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Monday 18.06.2018 | Name days: Madis, Alberts

Latvian banks fall victim to large-scale theft

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULast Wednesday, 3 May, a massive theft took place. Experts are still unsure about the exact scale and possible consequences of this crime. The crime involves IT service provider Rostelecom, which is partially owned by Russia. This company managed to intercept data flow from multiple banks. Among them are two Latvian banks, as reported by Nekā personīga.

The programme reports that banks claim no data was stolen from them, as all activities are safely encrypted. Internet security experts, on the other hand are not so certain. The Russian company most likely managed to access strategically important information about the internal function of those banks. This information can be used for large-scale attacks.

On 26 April, Rostelekom managed to achieve that all transactions performed by banks were being redirected in secret through Russia for five to seven minutes. NP notes that this was an unprecedented event when a company owned by the Russian state intercepted all correspondence.

It is possible that what happened was only a test. Reaction to this ‘test’ allows Russian special services to study the speed and methods used to trace the attack. deputy manager Varis Teivans told the programme: «This is what happened with this data flow. For ban X, transaction communication with MasterCard or VISA was performed not through original partners in Germany or USA or elsewhere, but through internet service provider close to the Russian state.»

It is possible to trace Rostelekom’s attacks by the seconds on websites that process data flow. It is clear from looking at the data that banks’ transactions are performed using specific data transfer companies. Suddenly, all data starts flowing through Rostelekom servers, NP explains.

Rostelekom can be compared to Latvia’s Lattelecom, the programme notes. The only difference is the size and scale of the company. Rostelekom has enormous international internet connections with other world-class IT companies. Lattelecom established a high-speed optic communication line with Rostelekom in 2009.

The company was previously managed by Sergei Kalugin, who was later rotated to Transport Ministry. Since March 2017, the company has been managed by a different political figure from United Russia – Mikhail Osevskiy. He was St Petersburg’s vice-governor for ten years. After that, he was vice-president of VTB Bank.

Rostelekom’s data interception can be considered an attack, because the intercepted information was carefully selected to contain only specific bank and credit card servicing companies VISA and MasterCard. Something like that cannot happen automatically, journalists say.

Teivans says that this situation is an indication that Russia does not care about secrecy in its cyber-operations. It shows the country is prepared to play dirty in the open without worrying about opinions of international partners, because this Rostelekom is not isolated – it has partners around the world.

They all know an incident has taken place. The question is – what excuse will Rostelekom offer. It is a sigh that they will no longer try to hide. Perhaps it is their strategic goal – to not hide any longer. Perhaps they want their cyber capabilities to be shown to the public and more amplified and cultivated in public space. Similar to how Russian hackers were glorified during elections in USA. And this is a goal to some extent, expert told the programme.

It should be noted that data from Norvik and DNB Bank was intercepted in Latvia. Representatives of the two banks told NP that they use encryption methods to communicate with other service providers. Data intercepted by thieves should be unreadable to thieves. experts are not as optimistic – even if the encryption key is intact, intercepted information is still very valuable for plans of future attacks. «It is the same as performing reconnaissance of the area before a battle, learning about the opposing army’s strengths and weaknesses. Having information allows generals to plan the scale, tactics and goals of attacks.»

Teivans explains the situation: «Neither we nor they can confirm that something has been stolen. It should be clear to everyone that financial institutions will always say that everything is good and nothing is stolen. […] Even though it was impossible to steal anything of value, they still surveyed the map. The attacker now knows the correspondence targets of those financial institutions when they perform transactions. They can now come up with measures to influence those processes.»

When asked if banks suffered damages or not, Defence Ministry’s state secretary Janis Garisons told NP: «It is hard to say, because we only have initial estimates. Banks should be asked directly.»

The Defence Ministry’s representative replies the following way in relation to any attack objectives: «We can only assume, but it is hard to say if there was any goal, what was and what was not achieved.»

NP found out that the largest internet service providers in Latvia have formed LIX system. When internet communications in foreign countries were expensive, communication in Latvia was performed through this network. As technologies continue to develop, it is now cheaper to use networks in foreign countries.

Latvia has strict rules on data flow that affect so-called critical infrastructure, stating that it should be performed solely through state networks.

Teivans says that this situation raises certain concerns, «because this is not the first time when we see communication intended for Latvia or goes from Latvia is unexpectedly diverted through Moscow. Such cases were noted in the past as well. One such incident took place last year – data intended to be transferred from one institution in Latvia to another was unexpectedly transferred through Moscow.»

Estonia has a special law that states that bank transactions in the cyber environment have to be performed within Estonia’s borders. Latvian Defence Ministry wants to establish similar legislation, but it is currently very hard to limit the IT sector in the country.


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