Phone Makers Are Still Opening Security Holes By Spying On Phones

A security researcher in Seattle has identified yet another program running in the background of some smartphones in the name of collecting quality of service information. This time the phone is Motorola's (NASDAQ:GOOG) Droid X2, and the program collects data that includes some user passwords—the researcher confirmed that his YouTube password was slurped up—which then are sent back to Motorola over an unencrypted connection.

Motorola doesn't have any real use for YouTube passwords, of course. But the fact that it's collecting them anyway suggests that whoever designed the software is really unclear on the security problems in slurping up data by default. Ironically, the one kind of data security that retailers are most concerned about, PCI, isn't strictly an issue if a customer uses a Droid X2 for mobile commerce, since the data leak is out of PCI scope—it's on the customer side. But a chain's employees might be sending their passwords to critical systems using a Motorola phone too, potentially exposing all the chain's systems to attack.

Ben Lincoln, the Seattle security engineer who first reported in June on the unexpected network activity he found on his phone, apparently didn't initially realize all the implications of what he was dealing with. But he had some idea—after he discovered the unexpected volume of data and used a makeshift sniffer to identify some of what it was, he stopped using it for his corporate e-mail.

His big concern: the risk of sending his employer's confidential information to Motorola. "I can't guarantee that proprietary corporate information isn't being funneled through Motorola's servers," Lincoln wrote on his blog. "I know that some information (like the name of our ActiveSync server, our domain name, and a few examples of our account-naming conventions) is, but I don't have time to exhaustively test to see what else is being sent their way, or to do that every time the phone updates its configuration."

That was before he realized that commands from Motorola were being sent to the phone over an encrypted channel, but data was being returned to Motorola unencrypted. That means anyone sniffing the phone's WiFi signal could pick up any data that Motorola was collecting—logins, passwords whatever else Motorola's software slurped up—even if the phone's user was careful to connect through a VPN or some other secured connection.

It's not clear how wide a variety of Android-based Motorola phones are collecting the information, though Lincoln said others have reported that older phones including Motorola's Photon 4G, Defy, and Milestone 2/Droid 2 also collect and pass along information. More recent Motorola phones are apparently collecting call information (which makes sense for a QOS application), but it's not clear whether they're collecting as much other data as the earlier software.

None of this is really new, as anyone who remembers the Carrier IQ uproar in 2011 knows. But it's a pain for retail IT. Never mind whether any chain would use Motorola smartphones as PCI-compliant mobile POS devices—they're unlikely candidates for that anyway, not having a fruity logo or an i in front of their names.

But now it looks like just letting IT staffers use phones like this to connect to applications, even by way of a secure connection, could still leak passwords. (Since smartphones have been a godsend for system administrators, who can use them to SSH into a system remotely without even having to find a PC, this is a real productivity problem as well as a security problem.)

Are retailers really going to have to vet (and regularly re-vet) the phones of every employee who has access to any PCI-connected system to make sure there are no passwords or data leaking? For now that's not clear. But the first time some future Albert Gonzalez sniffs an employee's WiFi stream and grabs a password that leads to a card breach, you can be sure that hammer will fall—and hard.