some extra work for security appliance manufacturers.

"Iptables is used heavily by lots of UTM products, like routers, DSL modems and the like," he says. "Support will end for that code and everyone will move to nftables. So all the Linux boxes out there using it... will eventually have to re-write all their stuff or wind up using old, unsupported code."

The new firewall has native IPv6 support and userland queuing. "Snort and anything at that layer will be better integrated," Pointon says, adding that nftables will be faster, process rules more efficiently and allow administrators more control at the userland level.

The code base is also significantly smaller. "That can only be a good thing for its security," Pointon says. "It will take Linux firewalling to the next level."

While the alpha release is available now, nftables will go through an extensive beta testing phase before finding itself included in the Linux Kernel.

Router Botnet Uncovered

Presented by

Patrick Gray
Patrick Gray

CEO and Publisher

The group claims the botnet has been targeting DroneBL's servers in a denial-of-service campaign for several weeks and is the first of its kind. It uses brute-force password cracking attempts to hijack any Linux mipsel routing device that uses insecure or common username and password pairs.

"This is the first known botnet based on exploiting consumer network devices, such as home routers and cable/dsl modems," the DroneBL team wrote in a post on their Website. "Action must be taken immediately to stop this worm before it grows much larger."

DroneBL claims many devices are vulnerable to the botnet, which is spreading automatically using compromised hosts to propagate. The size of the botnet, dubbed "psyb0t," is currently unknown.

Malware to Bite Apple in 2009

Presented by

Patrick Gray
Patrick Gray

CEO and Publisher

It's been easy to see why, historically, most Mac users haven't felt the same level of security-related anxiety as Windows users. Until now, no one has really bothered targeting them.

When commentators like this one dared suggest, in 2003, that Apple's OS X software was susceptible to the same sorts of vulnerablities that have plagued other operating systems, the reader reaction was so severe it was worrying.

Indeed, one of the comments posted on the piece by a particularly passionate reader suggested ZDNet's Sydney bureau would make an excellent destination for a truck laden with explosives.

Keep in mind that in 2003 there were few vulnerabilities being disclosed in OS X, leading most consumers to genuinely regard it as more secure. But from there, a trickle of bugs began to be disclosed. By 2008, OS X was giving Windows a real run for its money in terms of the number of bugs being disclosed and patched. The myth of OS X as a "secure" operating systems was destroyed among the more savvy types in the IT industry, and Apple dropped its rhetoric about its operating system's amazing invulnerability to malware.

Yet in the years since the malware never showed up. Sure, anyone with half a clue could trigger a client-side exploit in OS X, but what then? The science of writing Trojans for Windows-based operating systems is mature; staff at CERT teams and AV companies have actually found comments and evidence of revision control in modern PC malware.

Mac malware has been primitive in the extreme by comparison -- the bad guys just haven't built up their OS X chops yet.

Last year, news of simple script-based Mac malware doing the rounds surfaced. The badware would simply alter the user's DNS settings, so it was pretty simple stuff. Some may argue that's actually pretty serious -- if an attacker can control their target's DNS, a man-in-the-middle hack is trivial, thanks to browser insecurity (Hi, Safari!). Still, this early Mac malware was hardly what you'd call sophisticated.

But now we're seeing some much, much nastier stuff. Risky.Biz forwarded a recently obtained Apple malware sample to two parties -- Paul Ducklin at Sophos (disclaimer: Sophos is a sponsor) and a contact who'd prefer not to be named.

Paul had seen that sample before, and Sophos's products detected its payload. But it was what the other had to say that I found particularly interesting.

His analysis indicated the sample -- which pops up as a flash installer on, err, "video sites" -- may in fact automatically trigger upon download. How? Well, every time Safari downloads a file with a DMG (Apple disk image) extension, it will auto-mount it when the download's complete.

That's really handy, but also a security issue, especially when you remember that there have been buffer overflow vulnerabilities in the code OS X uses to mount DMG disk images. So if a user hadn't patched against the DMG overflow, all they'd have to do is click "ok" to a bogus Flash installer notification, served from the domain apple-updates.com. OS X would do the rest for you.

My contact couldn't be 100 percent sure the sample was trying to trigger the DMG bug, but even the possibility should give us pause; it would mean the badware is getting much smarter.

