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Homeland Security

Statement of Mr. Pablo A. Martinez, Deputy Special Agent in Charge, Criminal Investigative Division, U.S. Secret Service, before the Committee on Energy and Commerce, Subcommittee on Commerce, Manufacturing, and Trade: "The Threat of Data Theft to American Consumers"

Release Date: 
May 3, 2011

Rayburn Office Building
Washington, D.C.

Good morning, Madam Chair, Ranking Member Butterfield and distinguished members of the Subcommittee. Thank you for the opportunity to testify on the role of the U.S. Secret Service (Secret Service) in investigating and dismantling criminal organizations involved in cyber crime.

On February 1, 2010, the Department of Homeland Security (DHS) delivered the Quadrennial Homeland Security Review (QHSR), which established a unified, strategic framework for homeland security missions and goals. The QHSR underscores the need for a safe and secure cyberspace:

"Our economic vitality and national security depend today on a vast array of interdependent and critical networks, systems, services and resources. We know this interconnected world as cyberspace, and without it, we cannot communicate, travel, power our homes, run the economy, or obtain government services.

Yet as we migrate more of our economic and societal transactions to cyberspace, these benefits come with increasing risk. We face a variety of adversaries who are working day and night to use our dependence on cyberspace against us. Sophisticated cyber criminals pose great cost and risk both to our economy and national security. They exploit vulnerabilities in cyberspace to steal money and information, and to destroy, disrupt, or threaten the delivery of critical services. For this reason, safeguarding and securing cyberspace has become one of the Department of Homeland Security's most important missions." (p. 29)1

In order to maintain a safe and secure cyberspace, we have to disrupt the criminal organizations and other malicious actors engaged in high consequence or wide-scale cyber crime.

As the original guardian of the nation's financial payment systems, the Secret Service has a long history of protecting American consumers, industries and financial institutions. Over the last two decades, the Secret Service's statutory authorities have been reinforced to include access device fraud (18 USC §1029), which includes credit and debit card fraud. The Secret Service also has concurrent jurisdiction with other law enforcement agencies for identity theft (18 USC §1028), computer fraud (18 USC §1030), and bank fraud (18 USC §1344).

Due to our extensive experience investigating financial crimes, the Secret Service participated in the President's Comprehensive National Cyber Security Initiative to raise our overall capabilities in combating cyber crime and all forms of illegal computer activity. The Secret Service developed a multifaceted approach to combating cyber crime by: expanding our Electronic Crimes Special Agent Program; expanding our network of Electronic Crimes Task Forces; creating a Cyber Intelligence Section; expanding our presence overseas; forming partnerships with academic institutions focusing on cybersecurity; and working with DHS to establish the National Computer Forensic Institute to train our state and local law enforcement partners in the area of cyber crime. These initiatives led to the opening of 957 criminal cases and the arrest of 1,217 suspects in fiscal year 2010 for cyber crime related violations with a fraud loss of $507.7 million. The arrest of these individuals prevented an additional loss estimated at $7 billion dollars and involved the examination of 867 terabytes of data, which is roughly the equivalent of 867,000 copies of the Encyclopedia Britannica. As a result of these efforts, the Secret Service is recognized worldwide for our investigative and innovative approaches to detecting, investigating and preventing cyber crimes.

Trends in Cyber Crimes

Advances in computer technology and greater access to personal information via the Internet have created a virtual marketplace for transnational cyber criminals to share stolen information and criminal methodologies. As a result, the Secret Service has observed a marked increase in the quality, quantity and complexity of cyber crimes targeting private industry and critical infrastructure. These crimes include network intrusions, hacking attacks, malicious software and account takeovers leading to significant data breaches affecting every sector of the world economy.

The increasing level of collaboration among cyber-criminals raises both the complexity of investigating these cases and the level of potential harm to companies and individuals. For example, illicit Internet carding portals allow criminals to traffic stolen information in bulk quantities globally. These portals, or "carding websites," operate like online bazaars where criminals converge to trade personal financial data and cyber-tools of the trade. The websites vary in size, from a few dozen members to some of the more popular sites boasting membership of approximately 80,000 users. Within these portals, there are separate forums moderated by notorious members of the carding community. Members meet online and discuss specific topics of interest. Criminal purveyors buy, sell and trade malicious software, spamming services, credit, debit and ATM card data, personal identification data, bank account information, brokerage account information, hacking services, counterfeit identity documents and other forms of contraband.

