Electronic Payments:

PCI Compliance Program Overview

Rick Dakin, QSA

Rick.dakin@coalfiresystems.com

August 2008

Who is Coalfire?

Clients include Fortune 100, retail, government, education, financial, healthcare, Law Firm and manufacturing

Security, Governance, Compliance Management, Audit – GLBA, SOX, PCI, HIPAA, SAS70 & Government

Practice areas: Risk and Vulnerability Assessment, E-discovery and Forensic Analysis

Solutions: Policy Development, Data Classification, Logging and Monitoring, Incident Response, Etc.

Application Security: PABP Certification, Code Audits, Penetration Testing, SDL Development

Founded in 2001, with offices in Denver, Seattle and NYCwith over 30 full time IT Auditors

IT Governance

and Compliance

Management

Agenda

Payment Card Overview

Controls Framework

Questions

Compliance Overview

Cyber Threats

PCI Compliance

1970-1980

1980-1990

1990-2000

2000- Present

The Regulatory Environment Represents The Regulatory Environment Represents a New Enterprise Challenge a New Enterprise Challenge

Computer Security Act of 1987

EU Data Protection HIPAA FDA 21CFR Part 11 C6-Canada GLBA

COPPA USA Patriot Act 2001 EC Data Privacy Directive CLERP 9 CAN-SPAM Act FISMA Sarbanes Oxley (SOX) CIPA 2002 Basel II NERC CIP 02-09) CISP Payment Card Industry

(PCI) California Individual

Privacy SB1386 Other State Privacy Laws

(38)

Privacy Act of 1974 Foreign Corrupt Practice

Actof 1977

Compliance Trends

State Privacy Laws

Businesses must establish basic information security programs

Businesses must establish basic information security programs

Businesses must proactively manage their confidential

consumer information

Businesses must proactively manage their confidential

consumer information

Businesses must take steps to know when their defenses have been

breached

Businesses must take steps to know when their defenses have been

breached

In the event of an actual or suspected

security breach businesses have a legal obligation to

notify impacted consumers resulting

in new security requirements

In the event of an actual or suspected

security breach businesses have a legal obligation to

notify impacted consumers resulting

in new security requirements

Compliant infrastructures are required!

Risks Have Increased as Technology

Changed

Unauthorized Users

Attack Vectors

• Virus AttackVirus Attack• Spyware Spyware (intentional and unintentional)(intentional and unintentional)

o Worms and TrojansWorms and Trojanso Image embedded TrojansImage embedded Trojans

• Targeted attacks that exploit Targeted attacks that exploit poor system configuration and poor system configuration and vulnerabilities vulnerabilities

• Targeted attacks against a Targeted attacks against a "friendly" who either loses your "friendly" who either loses your data or passes along the attackdata or passes along the attack

• Physical theftPhysical theft• System misuse by an authorized System misuse by an authorized

userusero Internal staffInternal staffo Third partiesThird parties

Stolen Account Data Value

DSW Shoe Warehouse customer database was hacked and 1.4 million records were stolen and records over $6.5 million reserve on 2005 financial statements.

Scary Bedtime Stories What is the cost of non-

compliance

Other headlines….- TJ MAX causes

several states to introduce new legislation to protect cardholder data.

- Card Systems International forced to sell operations at a loss.

- Ongoing compromises are driving changes in the DSS to include dual factor authentication and wireless security.

FTC fines Choice Point $10 million for unfair business practices for failure to protect consumer data.

Costs of a PCI Compromise

Notify Clients and Provide Privacy Guard

Fines and Penalties

Loss of Clients

Fraud liability (ADCR)

Reputation Loss

$50 x 10,000 = $500,000

$10,000 to $1 million

10,000 clients – 15% = 1,500 clients1,500 x $100 in fees = $150,000 in lost fees

1,000 accounts x $500 = $500,000

PRICELESS!

A hypothetical merchant compromises 10,000 accounts when a third party service provider has a server stolen.

What is the potential financial impact?

Cardholder Verification Number

(CVV2)

Cardholder Verification Number (CVN)(CID/CVV2/CVC2)

CVV2

CVV

ProcessorGateway

Service Provider

Cardholder

Merchant

PCI Relationship MatrixAcquiring Bank

App Vendors

Acquiring BankIssuing Bank

Merchant Cardholder Environment

PCI Data Security Standard

PCI Compliance Levels

MerchantLevel 1

MerchantLevel 2

MerchantLevel 3

MerchantLevel 4

Any merchant processing 1 to 6 million VISA or MasterCard transactions per year.

