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Microsoft has somewhat controversially claimed that money mules are the ultimate victims of phishing emails, rather than the consumers or banks that cyber-crooks target in online banking scams.

Mules act as middlemen who receive funds from compromised bank accounts before sending the bulk of the cash overseas to the organisers of scams, who are often based in eastern Europe and unable to receive funds from compromised accounts directly.

Whether they are witting or unwitting¹ accomplices to cybercrime, money mules are far more likely to be arrested, and when the dust settles, they'll be out of pocket as banks reverse fraudulent transactions.

"Money mules are not merely unwitting accomplices, they are the true victims in credential theft fraud," Cormac Herley and Dinei Florencio of Microsoft Research argue in a paper entitled Is Everything We Know About Password-Stealing Wrong? (abstract below) in the latest issue of IEEE Security and Privacy magazine.

Federal Reserve Regulation E guarantees that US consumers are made whole when their bank passwords are stolen. The implications lead us to several interesting conclusions.

First, emptying accounts is extremely hard: transferring money in a way that is irreversible can generally only be done in a way that cannot later be repudiated. Since password-enabled transfers can always be repudiated this explains the importance of mules, who accept bad transfers and initiate good ones.

This suggests that it is the mule accounts rather than those of victims that are pillaged.

We argue that passwords are not the bottle-neck, and are but one, and by no means the most important, ingredient in the cyber-crime value chain. We show that, in spite of appearances, password-stealing is a bad business proposition.

The argument rests the premise that US consumers are indemnified from losses against their online banking accounts.

Mules fall within the reach of Western police forces - and banks are getting more efficient at detecting and reversing fraudulent transactions, a process that plunges mules' accounts heavily into the red just after they have wired funds to fraudsters.

"The thief is really stealing from the mule, not the compromised account, though that fact does not become clear until the dust settles," the researchers write.

The major problem with this argument is that the victims of phishing fraud are often small business owners. And, in the US at least, bosses are liable for losses on corporate accounts caused by cyber-fraud. Unlike consumers they don't get refunded by banks. So a virus infection on a PC used to do the corporate accounts can mean hundreds of thousands of dollars siphoned out of a business.

Former Washington Post staffer turned security blogger Brian Krebs has chronicled dozens of cases of small businesses left bankrupt in just these circumstances, as can be seen in a archive of relevant stories on his site here.

Herley has become noted in security circles by questioning many aspects of conventional wisdom about information security. For example, he has probed the validity of cybercrime surveys and lambasted many aspects of current thinking on password best practices. This time however his provocative thinking seems to have strayed a little wide of the mark.

As well as painting mules as the ultimate victims of phishing scams, Herley and Florencio suggest that developing better back-end fraud detection or interfering with money mule recruitment is the best way to stamp out banking fraud. That's certainly part of the picture but the researchers go on to describe the focus of banking authentication systems as misplaced, wrongly in El Reg's view. ®

Bootnote

¹Money mules range from cynically abused Down Syndrome individuals and innocents taken in by fraudulent work-at-home schemes (of the type chronicled by BobBear here) to willing accomplices, such as the Russian nationals involved in a ZeuS-powered cybercrime ring that was busted by the Feds two years ago. Three of the suspects in the latter case were Russian citizens who came to the US on student visas before allegedly using multiple forged passports to open bank accounts that received funds from compromised accounts.

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