Over the years, the Secret Service has infiltrated many of the "carding websites." One such infiltration allowed the Secret Service to initiate and conduct a three-year investigation that led to the indictment of 11 perpetrators involved in hacking nine major U.S. retailers and the theft and sale of more than 40 million credit and debit card numbers. The investigation revealed that defendants from the United States, Estonia, China and Belarus successfully obtained credit and debit card numbers by hacking into the wireless computer networks of major retailers — including TJX Companies, BJ's Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority and Dave & Buster's. Once inside the networks, they installed "sniffer" programs that would capture card numbers, as well as password and account information, as they moved through the retailers' credit and debit processing networks. After the data was collected, the conspirators concealed the information in encrypted computer servers that they controlled in the United States and Eastern Europe. The credit and debit card numbers were then sold through online transactions to other criminals in the United States and Eastern Europe. The stolen numbers were "cashed out" by encoding card numbers on the magnetic strips of blank cards. The defendants then used these cards to withdraw tens of thousands of dollars at a time from ATMs. The defendants were able to conceal and launder their fraudulent proceeds by using anonymous Internet-based electronic currencies within the United States and abroad, and by channeling funds through bank accounts in Eastern Europe.

In both of these cases, the effects of the criminal acts extended well beyond the companies compromised, affecting millions of individual card holders in one of the incidents. Although swift investigation, arrest, and prosecution prevented many consumers from direct financial harm, all potential victims were at risk for misuse of their credit cards, overall identity theft, or both. Further, business costs associated with the need for enhanced security measures, reputational damage and direct financial losses are ultimately passed on to consumers.

Collaboration with Other Federal Agencies and International Law Enforcement

While cyber-criminals operate in a world without borders, the law enforcement community does not. The increasingly multi-national, multi-jurisdictional nature of cyber crime cases has increased the time and resources needed for successful investigation and adjudication. The partnerships developed through our Electronic Crimes Task Forces, the support provided by our Cyber Intelligence Section, the liaison established by our overseas offices, and the training provided to our special agents via Electronic Crimes Special Agent Program were all instrumental to the Secret Service's successful investigation into the network intrusion of Heartland Payment Systems. An August 2009 indictment alleged that a transnational organized criminal group used various network intrusion techniques to breach security, navigate the credit card processing environment, and plant a "sniffer," a data collection device, to capture payment transaction data.

The Secret Service investigation - the largest and most complex data breach investigation ever prosecuted in the United States - revealed that data from more than 130 million credit card accounts were at risk of being compromised and exfiltrated to a command and control server operated by an international group directly related to other ongoing Secret Service investigations. During the course of the investigation, the Secret Service uncovered that this international group committed other intrusions into multiple corporate networks to steal credit and debit card data. The Secret Service relied on various investigative methods, including subpoenas, search warrants, and Mutual Legal Assistance Treaty requests through our foreign law enforcement partners to identify three main suspects. As a result of the investigation, the three suspects in the case were indicted for various computer-related crimes. The lead defendant in the indictment pled guilty and was sentenced to twenty years in federal prison. This investigation is ongoing with over 100 additional victim companies identified. The Secret Service is working with our law enforcement partners both domestically and overseas to apprehend the two defendants who are still at large.

Recognizing these complexities, several federal agencies are collaborating to investigate cases and identify proactive strategies. Greater collaboration within the federal, state and local law enforcement community enhances information sharing, promotes efficiency in investigations, and facilitates efforts to de-conflict in cases of concurrent jurisdiction. For example, the Secret Service has collaborated extensively with the Department of Justice's Computer Crimes and Intellectual Property Section (CCIPS), which "prevents, investigates, and prosecutes computer crimes by working with other government agencies, the private sector, academic institutions, and foreign counterparts."2 The Secret Service's Electronic Crimes Task Forces are a natural complement to CCIPS, resulting in an excellent partnership over the years. In the last decade, nearly every major cyber investigation conducted by the Secret Service has benefited from CCIPS contributions. Successful investigations such as the prosecution of the Shadowcrew criminal organization, E-Gold prosecution, TJX and Heartland investigations, as well as the recent apprehension of Vladislav Horohorin, were possible as a result of this valued partnership. The Secret Service looks forward to continuing our excellent work together.

