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Phishing: The Basics

Here's how to be on your guard against phishing attacks

Phishing is a method of trying to gather personal information using deceptive e-mails and websites. Pharming also aims to collect personal information from unsuspecting victims by essentially tinkering with the road maps that computers use to navigate the Web. You don't want either one working its evil genius on your customers. Here's how to be on your guard against both phishing and pharming.

Q: What is phishing?

A: Phishing is a method of trying to gather personal information using deceptive e-mails and websites. Typically, a phisher sends an e-mail disguised as a legitimate business request. For example, the phisher may pass himself off as a real bank asking its customers to verify financial data. The e-mail is often forged so that it appears to come from a real e-mail address used for legitimate company business, and it usually includes a link to a website that looks exactly like the bank's website. However, the site is bogus, and when the victim types in passwords or other sensitive information, that data is captured by the phisher. The information may be used to commit various forms of fraud and identity theft, ranging from compromising a single existing bank account to setting up multiple new ones.

Early phishing attempts were crude, with telltale misspellings and poor grammar. Since then, however, phishing e-mails have become remarkably sophisticated. Phishers may pull language straight from official company correspondence and take pains to avoid typos. The fake sites may be near-replicas of the sites phishers are spoofing, containing the company's logo and other images and fake status bars that give the site the appearance of security. Phishers may register plausible-looking domains like aolaccountupdate.com, mycitibank.net or paypa1.com (using the number 1 instead of the letter L). They may even direct their victims to a well-known company's actual website and then collect their personal data through a faux pop-up window.

Can we prevent phishing attacks?

Companies can reduce the odds of being targeted, and they can reduce the damage that phishers can do (more details on how below). But they can't really prevent it. One reason phishing e-mails are so convincing is that most of them have forged "from" lines, so that the message looks like it's from the spoofed company. There's no way for an organization to keep someone from spoofing a "from" line and making it seem as if an e-mail came from the organization.

A technology known as sender authentication does hold some promise for limiting phishing attacks, though. The idea is that if e-mail gateways could verify that messages purporting to be from, say, Citibank did in fact originate from a legitimate Citibank server, messages from spoofed addresses could be automatically tagged as fraudulent and thus weeded out. (Before delivering a message, an ISP would compare the IP address of the server sending the message to a list of valid addresses for the sending domain, much the same way an ISP looks up the IP address of a domain to send a message. It would be sort of an Internet version of caller ID and call blocking.)

Although the concept is straightforward, implementation has been slow because the major Internet players have different ideas about how to tackle the problem. It may be years before different groups iron out the details and implement a standard. Even then, there's no way of guaranteeing that phishers won't find ways around the system (just as some fraudsters can fake the numbers that appear in caller IDs). That's why, in the meantime, so many organizations—and a growing marketplace of service providers—have taken matters into their own hands.

What can my company do to reduce our chances of being targeted by phishing attacks?

In part, the answer has to do with NOT doing silly or thoughtless things that can increase your vulnerability. Now that phishing has become a fact of life, companies need to be careful about how they use e-mail to communicate with customers. For example, in May 2004, Wachovia's phones started ringing off the hook after the bank sent customers an e-mail instructing them to update their online banking user names and passwords by clicking on a link. Although the e-mail was legitimate (the bank had to migrate customers to a new system following a merger), a quarter of the recipients questioned it.

As Wachovia learned, companies need to clearly think through their customer communication protocols. Best practices include giving all e-mails and webpages a consistent look and feel, greeting customers by first and last name in e-mails, and never asking for personal or account data through e-mail. If any time-sensitive personal information is sent through e-mail, it has to be encrypted. Marketers may wring their hands at the prospect of not sending customers links that would take them directly to targeted offers, but instructing customers to bookmark key pages or linking to special offers from the homepage is a lot more secure. That way, companies are training their customers not to be duped.

It also makes sense to revisit what customers are allowed to do on your website. They should not be able to open a new account, sign up for a credit card or change their address online with just a password. At a minimum, companies should acknowledge every online transaction through e-mail and one other method of the customer's choosing (such as calling the phone number on record) so that customers are aware of all online activity on their accounts. And to make it more difficult for phishers to copy online data-capture forms, organizations should avoid putting them on the website for all to see. Instead, organizations should require secured log-in to access e-commerce forms.

At the end of the day, though, better authentication is the best way to decrease the likelihood that phishers will target your organization. Banks are beginning to experiment with technologies like RSA tokens, biometrics, one-time-use passwords and smart cards, all of which make their customers' personal information less valuable for phishers.

One midsized bank was able to cut its phishing-related ATM card losses by changing its authentication process. Every ATM card has data encoded on its magnetic strip that the customer can't see but that most ATM machines can read. The bank worked with its network provider to use that hidden information to authenticate ATM transactions—an important step that, according to Gartner, only about half of U.S. banks had taken by mid-2005. "Since the number isn't printed on the back of the card, customers can't accidentally disclose it," the bank's CISO explained. The information was already in the cards, so the bank didn't have to go through an expensive process of reissuing cards. "It was a very economical solution, and it's been very effective," said the CISO.