Decoding Ransomware Attacks: Who is Behind the Attacks and How do We Investigate Them?

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Ransomware is a widespread problem. Chainalysis has identified more than 52,000 victims of the attacks, and this likely underestimates the issue because so many breaches go unreported.

In recent years, ransomware perpetrators have become more sophisticated, resulting in a more targeted approach and higher costs for individual victims. The average amount sent to ransomware addresses increased more than tenfold between 2015 and 2019.

Perpetrators of ransomware attacks employ cryptocurrency for secrecy; however, Chainalysis has the resources and expertise to crack the code. Recently, we used proprietary heuristics to gain insight into ransomware attackers, their motives, their methodologies and, crucially, the way they cash out illicit revenues. Here is what we found.

Who are the perpetrators of ransomware attacks?

There are two main categories of ransomware perpetrators: organized criminal groups and state actors.

Organized criminal groups

Organized criminals operating primarily out of Eastern Europe initially used a “wide and shallow” ransomware approach to find victims. Their attacks used spam kits to spread virus-infected software rapidly and indiscriminately, sometimes to hundreds of thousands of victims in a single attack.

These attackers often developed highly automated infrastructure to handle infections, payments, decryption, and laundering. They typically demanded small ransom payments; it was a high volume, low dollar value attack.

The infrastructure employed in these attacks strongly benefitted from the “network effects” present in organized crime circles—where criminals could simply plug into well-run laundering mechanisms built and used by their “network.”

State actors

State-led ransomware typically comes from heavily sanctioned countries like North Korea, Iran, and Russia. They operate for a variety of reasons, not just to steal funds but also to sow chaos for their adversaries.

For instance, NotPetya was a widespread ransomware attack led by the GRU, the intelligence arm of the Russian military. NotPetya never developed a workable payment mechanism; the attackers may not have ever intended to decrypt any files. Given the large number of Ukrainian victims, it seems that NotPetya’s primary objective was sabotage and geopolitical disruption.

The WannaCry ransomware attack, linked to North Korean cybercriminal group “Lazarus,” similarly had no known cases of decryption. This was another attack with no real infrastructure for handling ransom payments. It only had three payment addresses and there was no clear way to communicate with victims. It is unlikely that financial gain was the main objective, but it’s difficult to discern a core motive. Perhaps the attackers were experimenting with new technologies, or the attack was an attempt at sabotage that was made to look like ransomware. Or WannaCry may have just “escaped” and accidentally affected more people than originally intended.

How ransomware has evolved

Businesses and individuals have taken steps to protect themselves against ransomware in the last few years, including installing software patches, training around simple security procedures, and moving important files into cloud storage services.

Organized criminal groups as well as state actors evolved their approach as a result, with more strategic, targeted ransomware attacks that have extracted over $2,300 per victim on average in 2019, up from $210 four years prior.


Who are the victims of ransomware?

  • High value targets such as the people handling finances for medium-sized financial institutions that likely have more lax security. Accountants in Russia were recently targeted through “malvertising” campaigns on websites pertinent to the accounting profession.
  • Targets with sensitive data such as hospitals where every second that data is locked up matters, including the U.K. National Health Service and Atlanta hospitals in the US. Perpetrators also target government organizations to gain access to sensitive data, such as information about police protection programs.
  • Organizations typically with low security or easy-to-breach systems. These include educational institutions with limited budgets for computer security systems whose HR departments can typically be accessed through imposter job applications.
  • Organizations with data that can be turned into attractive targets for state actors including government agencies, defense contractors, government consultants, and  political campaigns. While some attackers wish to gain access to sensitive files, others may simply wish to delete data to create chaos. For instance, NotPetya spread rapidly among Ukrainian businesses, causing havoc by erasing tax reporting data. Ukrainian subsidiaries of multinationals like FedEx and Maersk then spread the attack globally, amplifying the damage.


Investigating and disrupting ransomware attacks

By “following the money” after an attack, we can better understand ransomware perpetrators and develop strategies for disrupting their activities. Chainalysis has tracked hundreds of ransomware attacks since 2014 and identified hundreds of services that received the stolen cryptocurrency funds. Exchanges are the most popular such services, receiving nearly 50% of the stolen cryptocurrency funds, followed by mixing services (34%) and P2P exchanges (8%).

