A Transaction authentication number, TAN or T.A.N. is used by some online banking services as a form of single use one-time passwords to authorize financial transactions. TANs are a second layer of security above and beyond the traditional single-password authentication.
TANs are believed to provide additional security because they act as a form of two-factor authentication. Should the physical document or token containing the TANs be stolen, it will be of little use without the password; conversely, if the login data are obtained, no transactions can be performed without a valid TAN.
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An outline of how TANs function:
However, as any TAN can be used for any transaction, TANs are still prone to phishing attacks where the victim is tricked into providing both password/PIN and one or several TANs. Further, they provide no protection against man-in-the-middle attacks where an attacker intercepts the transmission of the TAN and uses it for a forged transaction. Especially when the client system should become compromised by some form of malware that enables a malicious user, the possibility of an unauthorized transaction is high. It should be noticed that the remaining TANs remain uncompromised and can be used safely, even though action should be taken by the user as soon as possible.
Indexed TANs reduce the risk of phishing. To authorize a transaction, the user is not asked to use an arbitrary TAN from the list but to enter a specific TAN as identified by a sequence number (index). As the index is randomly chosen by the bank, an arbitrary TAN acquired by an attacker is usually worthless.
However, iTANs are still susceptible to man-in-the-middle attacks, including phishing attacks where the attacker tricks the user into logging in into a forged copy of the bank's website.
Prior to entering the iTAN, the user is presented a CAPTCHA, which in the background also shows the transaction data and data deemed unknown to a potential attacker, such as the user's birthdate. This is intended to make it hard (but not impossible) for an attacker to forge the CAPTCHA.
This variant of the iTAN is method used by some German banks adds a CAPTCHA to reduce the risk of man-in-the-middle attacks.[1] Some Chinese banks have also deployed a TAN method similar to iTANplus. A recent study shows that these CAPTCHA-based TAN schemes are not secure against more advanced automated attacks.[2]
mTANs are used by banks in Germany, Spain, Switzerland, Austria, Bulgaria, Poland, the Netherlands, Hungary, Russia, South Africa and some in New Zealand. When the user initiates a transaction, a TAN is generated by the bank and sent to the user's mobile phone by SMS. The SMS may also include transaction data, allowing the user to verify that the transaction has not been modified in transmission to the bank.
However, the security of this scheme depends on the security of the mobile phone system. In South Africa, where SMS-delivered TAN codes are common, a new attack has appeared: SIM Swap Fraud. A common attack vector is for the attacker to impersonate the victim, and obtain a replacement SIM card for the victim's phone from the mobile network operator. The victim's user name and password are obtained by other means (such as keylogging or phishing). In-between obtaining the cloned/replacement SIM and the victim noticing their phone no longer works, the attacker can transfer/extract the victim's funds from their accounts.[3]
The process of using a TAN generator to generate or receive a TAN for bank transactions.
The risk of compromising the whole TAN list can be reduced by using security tokens that generate TANs on-the-fly, based on a secret known by the bank and stored in the token or a smartcard inserted into the token.
However, this is mostly ineffective against phishing attacks where the TAN is directly used by the attacker.