Microsoft's reaction to Flame shows seriousness of 'Holy Grail' hack

The exploit of Microsoft's Windows Update system by the sophisticated Flame cyber espionage malware was a "significant" event in the history of Windows hacking, experts said today.

And by its response, Microsoft appears to agree: It not only issued an immediate fix just days after the malware's public unveiling with one of its increasingly-rare "out-of-band" updates, but it has turned its certificate-generation process upside down and will revamp how it secures Windows updates.

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"It was a very significant," said Wolfgang Kandek, chief technology officer with Qualys, in an interview today. "It's the Holy Grail of exploits, and until now it had only been done in research."

Kandek wasn't the first to link the term "Holy Grail" with Flame: Earlier in the week, Mikko Hypponen, F-Secure's chief research officer and the first to announce that Flame was somehow using Windows Update, called the feat "the Holy Grail of malware writers" and "the nightmare scenario" for antivirus researchers.

And yesterday, Alexander Gostev, who leads Kaspersky's research and analysis team, said the Windows Update deception was "better than any zero-day exploit ... it actually looks more like a 'god mode' cheat code."

What had those researchers reaching for superlatives was the Flame makers' theft of digital "signatures," or certificates, that labeled code as Microsoft's, and then the use of those certificates to "sign" malicious files that posed as legitimate Windows updates.

The combination allowed Flame to infect fully-patched Windows XP, Vista and Windows 7 PCs that were on the same network as an already-infected system.

With a complex series of operations that involves three of its many modules, "Snack," "Munch" and "Gadget," Flame sniffs out victims, intercepts connection requests to Windows Update and serves up malware, including a copy of Flame, that masquerades as a valid update.

Third-party security researchers had mapped out those maneuvers and modules, but until Microsoft's revelation that its certificates had been fraudulently generated, didn't see the point.

"Once they confirmed [the certificate theft], it filled in the missing puzzle pieces," Liam O Murchu, director of operations for Symantec's security response center, said in an email reply to questions. "Without a Microsoft certificate these components did not make sense."

But it may be Microsoft's own moves since Monday, May 28, when Kaspersky Lab first released an analysis of Flame, that is the best evidence of the hack's gravity.

"You can get a pretty good idea by what Microsoft's done that they think this is very urgent," said Kandek. "They released the patch on Sunday, even though Patch Tuesday was just a little over a week away."

June's Patch Tuesday -- the name for Microsoft's religiously-scheduled security updates -- is next week.

Microsoft revoked three certificates -- those used to sign code in Flame -- on Sunday, June 3, only six days after Kaspersky disclosed the malware, an extremely rapid response for the company. The same day, Microsoft modified the Terminal Services licensing certificate authority (CA), the one hackers had exploited, so it could no longer issue code-signing certificates of any kind.

It's rare that Microsoft issues an emergency update rather than wait for the next Patch Tuesday. Last year, Microsoft shipped only one, and that was just two days before 2011's close. In 2010, Microsoft delivered four out-of-band updates and 104 on Patch Tuesdays.

On Wednesday Microsoft announced it would revamp how Windows updates are secured, saying that it would dedicate a new CA to Windows Update, in effect unlinking the service from all other Microsoft-generated certificates. The update to end users and enterprises -- the latter for WSUS, or Windows Server Update Services -- is to start reaching customers this week.

Andrew Storms, director of security operations at nCircle Security, said that should have been how Microsoft treated Windows Update from the get-go.

"Windows Update should have been an entirely different [certificate] stream than anything else," said Storms. "It's just too darned important to have been intermingled with any other chain of trust. For all that Microsoft has done to better their security practices, I'm pretty surprised they didn't think of this attack vector previously."

Storms was also critical of Microsoft's vague description of their plans to harden Windows Update.

"The Windows Update team needs to describe in more detail how they are going to fix the problem. Until then, I bet a lot of people will be thinking twice about the security of Windows Update," said Storms.

Users should deploy last Sunday's certificate revocation update as soon as possible, Microsoft has said, to protect themselves from possible copy-cat hackers.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com.

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