PayChoice breached for the second time this month

For the second time this month, PayChoice Inc., a large online provider of payroll processing services, has had to shut down its online portal because of a security breach.

The company said its Online Employer site was “briefly taken offline” as the result of a security breach discovered a day earlier. The company did not identify what the problem was, but said that it had deployed additional security measures to protect client data after it identified a “key mechanism” used by online attackers.

PayChoice, based in Moorestown, N.J, provides payroll processing services and technology. The company bills itself as the “national leader” in the payroll services and software industry and claims over 125,000 business customers.

A story in the Washington Post quoted from a letter PayChoice sent to its customers saying the breach appeared to be linked to the password reset function on the portal. Those responsible for the breach appear to have stolen login IDs and passwords belonging to customers by exploiting a weakness in the function, the Post reported. The company has disabled the change password capability on the site and modified all login IDs as a result of the intrusion.

The valid login credentials of an employee at one of PayChoice's customers was used to add fictitious employees to that customer's payroll in an attempt to have payments made to fraudulent bank accounts, PayChoice confirmed today.

Steve Friedl, an independent security analyst and a consultant with a PayChoice competitors, said the attackers may have used a SQL injection attack to steal the information. Though he has no direct knowledge of the breach, chances are high that SQL injection techniques were used, said Frield who has provided examples of how it can be done on his blog.

Incidents such as these highlight the need for companies to use multi-factor authentication for controlling access to critical accounts, said Lawrence Levine, president of FireID, a South Africa-based vendor that sells a phone-based, one-time password product. The apparent ability of hackers to access accounts simply by entering a valid username and password shows why companies need additional authentication measures such as a token-based or one-time password mechanism, he said.

The Federal Financial Institutions Examination Council (FFIEC), a council set up to develop standards for auditing financial institutions, has in recent years urged financial institutions to implement strong authentication mechanisms. As far back as 2005, the FFIEC issued a set of guidelines that called on banks to stop relying just on usernames and passwords and implement a third authentication measure.

This is the second time this month that PayChoice has been breached. In the first incident, hackers stole the login credentials of an unknown number of customers and then attempted to use the data to steal additional information directly from the customers themselves. In that incident, hackers broke into the site and managed to access the real legal names, usernames and the partially masked passwords used by customers to log into the site.

They then used the information to send realistic-looking phishing e-mails to PayChoice's customers directing them to download a Web browser plug-in to be able to continue using the onlineemployer.com service. Each of the messages addressed people by their real names and contained their real username and passwords (partially masked), which had been harvested earlier from PayChoice. Those who followed the link had their systems infected with a password stealing Trojan horse program.