Pretense:A New Threat to Electronic Settlement Systems

1
PretenseA New Threat to Electronic Settlement
Systems

• INET98
• Track3 Commerce and Finance
• S.Miwa and Y.Shinoda
• School of Informational Science
• JAIST

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Contents

• Introduction
• Electronic Settlement Systems Overview
• A new threat to ESS Pretense
• Improvements to ESS to resist Pretense
• Conclusion

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Introduction

• Practical use in the near future
• Various Electronic Settlement Systems (ESS)
• ESS for Open-network systems like the Internet
• But existing ESS has drawbacks

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Electronic Settlement Systems

• To settle, an ESS must correctly communicate
• information about a payment
• who, whom and how much
• among correct peers
• a payer, a payee and a settlement institution
• using 2-way authentication technology to specify
  the correct peer

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ESS on open network systems

• Exposed to various threats
• eavesdropping, interpolation and impersonation
• ESS can prevent existing these threats with
• 2-way authentication technology
• cryptography
• electronic signature technology
• But, a new threat Pretense does exist

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Designation of the payee
1) Designates the Payee

• ESS on open network systems are composed of
• Designation, Authentication and Communication

2) Authenticates mutually
3) Communicates payment information
The Payer
The Payee
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Can Payer designate the correct Payee?

• Payer cannot always specify who is the correct
  Payee
• If Payer already knows the correct Payee
• Payer never designates the wrong Payee
• If Payer doesnt know the correct Payee
• It is difficult for that Payer to designate the
  correct Payee

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Payer Cannot always designate the correct Payee

• Malicious entity alters the correct ID to its ID
• The correct ID
• Payer designates the correct Payee
• The ID is altered
• Payer then designates the wrong Payee
• This injustice is called Pretense
• The entity can receive the payment as a correct
  Payee

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What is Impersonation?
1) Designates the correct Payee
2) Communicates payment information
Impersonation
The Payer
The Correct Payee
2) Communicates payment information
The Impersonated Payee
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What is Pretense?
1) Designates the correct Payee
Pretense
1) Designates the pretended Payee
The Payer
The Correct Payee
2) Communicates payment information
The Pretended Payee
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Threat arising from Pretense

• The correct Payee on existing ESS
• Anyone who was designated by Payer
• Pretended payee can be paid the right payment as
  the correct Payee
• Existing ESS are not immune to Pretense

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Is demand for a refund possible?

• Key factors for refund
• Identifying the pretended payee
• The legal basis of a refund
• Is establishing the Pretense as an imposture
  possible?

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Identifying the pretended payee

• Payer must identify whom Payer paid
• On ESS which does not provide anonymity
• Payer may be able to identify Pretended Payee
• Most of ESS which provide anonymity
• Payer cannot identify Pretended Payee
• Newer ESS provides anonymity that is cancelable
• Payer can identify Pretended Payee

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The legal basis of a refund

• If Pretense was to take place, is there any
  breach of contract?
• The legal basis of a refund is required
• Generally, it is breach of contract

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Contract of generic mail-order
1) Presentation of the goods
2) Order
3) Receipt of the goods
4) Payment (Customers fulfillment)
The Customer
The Merchant
5) Delivery of the goods (Merchant fulfillment)
Non fulfillment
Breach of Contract
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Contract of online-shopping
1) Presentation of the goods
2) Order
3) Receipt of the goods
4) Payment with ESS
Pretense
The Customer
The Correct Merchant
4) Payment with ESS
Even if Pretended Merchant doesnt deliver the
ordered goods
The Pretended Merchant
No Breach of Contract
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Payer cannot be refundedunder Pretense

• Existing ESS doesnt manage Sales Contract
• Even if Payer concludes Sales Contract with
  Pretended Payee
• Payer cannot prove Link between Payment and Sales
  Contract
• Payer cannot prove breach of contract
• Refund cannot be demanded on breach of contract

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Pretense as an imposture

• Existing ESS cannot prove that Pretense was
  committed
• can prove only about the payment
• who, whom and how much
• can do nothing against Pretense
• But, ESS must resist Pretense

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ESS to resist pretense

• An immediate and intuitive solution
• Make the information for designating Payee public
• Communicate over the secure communication route
• 2 improvements for ESS to resist pretense
• Traceability
• Contract Function

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Providing Traceability

• Some of ESS doesnt provide anonymity
• Electronic Check System
• Secure Credit Card Payment System
• They are already providing traceability
• Newer ESS has function to cancel anonymity
• These ESS provide traceability
• With this, Pretended payee can be identified

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Providing Contract Function

• ESS must manage the sales contract
• Make the legal basis of a refund clear
• Add a function that
• Conclude the sales contract
• Manage Link between
• Sales Contract
• Payment

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Conclusion

• Existing ESS cannot resist Pretense
• By examining both technical and legal aspect of
  Pretense
• Have proposed 2 improvements
• Traceability
• Contract Function
• ESS can be made Pretense Resistant
• NECS extension