Justice Department joins probe of huge Target data security breach

  • Article by: JENNIFER BJORHUS , Star Tribune
  • Updated: December 24, 2013 - 5:46 AM

Analyst says suspects may have been identified; Target’s general counsel confers with states.

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Nov. 28, 2013: Hundreds of bargain hunters were in line to enter the Target store at Ridgedale in Minnetonka.

Photo: Jeff Wheeler, Star Tribune

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The U.S. Department of Justice has stepped into the investigation of the huge data security breach plaguing Target Corp. and its shoppers, the company said Monday.

The nation’s No. 2 retailer disclosed the Justice Department’s involvement in a brief statement, also noting that the company’s top lawyer was participating in a conference call Monday with state attorneys general to discuss the breach and its impact.

Target didn’t elaborate on the focus of the Justice Department’s investigation, and a spokesman for the federal agency declined to comment. Al Pascual, security risk and fraud analyst at Javelin Strategy & Research, said the Justice Department may have an interest in the case because a suspect or suspects have been identified.

“I can’t see another reason that they would be involved at this point,” Pascual said. “It’s too early to say it’s criminal negligence on the part of the company.”

Target confirmed Monday that the data breach involved malicious software that somehow got on the point-of-sale card-swiping devices in the checkout aisles of Target’s U.S. stores. The cyberattack exposed debit and credit card information of 40 million customers who bought merchandise in U.S. stores from Nov. 27 to Dec 15.

Since the breach was revealed last week, consumers have been scrambling for information from Target, jamming the company’s phones.

“We have communicated to 17 million guests via e-mail and reminded them that unless they have seen fraudulent activity on their account, there is no urgent need to call,” Target spokeswoman Molly Synder said Monday in the statement.

The data breach is among the largest recorded, and it remains under investigation by the U.S. Secret Service and an outside forensics company working with Target. The Minneapolis-based chain has emphasized that it was the victim of a sophisticated crime and sought to bolster the public’s confidence by extending a 10 percent discount to shoppers last weekend.

To date, little card fraud connected to the Target theft has been reported. It probably will be many months before it becomes clear how the data may have been misused.

Nearly any type of credit and debit card used for purchases at the store during the 19-day period was affected, including Target’s own Redcard debit and credit cards. About 20 percent of Target’s total sales are made on Redcards.

The theft involved the CVV security codes embedded in the magnetic stripes on the cards and not the three-digit CVV codes on the back of the cards, as the company initially reported. Target has repeatedly said the security breach did not compromise debit card personal identification numbers (PINs). Still, some banks have decided proactively to issue new debit cards and PINs to affected customers.

Over the weekend JPMorgan Chase & Co., one of the country’s largest card issuers, imposed daily limits on ATM debit withdrawals and debit card purchases of about 2 million of its customers whose accounts were exposed. At first, Chase limited customers to cash withdrawals of $100 a day and total purchases of $300 a day. It has since relaxed the restrictions to cash withdrawals of $250 and total purchases of $1,000 a day.

“We realize this could not have happened at a more inconvenient time with the holiday season upon us,” Chase said in its notice to its customers.

Doug Johnson, vice president of risk management policy at the American Bankers Association, said he didn’t know of any other major card issuer taking such a step. Banks are walking a fine line, he said, trying to eliminate risk without hassling customers at a time of heavy holiday shopping and traveling.

San Francisco-based Wells Fargo & Co., the largest bank in Minnesota, and Minneapolis-based U.S. Bancorp said they aren’t canceling or restricting cards. The banks are among the nation’s major card issuers, and both have said they are monitoring cardholder accounts for unusual patterns and activity.

Wayzata-based TCF Financial Corp. said it was advising customers with Target debit cards linked to checking accounts at TCF to cancel their Redcard, or detach the card from their checking account.

Costly, inconvenient to cancel

There’s pressure not to cancel cards because it costs banks about $4 to $5 to replace a consumer’s card.

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