Electronic Payments: PCI Compliance Program Overview Rick Dakin, QSA 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 NYC with over 30 full time IT Auditors IT Governance and Compliance Management

Agenda Payment Card Overview Controls Framework Questions Compliance Overview Cyber ThreatsPCI Compliance

Present The Regulatory Environment Represents 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 Act of 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 Compliant infrastructures are required!

Risks Have Increased as Technology Changed

Unauthorized Users

Attack Vectors Virus AttackVirus Attack Spyware (intentional and unintentional)Spyware (intentional and unintentional) oWorms and Trojans oImage embedded Trojans Targeted attacks that exploit poor system configuration and vulnerabilitiesTargeted attacks that exploit poor system configuration and vulnerabilities Targeted attacks against a "friendly" who either loses your data or passes along the attackTargeted attacks against a "friendly" who either loses your data or passes along the attack Physical theftPhysical theft System misuse by an authorized userSystem misuse by an authorized user oInternal staff oThird 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 clients 1,500 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

Processor Gateway Service Provider Cardholder Merchant PCI Relationship Matrix Acquiring Bank App Vendors Acquiring BankIssuing Bank Merchant Cardholder Environment

PCI Data Security Standard

PCI Compliance Levels Merchant Level 1 Merchant Level 2 Merchant Level 3 Merchant Level 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 Requirements LevelValidation ActionsSCOPEValidated By 1 Annual On-Site Security Audit - AND - Authorization and Settlement Systems Independent Assessor or Internal Audit if signed by Officer Quarterly Network ScanInternet 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 ScanInternet 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 Visas 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 Scope Where is the card holder data? Customer Production Environment Acquiring Bank Wells Fargo, BoA, Chase Admin Environment Portal Access to Reconciliation Data (Charge Back / Sales Audit) Transaction Servers or Payment Gateway Transaction Record & Archive Data Warehouse Payment Gateway and Transaction Database Batch Settlement Application Servers Back Office & Customer Svc Marketing Customer Service Ecommerce Phone / Fax Gift Cards Fraud Accounting / Administration Phone, Fax, Web Server (card not present) POS Terminals (card present in stores and parking facilities) Authorization Document Vaults Paper records

PhaseCompliance MandatesEffective 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 ext Knowledge – Action = Negligence