Pass Bureau Association 46 th Annual Conference Nashville, 12 th September 2013

1. Fraud in the Airline Industry Pass Bureau Association 46th Annual Conference Nashville, 12th September 2013

2. Today’s Agenda • Overview of IATA • Different types of fraud • Card data fraud is rampant and easy to commit • PCI DSS update • Credit card fraud in the airline industry • How to fight credit card fraud • Conclusions • Q & A

3. Overview of IATA • Non-profit international trade body, created 68 years ago by a group of airlines in Havana, Cuba. • IATA represents 240 airlines from 126 nations, comprising 84% of total air traffic globally • IATA’s Mission: To represent, lead and serve the airline industry

4. Different types of fraud • Credit card fraud • Internet based crime and e-commerce • Fake Travel Agency websites • Solicitation emails scams • Internal employee fraud • Frequent Flyer abuse and brokering schemes • Agency fare abuse • Baggage fraud • ???

9. Frequent flyer fraud • FFP Members are not always honest • Double dipping – on code share flights • Rerouting/cancellations (fraud?) • Airline Staff • Adding personal FFPs to PNR’s • Customer service staff awarding miles to friends • Claiming miles for ID/AD tickets • Accessing a/c’s

10. Frequent flyer fraud • Travel Agency staff • Selling mileage tickets • Adding FFP numbers to bookings • Double dipping – on code share flights • May get access to FFP member accounts passwords • Fraudsters – growth area!! • Account take over – phishing emails • Buying miles with stolen cards • E-shop/mail frauds

11. Hackers steal air miles from frequent flyer accounts Hackers managed to break into US Airways' frequent flyer accounts and steal the air miles ……...US Airways spokesman Bill McGlashen told TravelMole that the carrier "noticed suspicious activity after customers reported that miles were deducted, and so we looked into what was happening, and notified state and federal officials."No credit card or social security numbers were compromised ……., McGlashen declined to reveal the exact number of accounts ……… Travel Mole - Friday 16th August 2013

13. = The Target of choice or Target of Opportunity • Our industry is dominated by a simple equation: • The era of simple, random attacks has passed. Expect, and prepare for, determined and sophisticated attacks. • If successfully attacked, customer trust and organisational reputation are at risk. • PCI DSS has become the minimum that an organisation needs to do to secure their environment. Visa Europe public

14. Visa Europe public Prevailing Symptoms • Compromises are becoming much more challenging, because the way cards are used and the way in which businesses are offering services is becoming increasingly complex • Vulnerabilities are everywhere • They are simple • Easy to exploit • But often very easy to remediate (if the merchant knows that they are there) • Most people could detect themselves that they have been breached if they just looked at the logs • Web development practices are very weak indeed

15. News round up… PCI – makes good business sense ! Lulzsec Wordpress Travelodge Sony RSA Epsilon Heartland Payment Systems Lush Dropbox Data breaches have almost become a statistical certainty TJX Lockheed Martin

16. List of businesses targeted by global hacking ring that stole 160 mio. card numbers 2005/12 7-Eleven Inc. Carrefour S.A. Dexia Bank Belgium Discover Financial Services Dow Jones Inc. Euronet (payment processor) Global Payment Systems Hannaford Brothers Co. Heartland Payment Systems Ingenicard US Inc.\ J.C. Penney Co. JetBlue Airways (employee data) Leading Abu Dhabi Bank Nasdaq Source The Associated Press – 27.07.13 Data breaches have almost become a statistical certainty

20. The first things you need…. A mask and Internet access and you can start the hunt for credit cards

21. Why One Employee is your greatest security threat • Size up the organization • Compromise a user (using social media) • Login & begin initial exploration • Solidify presence within the organization • Impersonate a privileged user • Steal confidential data • Cover tracks & prepare for return visit

22. How much for my card details?

23. Large Organised Attacks Can Potentially Ruin Merchants Over 4,000 cards used Over 500 delivery addresses Over £300,000 of fraud attempted within only 2 weeks

24. Building a website

25. Building a website

26. Credit card fraud in the airline industry • Global Card Fraud Rises 14% in 2012 – Nilson Report Aug.2013 • Acquirers, Issuers and merchants lost $11.27 billion • US accounted for 47.3% fraud losses, but generate just 23.5 % transactions, due to slow EMV (Europay, MasterCard, Visa) migration • Airline Internet fraud, as reported by card issuers: 0.54% • CyberSource puts total Airline costs at 1.4% (staff, fees, prevention) for online sales • Significant regional differences • Cost of avoided fraud, lost sales, etc. ??? • Estimated profitability of the airlines 2012 : 0.6%

27. News from Visa Europe • Every three minutes a fraud occurs in our industry • Increase 2012 over 2011 – 24% • Increase Jan. – May 2013 over 2012 – 35% • Airline fraud accounts for 11% of all fraud • Airline fraud accounts for 13% of all CNP fraud (Card Not Present) • • 82% of Airline fraud is CNP • • 29% of all Airline fraud is undertaken on US issued cards • No complete figures are available, as people argue what is fraud, and figures are hard to obtain

28. The “total” cost of credit card fraud • Transactions charged bank (not all fraud is charged back by the acquirer (3D Secure protection, EMV liability shift)) • Chargeback handling cost (chargeback successful disputed, ADMs issued against a Travel Agent) • Lost sales to fraud • Rejecting, insulting & losing genuine customers. Lost repeat sales • Cost of fraud prevention/detection activities (3D Secure, EMV Chip & PIN, Profiling systems, Perseuss, etc.) • Surcharges and fines levied by the banks or the Card Schemes • Etc.