The Secret Service also maintains an excellent relationship with the Federal Bureau of Investigation (FBI). The Secret Service has a permanent presence at the National Cyber Investigative Joint Task Force where the FBI leads federal law enforcement efforts surrounding cyber matters of national security. In the last several years, the Secret Service has partnered with the FBI on various high-profile cyber investigations.

For example, in August 2010, a joint operation involving the Secret Service, FBI and the Security Service of Ukraine (SBU), yielded the seizure of 143 computer systems - one of the largest international seizures of digital media gathered by U.S. law enforcement - consisting of 85 terabytes of data, which was eventually transferred to law enforcement authorities in the United States. The data was seized from a criminal Internet service provider located in Odessa, Ukraine, also referred to as a "Bullet Proof Hoster." Thus far, the forensic analysis of these systems has already identified a significant amount of criminal information on numerous investigations currently underway by both agencies, including malware, criminal chat communications, and personally identifiable information of U.S. citizens.

The case of Vladislav Horohorin is another example of successful cooperation between the Secret Service and its law enforcement partners around the world. Mr. Horohorin, one of the world's most notorious traffickers of stolen financial information, was arrested in Nice, France on August 25, 2010, pursuant to a U.S. arrest warrant issued by the Secret Service. Mr. Horohorin created the first fully-automated online store which was responsible for selling stolen credit card data. Working with our international law enforcement partners, the Secret Service identified and apprehended Mr. Horohorin as he was boarding a flight from France back to Russia. Both the CCIPS and the Office of International Affairs of the Department of Justice played critical roles in this apprehension. Furthermore, as a result of information sharing, the FBI was able to bring additional charges against Mr. Horohorin for his involvement in a Royal Bank of Scotland network intrusion. We are presently awaiting Mr. Horohorin's extradition to the United States to face charges levied upon him in different districts by both the Secret Service and the FBI. This type of cooperation is crucial if law enforcement is to be successful in disrupting and dismantling criminal organizations involved in cyber crime.

One of the main obstacles that agents investigating transnational crimes encounter is the jurisdictional limitations. The Secret Service believes that to fundamentally address this issue, appropriate levels of liaison and partnerships must be established with our international law enforcement counterparts. Currently, the Secret Service operates 23 offices abroad, each having regional responsibilities to provide global coverage. The personal relationships that have been established in those countries are often the crucial element to the successful investigation and prosecution of suspects abroad.

The Secret Service also commends the efforts of both the Department of Justice and the FBI in working to address the "Going Dark" problem - the widening gap between the legal authority to intercept electronic communications pursuant to court order and providers' practical ability to actually intercept those communications. The Secret Service supports the written statements made by FBI Chief Counsel Valerie Caproni before the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security on February 17, 2011. As stated in her recent testimony, there are significant law enforcement challenges in light of the pace of technological advancements. Cyber criminals are at the forefront of exploiting these latest technological gaps to commit crimes.

Within DHS, the Secret Service has strengthened our relationship with the National Protection and Programs Directorate's (NPPD) United States Computer Emergency Readiness Team (US-CERT), which provides response support and defense against cyber intrusions or incidents for the Federal Civil Executive Branch (.gov) domain, as well as information sharing and collaboration with state and local government, industry and international partners. As the Secret Service identifies malware, suspicious IPs and other information through its criminal investigations, it shares information with US-CERT. The Secret Service looks forward to building on its full-time presence at US-CERT, and broadening this and other partnerships within the Department.