Any merchant processing 20,000 to 1 million VISA or MasterCard e-commerce transactions per year.

Any merchant processing less than 20,000 VISA or MasterCard e-commerce transactions per year, and all other merchants with less than 1 million transactions

Any merchant processing over 6 million VISA or MasterCard transactions per year OR identified as any card brand as a Level 1 merchant.

Compliance Validation

RequirementsLevel Validation Actions SCOPE Validated By

1

• Annual On-Site Security Audit - AND -

• Authorization and Settlement Systems

• Independent Assessor or Internal Audit if signed by Officer

• Quarterly Network Scan • Internet Facing Perimeter Systems

• Qualified Independent Scan Vendor

2 & 3

• Annual Self-Assessment Questionnaire

- AND -

• Any system storing, processing, or transmitting cardholder data

• Merchant• Optional support from

qualified vendor

• Quarterly Network Scan • Internet Facing Perimeter Systems

• Qualified Independent Scan Vendor

4

• Annual Self-Assessment Questionnaire

• Internet Facing Perimeter Systems

• Merchant• Optional support from

qualified vendor

• Network Scan Recommended

• Internet Facing Perimeter Systems

• Qualified Independent Scan Vendor

New Self Assessment Questionnaire (SAQ)

Visa Fine Schedule*(other card associations have different costs)

Data compromise or non-compliance with PCI requirements:

• First Violation -- Up to $50,000

• Second Violation -- Up to $100,000

• Third Violation -- At Visa’s discretion for more than two violations in 12 months

Merchants who store full-track data:

• Initial penalty of $50,000

• Thereafter Visa assesses fines up to $100,000 monthly until track data is removed

• Representative fine structure based on public information distributed by Chase Paymentech. Actual fines to merchants may vary based on their acquirer.

Assessment ScopeWhere is the card holder data?

Customer Production Environment

Acquiring BankWells Fargo, BoA,

Chase

Admin Environment

Portal Access to Reconciliation Data (Charge Back / Sales Audit)

Transaction Servers or Payment Gateway

Transaction Record & Archive

Data WarehousePayment Gateway and Transaction Database

Batch Settlement

Application Servers

Back Office & Customer Svc

• Marketing

• Customer Service

• Ecommerce• Phone / Fax• Gift Cards

• Fraud• Accounting /

Administration

Ph

on

e,

Fa

x,

Em

ail

Web Server(card not present)

POS Terminals(card present in

stores and parking facilities)

Authorization

Document VaultsPaper records

Phase Compliance Mandates Effective Date

I. Newly boarded merchants must not use known vulnerable payment applications, and VisaNet Processors (“VNPs”) and agents must not certify new payment applications to their platforms that are known vulnerable payment applications.

1/1/08

II. VNPs and agents must only certify new payment applications to their platforms that are PABP-compliant.

7/1/08

III. Newly boarded Level 3 and 4 merchants must be PCI DSS compliant or use PABP-compliant applications.

10/1/08

IV. VNPs and agents must decertify all vulnerable payment applications. 10/1/09

V. Acquirers must ensure their merchants, VNPs and agents use only PABP-compliant applications.

7/1/10

Oct 23 Announcement from Visa: “It is critical that merchants and agents do not use payment applications known to retain prohibited data elements and that corrective action is immediately taken to address any identified deficiencies because these applications are at risk of being compromised.”

New Visa Application Requirements

Summary

• Assessment – vs - Audit• Penalties for non-compliance is high but guidelines on

“Assessment” procedures are marginal (sample size, evidence of control effectiveness, retention period, testing oversight)

• The testing procedures for each control activities are PRECRIPTIVE .. Maintain evidence of controls

• Self Assessment Questionnaire must track to the environment

• Organizations may not understand the cardholder environment

• Reporting process depends on the acquiring bank• More risks to manage than test procedures measure

(example Hannaford)

Questions

Rick Dakin

Rick.dakin@coalfiresystems.com303.554.6333 ext. 7001

Knowledge – Action = Negligence