29. PCI DSS makes good business practice • First line of defense against fraud • PCI compliance required since 2008 • PCI is about SECURITY • PCI is part of RISK MANAGEMENT • Protects your clients data • Protects company’s reputation • ‘Safe Harbor’ Principle • Protects against fines, penalties, forensic investigations • PCI is also plain common sense

30. PCI DSS - Six Goals: Twelve Requirements Goal 1:Build and Maintain a Secure Network Goal 2: Protect Cardholder Data Goal 3: Maintain a Vulnerability Management Program Goal 4: Implement Strong Access Control Measures Goal 5: Regularly Monitor and Test Networks Goal 6: Maintain an Information Security Policy

31. PCI DSS update Key drivers for version 3.0 updates include: • Lack of education and awareness • Weak passwords and authentication challenges • Third party security challenges • Slow self-detection in response to malware and other threats • Inconsistency in assessments

32. How to fight credit card fraud • Prevent card compromises – PCI DSS • Fraud prevention, fraud detection • Conduct all the basic checks • Physical checks of the card, CVV, AVS • Use all security features • EMV Chip & PIN, 3D Secure • Systematic authorization of all transactions • Training

33. Visible Security Features on the card • EMV Chip (Contact and/or Contactless) • Scheme Logo • pre-printed 4-digit BIN • Magnetic Stripe • Signature Panel (with the card scheme’s specific printing) • Signature • CVV 2 / CVC 2 (helps determine whether the user has possession of the card for card-not-present transactions) • Hologram (front or back) …. some of them will be used in the authorisaton process

34. The systematic authorization request • Is absolutely necessary • Cardholder name is never verified – only card number, expiration date, CVX2 and amount is sent! • Only the issuer can verify • the card number, expiry date and security code (CVX2) • AVS (Address Verification System), if supported • 3D Secure transaction • Authorization is NOT a payment guarantee • Only a confirmation that card number is in good standing at the time of the transaction

35. High risk sales patterns • One-way trip • Urgent departure for long-haul destination • Short “book to fly” timeframe (<3 days) • Change in passenger name after the original booking • Third party sale: legitimate but more fraud prone • Multiple purchases by the same customer: there is no windfall! • Customer offers one card number after the other, when first authorization request is denied • High risk countries and routes • Splitting a ticket value on the same card: prohibited by the International Card Schemes • Inflight sales (no authorization of the transaction)

36. Unusual customer information • A repeat customer is a lesser risk • Identify them so as not to include their tickets in the manual queue for verification • Most sales are local: it is unusual for a customer to purchase an airline ticket outside his country of residence • Particularly true for Travel Agent sales • Discrepancies in the coordinates: country of residence, telephone number country domain name, IP geolocation • Free e-mail services (no billing trail)

37. There is no windfall! • Sales excessively high compared to usual ticket order • Huge orders placed by unknown intermediaries • ‘Spam’ e-mail searching for airline tickets • Orders for a carrier or a route never sold before by the Travel Agent • Orders placed from a country which is not the country of departure or arrival

38. How to fight credit card fraud Dedicated, trained teams and: • Database – own positive or negative and Perseuss • Sharing of data that has been used in fraudulent transactions • Rules Engine • Fully customisable, continual monitoring and analysis • Fraud Scoring Systems • Neural scoring • Continuous proactive analysis (chargebacks, reports from acquiring banks, pattern detection) • Continuous training • Fraud Prevention working groups

39. What is IATA Perseuss? Data base that allows exchange of customer information related to fraudulent ticket purchase Simple and standardized structure Truly global All relevant customer data can be shared, except credit card number and transaction amount

41. Perseuss today • 4 Mio. + PNR uploaded • 80 + airlines participating • 20 + large OTA’s participating • API to major fraud profilers • Average hit rate between 35 – 45 on “bad” email addresses • Perseuss is a fraud fighter community • Fraudchasers.org • ffp-fraudbusters.org

42. 43,91% 48 airlines Fraud chart of The top 10 of TA 9 8 7 4 1 LH 2 CM 3 KL 4 BA 5 LA 6 LX 7 MS 8 AY 9 TB 10 MA 6 2 1 10 3 5

43. 36,34% 54 airlines Fraud chart of The top 10 of CM 7 8 1 1 TA 2 LH 3 BA 4 MS 5 KL 6 LX 7 AK 8 AY 9 LO 10 HV 3 10 4 5 6 9 2

44. IATA support to prevent fraud • Develop/implement industry wide initiatives • Resolution 890 (Card Sales Rules for Travel Agents) • All transactions must be authorized and transmittal of authorization code in remittance file, CVV mismatch, liability shift in case of fraud • Best Practices Guide, warnings on fraudulent emails • PCI and Fraud Prevention Work Groups • Training • IATA Perseuss • Lobbying with Card Brands

45. Conclusions • Fraud is here to stay • Fraudsters are usually a step ahead • Fraudsters have no airline preference – they attack the weakest link • Fraud is “eating” our profit margins

46. Conclusions Therefore: • Create awareness of pitfalls (phishing emails!) • Be alert – unusual behavior • Fighting fraud must be a priority • Training • Collaboration on fraud prevention/detection in the industry and with Card Brands (acquirers, issuers)

47. European day of action targets airline fraudsters The Hague, 28th June 2013 • To clamp down on criminals using fraudulent credit cards to purchase airline tickets • International operation with the help of Visa Europe: • 38 airports in 16 European countries • 200 suspicious transactions were reported by participating airlines, resulting in 43 arrests • Individuals linked to drug trafficking, illegal immigration, counterfeit documents Note: Active participation of FBI with ARC/GDS Fraud Group

48. Questions & Answers maederp@iata.org Tel:+41 79 691 71 35

49. Visa Europe public New Payment ArchitecturesEncryption& Tokenisation Data Encrypted Data Decrypted Data Tokenised No ability to Decrypt Token not considered security sensitive