As a part of these efforts and to ensure that information is shared in a timely and effective manner, the Secret Service has personnel detailed to the following DHS and non-DHS entities:

  • NPPD's Office of the Under Secretary;
  • NPPD's National Cyber Security Division (US-CERT);
  • NPPD's Office of Infrastructure Protection;
  • DHS's Science and Technology Directorate (S&T);
  • Department of Justice National Cyber Investigative Joint Task Force (NCIJTF);
  • Each FBI Joint Terrorism Task Force (JTTF), including the National JTTF;
  • Department of the Treasury - Terrorist Finance and Financial Crimes Section
  • Department of the Treasury - Financial Crimes Enforcement Network (FinCEN);
  • Central Intelligence Agency;
  • Department of Justice, International Organized Crime and Intelligence Operations Center;
  • Drug Enforcement Administration's Special Operations Division
  • EUROPOL; and
  • INTERPOL

The Secret Service is committed to ensuring that all its information sharing activities comply with applicable laws, regulations, and policies, including those that pertain to privacy and civil liberties.

Secret Service Framework

To protect our financial infrastructure, industry, and the American public, the Secret Service has adopted a multi-faceted approach to aggressively combat cyber and computer-related crimes. The Secret Service has dismantled some of the largest known transnational cyber-criminal organizations by:

  • providing computer-based training to enhance the investigative skills of special agents through our Electronic Crimes Special Agent Program, and to our state and local law enforcement partners through the National Computer Forensics Institute;
  • collaborating with our partners in law enforcement, the private sector and academia through our 31 Electronic Crimes Task Forces;
  • identifying and locating international cyber-criminals involved in network intrusions, identity theft, credit card fraud, bank fraud, and other computer-related crimes through the analysis provided by our Cyber Intelligence Section;
  • maximizing partnerships with international law enforcement counterparts through our international field offices; and
  • maximizing technical support, research and development, and public outreach through the Software Engineering Institute/CERT Liaison Program at Carnegie Mellon University.

Electronic Crimes Special Agent Program

A central component of the Secret Service's cyber-crime investigations is its Electronic Crimes Special Agent Program (ECSAP), which is comprised of nearly 1,400 Secret Service special agents who have received at least one of three levels of computer crimes-related training. These agents are deployed in more than 98 Secret Service offices throughout the world and have received extensive training in forensic identification, preservation and retrieval of electronically stored evidence. ECSAP-trained agents are computer investigative specialists, qualified to conduct examinations on all types of electronic evidence. These special agents are equipped to investigate the continually evolving arena of electronic crimes and have proven invaluable in the successful prosecution of criminal groups involved in computer fraud, bank fraud, identity theft, access device fraud and various other electronic crimes targeting our financial institutions and private sector.

The ECSAP program is divided into three levels of training:

Level I - Basic Investigation of Computers and Electronic Crimes (BICEP)
The BICEP training program focuses on the investigation of electronic crimes and provides a brief overview of several aspects involved with electronic crimes investigations. This program provides Secret Service agents and our state and local law enforcement partners with a basic understanding of computers and electronic crime investigations and is now part of our core curriculum for newly hired special agents.

Level II - Network Intrusion Responder (ECSAP-NI)
ECSAP-NI training provides special agents with specialized training and equipment that allows them to respond to and investigate network intrusions. These may include intrusions into financial sector computer systems, corporate storage servers or various other targeted platforms. The Level II trained agent will be able to identify critical artifacts that will allow effective investigation of identity theft, malicious hacking, unauthorized access, and various other related electronic crimes.

Level III - Computer Forensics (ECSAP-CF)
ECSAP-CF training provides special agents with specialized training and equipment that allows them to investigate and forensically obtain legally admissible digital evidence to be utilized in the prosecution of various electronic crimes cases, as well as criminally focused protective intelligence cases.

Electronic Crimes Task Forces

In 1995, the Secret Service established the New York Electronic Crimes Task Force (ECTF) to combine the resources of academia, the private sector, and local, state and federal law enforcement agencies to combat computer-based threats to our financial payment systems and critical infrastructures. Congress further directed the Secret Service in Public Law 107-56 to establish a nationwide network of ECTFs to "prevent, detect, and investigate various forms of electronic crimes, including potential terrorist attacks against critical infrastructure and financial payment systems."

The Secret Service currently operates 31 ECTFs, including two based overseas in Rome, Italy, and London, England. Membership in our ECTFs includes: 4,093 private sector partners; 2,495 international, federal, state and local law enforcement partners; and 366 academic partners. By joining our ECTFs, all of our partners benefit from the resources, information, expertise and advanced research provided by our international network of members while focusing on issues with significant regional impact.