To be fair, Windows still does some similar, super-daft things. The Conficker malware is currently spreading left right and centre because it's basically impossible to disable autorun in Windows without resorting to a registry hack.

The payload in the Mac malware sample in question was a 'dloader,' tasked with connecting to some shady data centre in Eastern Europe and downloading more bad stuff.

This is much more sophisticated than a script that just alters some DNS settings. It's closer in sophistication to the malware we've been seeing targeting PCs for the last 10 years.

Interestingly, we haven't seen this dloader actually grabbing a payload yet. That tells me these guys haven't bothered actually writing a serious Trojan yet -- they've just sent the first stage of the attack out there to see how many bots they wind up with.

If they get enough, undoubtedly they'll actually create some "real" malware for it, and begin distributing it to pre-infected hosts.

So that's it folks. Mac malware has arrived, and what a party it's going to be. Most Mac users are convinced they're using a magical, impenetrable platform, so they don't actually use antivirus software. Apple's advertising campaigns of yesteryear actually encouraged that mentality. Combine that with Apple's expanding market share, and the average Mac user is now a very tempting target. A sitting duck, if you will.

Enjoy the next couple of malware free months, Mac users, because you're in for a rough ride in '09.

Patrick Gray is the managing editor of Risky.Biz and the host of the Risky Business security podcast.

Confidence is Key

Presented by

Nigel Phair
Nigel Phair

The online environment is just like the real world, yet for some reason many consumers completely abandon their street smarts the second they fire up their browsers. When a leather-clad, toothless ruffian is walking up and down the street saying "give me $500 and I'll come back in an hour with a computer worth $1000," everyone knows not to trust him. Yet this is the same premise by which many scams, such as online auction fraud, are perpetrated.

The success of online criminals is harming consumer confidence.

In late 2008 I released the findings of the Consumer Trust and Confidence Online Survey [pdf] which was aimed at determining the level of trust and confidence of Australian Internet users within the online environment. The survey focused on e-commerce, social networking and online safety.

There were some interesting results. For example, 35 percent of respondents were more trusting of online transactions than two years ago. That sounds great until you realise 65 percent were either less trusting or had the same level of trust as two years prior.

Considering the increasing value and importance to the Australian economy the Internet plays, these statistics should ring alarm bells for anyone with a vested interest in online commerce.

Let's dig a little deeper.

The two most important factors considered by survey respondents when considering purchasing goods and services online was the reputation of the merchant and the payment method. Now we have some actionable information that tells us organisations must boost their reputation to bolster consumer confidence. Here's how:

  • Be transparent -- give honest and open responses to customer questions and feedback
  • Be flexible -- recognise change in systems and behaviour and implement swiftly
  • Establish a reputation system -- it's a popular feature for eBay transactions
  • Reflect reality - customers (and the media) are smarter than you think [They sure are.. ;) -- ed], they can sniff out a fake quickly.

Which leads into payment methods. While plenty of organisations abide by the Payment Card Industry Data Security Standards, some just don't. Media reporting of e-commerce organisations that have been compromised with the loss of customer credit card and personal information is a weekly occurrence.

But it's not just targeted hacks that are causing problems, there are far simpler forms of fraud. Consumers have proven willing to send payment for non-existent goods to unknown beneficiaries in international destinations via money transfer systems like Western Union.

Why do consumers engage in this risky behaviour? Maybe it's because online consumers are usually at home in a relaxed and comfortable environment where they can't see the normal visual cues that make us suspicious. Like the guy who's trying to sell you the Blu-ray player is covered in prison ink and has no teeth.

In a real world transaction their radar is far better attuned to detecting the potential for fraud.

The successful integration of e-commerce into the Australian economy is dependent upon the level of trust and confidence consumers have in the digital environment.

Developing new kinds of commercial activities utilising the Internet hinges on assuring consumers that their use of networked services is secure and reliable, that their transactions are safe and that they will be able to verify information about transactions and transacting parties. There are too many organisations that have a commercial interest in establishing customer trust and confidence in online technologies for this not to be taken seriously.

Nigel Phair was the Team Leader of Investigations for the Australian High Tech Crime Centre from 2003 to 2007 and the author of Cybercrime: The Reality of the Threat. He is an active cyber crime analyst.