Once we identify the destination of funds, we then work with law enforcement who can then subpoena the service to identify criminals behind the attack.

Our investigators have found that ransomware attackers typically cash out or convert funds via services quickly and simply; there are no elaborate fund movements between receipt of funds and their withdrawal through services.

Ransomware perpetrators focus on criminally friendly exchanges such as BTC-e, or conversion services with low KYC (Know Your Customer) requirements. However, even exchanges with strong KYC standards may see ransomware proceeds come through their organizations. As a result, identifying ransomware attackers is a problem for the entire cryptocurrency ecosystem.

Recommendations

Ransomware attacks have become more sophisticated and costly in recent years, and they can have a devastating impact on targeted organizations. To protect against them, organizations should follow these recommendations:

  • Know the actors. State actors and criminal organizations approach ransomware attacks differently. Understanding their aims and methods is the first step towards protection.
  • Act quickly. Ransomware attackers move stolen funds quickly, often in a single transaction. Time is of the essence if you want to get funds back.
  • Engage law enforcement. Many victims don’t report ransomware attacks. As a result, perpetrators operate with impunity. If you are the victim of an attack, it’s important to get law enforcement involved. By sharing data about attacks among exchanges, law enforcement professionals, investigators, and other key parties, we can develop better tools for catching perpetrators and recovering stolen funds.
  • Use available tools. Familiarize yourself with specialized software that identifies ransomware perpetrators, tracks stolen fund flows, and helps prevent or thwart ransomware attacks.

For more information about how Chainalysis’ blockchain analysis can help you protect your organization from ransomware, contact us today.

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How Transaction Monitoring Works at Chainalysis

One of the reasons Chainalysis KYT is so popular is that it uses global anti-money laundering (AML) standards common across regulatory bodies. We apply these standards when each transaction is screened.

Cryptocurrency businesses also need to understand the aggregate risk profile of each of their users. That’s why Chainalysis KYT provides a view of risk profiles at the user level, which reflects all of a user’s screened transactions. For example, if an organization has a user who receives funds from a darknet market, our software automatically flags that transaction as high risk. If the user sends funds to a regulated exchange, our software marks that transaction as low risk. And so on. Every screened transaction feeds into a user’s risk profile. Chainalysis KYT displays all user profiles, sortable by high, medium or low risk (using traffic light colors) for easy scanning.

We apply our risk methodology in real time to all users within an organization’s user base. This saves compliance teams from laborious, manual screening work. They can instead focus on developing comprehensive compliance programs. Organizations that work with us tell us this has enabled them to meet regulatory expectations and launch or grow their businesses.

Customizable risk level

We’re now giving our customers the ability to adjust the risk level of a category or a service. For example, not all jurisdictions around the world treat gambling the same way. In some countries, gambling is not considered a legitimate business activity and thus online gambling sites would be treated as high risk. In other countries, gambling is not considered illicit, which means properly licensed online gambling sites would be treated as low risk.

The ability to customize the risk level of categories and specific services means our customers can automate even more of their compliance workflows.

Organization-wide dashboard

One of the most useful facets of Chainalysis KYT is having a view of all users and their risk profiles directly accessible upon first logging in. It provides a visual alert of which users have high risk profiles and therefore require the most immediate attention. In keeping with the spirit of simplified visual cues, we have now launched a dashboard that summarizes key indicators at the total organization level. For example, organizations can now see what percentage of their user base is falling under high, medium or low risk. They will soon be able to see things like total exposure by category, or total transaction volume per day. These and other metrics will provide our customers additional understanding of their organization’s total exposure trends over time.

In-app chat

At Chainalysis, we strive to provide as much support to our customers as we can. To make it easier to interact with us, we added in-app chat to Chainalysis KYT. This allows our customers to send us questions or feedback without having to leave the environment. Our team typically responds within minutes.

Looking ahead

We know software is most valuable when it makes the lives of our customers easier and more productive. This means we’ll continue to add intuitive capabilities to our compliance products while increasing versatility for ongoing transaction monitoring. In the coming months, we will improve how transaction information is displayed. We will also boost our monitoring capabilities for other cryptocurrencies beyond Bitcoin. And we will deepen the integration with Chainalysis Reactor, which is used for enhanced due diligence and investigations.

The momentum around cryptocurrency compliance is only just starting and we look forward to continuing to offer software that builds trust in blockchains.

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