Cyber Intelligence Section

Another example of our partnership approach with private industry is our Cyber Intelligence Section (CIS) which collects, analyzes, and disseminates data in support of Secret Service investigations worldwide and generates new investigative leads based upon its findings. CIS leverages technology and information obtained through private sector partnerships to monitor developing technologies and trends in the financial payments industry for information that may be used to enhance the Secret Service's capabilities to prevent and mitigate attacks against the financial and critical infrastructures.

CIS has an operational unit that investigates international cyber-criminals involved in cyber-intrusions, identity theft, credit card fraud, bank fraud, and other computer-related crimes. The information and coordination provided by CIS is a crucial element to successfully investigating, prosecuting, and dismantling international criminal organizations.

National Computer Forensics Institute

The National Computer Forensics Institute (NCFI) initiative is the result of a partnership between the Secret Service, NPPD of DHS, the State of Alabama and the Alabama District Attorney's Association. The goal of this facility is to provide a national standard of training for a variety of electronic crimes investigations. The program offers state and local law enforcement officers, prosecutors, and judges the training necessary to conduct computer forensics examinations. Investigators are trained to respond to network intrusion incidents and conduct electronic crimes investigations.

Since the establishment of NCFI on May 19, 2008, the Secret Service has provided critical training to 932 state and local law enforcement officials representing over 300 agencies from all 50 states and two U.S. territories.

Computer Emergency Response Team/Software Engineering Institute (CERT-SEI)

In August 2000, the Secret Service and Carnegie Mellon University Software Engineering Institute (SEI) established the Secret Service CERT Liaison Program to provide technical support, opportunities for research and development and public outreach and education to more than 150 scientists and researchers in the fields of computer and network security, malware analysis, forensic development, training and education. Supplementing this effort is research into emerging technologies being used by cyber-criminals and development of technologies and techniques to combat them.

The primary goals of the program are: to broaden the Secret Service's knowledge of software engineering and networked systems security; to expand and strengthen partnerships and relationships with the technical and academic communities; to provide an opportunity to work closely with CERT-SEI and Carnegie Mellon University; and to present the results of this partnership at the quarterly meetings of our ECTFs.

In August 2004, the Secret Service partnered with CERT-SEI to publish the first ever "Insider Threat Study" examining the illicit cyber activity in the banking and finance sector. Due to the overwhelming response to this initial study, the Secret Service and CERT-SEI, in partnership with DHS S&T, are working to update the study. An updated study, expected to be released in late 2011, will analyze actual incidents of insider crimes from inception to prosecution. The research team will share its findings with federal, state, and local law enforcement, private industry, academia and other government agencies.

Conclusion

As more information is stored in cyber space, target-rich environments are created for sophisticated cyber criminals. With proper network security, businesses can provide a first line of defense by safeguarding the information they collect. Such efforts can significantly limit the opportunities for these criminal organizations. Furthermore, the prompt reporting of major data breaches involving sensitive personally identifiable information to the proper authorities will help ensure a thorough investigation is conducted.

The Secret Service is committed to safeguarding the nation's financial payment systems by investigating and dismantling criminal organizations involved in cyber crime. Responding to the growth in these types of crimes and the level of sophistication these criminals employ requires significant resources and greater collaboration among law enforcement and its public and private sector partners. Accordingly, the Secret Service dedicates significant resources to improving investigative techniques, providing training for law enforcement partners and raising public awareness. The Secret Service will continue to be innovative in its approach to cyber crime and cyber security and is pleased that the Subcommittee recognizes the magnitude of these issues and the evolving nature of these crimes.

Madam Chair, Ranking Member Butterfield, and distinguished members of the Subcommittee, this concludes my prepared statement. Thank you again for this opportunity to testify on behalf of the Secret Service. I will be pleased to answer any questions at this time.


1 Department of Homeland Security. (2010). Quadrennial Homeland Security Review Report: A Strategic Framework for a Secure Homeland.

2 U.S. Department of Justice. (n.d.). Computer Crime & Intellectual Property Section: About CCIPS. Retrieved from http://www.justice.gov/criminal/cybercrime/

 

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