[BreachExchange] The IRS Hack Was Twice as Bad as We Thought

[Audrey McNeil]

http://www.theatlantic.com/technology/archive/2016/02/the-irs-hack-was-twice-as-bad-as-we-thought/471255/


On Friday, for the second time in six months, the Internal Revenue Service
revised its estimate of the scale of a cyberattack on its systems,
announcing that a total of about 724,000 individuals may have had their
personal information stolen by hackers last year. That’s more than twice as
many as the agency said were affected after an investigation that concluded
this August—and a whopping six times larger than the original estimate of
the damage.

The agency said that it arrived at the new number after a nine-month
investigation that examined network activity all the way back to January
2014, when it launched a service called “Get Transcript” that allows
taxpayers to check their tax history online. That’s the service that
hackers exploited to gain access to hundreds of thousands of individuals’
personal records. According to the IRS, the hackers also attempted to steal
more than 570,000 more records, but were unsuccessful.

Why the repeated revisions? When thieves break in and ransack the sensitive
contents of a server, it can be difficult to assess the damage and
determine what was taken—data is usually copied, not deleted, and forensics
teams may not know exactly what to look for, or over what period of time.

When it issued its first two estimates, the IRS wasn’t looking at a broad
enough timeframe to understand the full scope of the data breach. The first
estimate, released in May 2015, only revealed 114,000 instances of
unauthorized access, and 111,000 failed attempts to access tax records. In
August, the agency examined the entirety of the 2015 tax-filing season, and
found that hackers had accessed records an additional 220,000 times, and
made a further 170,000 failed attempts.

Finally, on Friday, the agency said the latest investigation—this one
conducted by the office of the IRS inspector general rather than the agency
itself—found 390,000 more cases of unauthorized access, and 295,000 more
accounts that were targeted but not breached.

The hackers bested the “Get Transcript” application by assuming others’
identities and tricking it into divulging tax history. They used details
about real taxpayers that they compiled separately—likely bought off of
other criminals who had previously stolen massive amounts of sensitive
information from other places—to convince the system that they were
authorized users logging in to download an official document.

It’s not a foregone conclusion that hackers stole information from all
724,000 accounts that were accessed. But they certainly did profit off of
some of them: In May, the IRS said the hackers filed about $50 million in
fraudulent tax returns.

The agency will mail notices to the taxpayers whose accounts were
compromised starting next week, and will offer them one year of free
identity-theft protection services. (The taxpayers whose accounts hackers
unsuccessfully attempted to access will also receive a notification, though
they won’t be offered the identity-theft protection plan.)

The IRS’s trouble determining the scale of cyberattacks was mirrored at
another federal agency last year.

When hackers connected to China made their way into systems that belonged
to the Office of Personnel Management, the agency’s initial damage report
was harrowing: Officials said the intruders made off with 4.2 million
individuals’ sensitive personal information. But then, as the breach was
being investigated, another, much larger intrusion was discovered.

OPM Director Katherine Archuleta had learned her lesson about speaking too
soon. Even as she was harangued by a Congress eager to learn the full
extent of the breach, she did not announce the scale of the intrusion until
a long investigation had been completed. Finally, in June, OPM announced
that a total of about 22 million people were affected by one or both hacks.
It took until December for all the people affected by the hack to be
notified by mail.

As cyberattacks like the IRS and OPM hacks become a standard part of doing
business, organizations are searching for new ways to detect and prevent
them. Strong defenses can help keep most intruders out, and for the data
that does leak, complex web crawlers can send alerts whenever private,
sensitive data pops up for sale on a hacker forum or the dark web.

And with better forensics tools and alerts, companies and agencies can
avoid embarrassing lowball estimates after the inevitable data breach hits.
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