Friday, October 3, 2014

Report from Orlando

[Here is another in our series of  posts from Joe Tinucci, Assistant Treasurer of the University of Colorado. Thanks for the report, Joe! --gaw]

If you have been around the PCI DSS for any length of time, you know that the standard is developed and maintained by the PCI Security Standards Council (PCI SSC).  Every year the PCI SSC holds a series of Community Meetings around the globe; this year's North American meeting was held in Orlando, FL, on September 9 - 11, 2014.  This meeting serves as a good opportunity to find out what is on the Council's mind regarding current issues and the direction of the PCI DSS, to network with other merchants, and to talk to the payment card brands.

There were several trends and/or important issues apparent at the meeting; a short summary follows.

Evolution of the Payment Card Industry Data Security Standard (PCIDSS)
There was a lot of discussion of the best practice guides and information supplements issued by the Council over the past couple of years to clarify the PCI DSS.  It was clear from the conversations that these best practices will be integrated into the next version of the PCI DSS.  So, if you want to plan for tomorrow’s requirements, look at today’s guidance and best practice documents.

Compliance as Business-As-Usual
It was emphasized repeatedly that real system security cannot come from a once-a-year compliance event but must be integrated on an ongoing basis into a business-as-usual process.  Several speakers noted that ongoing compliance monitoring saves a significant amount of time and money over an annual point-in-time assessment.  It was also pointed out that most of the cardholder data breaches in the past year or two were of compliant entities who had let their security posture degrade, or whose compensating controls for PCI DSS requirements that could not be met directly didn’t adequately compensate for the risks / threats they were intended to counter.

Compensating Controls May Not Be Adequately Compensating
I got the sense from the official and unofficial discussions at the meeting that future guidance will tighten up on the issue of compensating controls.  A compensating control is put in place because an entity cannot meet one or more of the PCI DSS requirements, and is intended to address the risk but with a different approach.  Since many of the breaches of compliant merchants appear to have been at the point of a compensating control, extra attention will be given to the justification for a compensating control, the implementation of the control, the verification that the control is actually meeting the goal of the security control it was intended to replace, and the maintenance of the control.  If you need compensating controls, you need to fully document why, what, how, for how long, and who accepted the risk of not implementing the required control.

Risk Management Approach
If there was a clear theme to the meeting it was that merchants and service providers have to adopt a risk management approach rather than a check-the-box mentality to security, whether for cardholder data or any other sensitive data.  Documented risk assessment, ranking, management, and acceptance processes are crucial to best using limited resources to best advantage.  Also, it was noted that the PCI DSS was moving toward risk-based requirements in future versions.

Scoping is Essential
Reducing the scope of the merchant environment wherever it contains cardholder data is an essential technique for reducing the risk for a merchant; that is, limit the machines and systems that hold sensitive data to the fewest possible to process card transactions.  Written documentation of how and why the scope was determined, how the isolation of the cardholder data environment is accomplished and maintained, and how that isolation was tested is a current best practice and very soon to be a requirement.  This includes documentation of how the merchant determined that the scope of isolation from the rest of the network / infrastructure / environment was verified through penetration testing.  The Council has a much-anticipated workgroup creating penetration testing guidelines; once these are issued institutions will need to quickly bring their security staff up to speed on this security technology / technique.

Web Site Security for Ecommerce Transactions
There is a new emphasis on the security of merchant web sites / web applications that hand over the processing of payment card transactions to a third party service processor.  Multiple recent breaches have been initiated with a compromise of the merchant web site, even though the actual payment was processed by the third party gateway processor.  The newest version of the PCI DSS, version 3.0, splits apart the old assessment used with third party service providers in two – one for completely outsourced situations and the other for any other type of ecommerce web site.

Managing Third Party Service Providers
Many organizations outsource the actual processing of a payment card transaction to a third party service provider.  There was a lot of discussion of best practices in managing these service providers, including the requirement to renegotiate contracts to be much more specific about which party is responsible for each of the PCI DSS requirements. Documentation should be provided for how third party service providers were vetted, how their performance is monitored, and to whom they are providing data from the merchant’s customers and the compliance status of those other parties.

Chipcards Are Coming But Are Not The Complete Answer
Chipcards, or smartcards with an onboard computer processing chip that conforms to the Europay / MasterCard / Visa (EMV) standard, are being issued (slowly) by financial institutions and merchants must be prepared to process them.  The implementation of EMV cards is being spurred by an October 2015 deadline by which liability is switched from the card issuer to the accepting merchant for card-present fraud if the merchant cannot process EMV card transactions, as well as announcements of large retailers that they will be upgrading their equipment to accept EMV transactions (most of the announcements have come after massive breaches, with Target and Home Depot providing some recent examples).  EMV cards provide much better protection against counterfeit plastic but do not provide much additional protection against other types of fraud.  Also, other countries that have adopted the EMV standard for the card networks have seen fraud migrate from card-present transactions to card-not-present and ecommerce transactions.

Joe Tinucci is the Assistant Treasurer at the University of Colorado, where he manages the University's banking relationships.  As part of that job, he also drives the PCI DSS compliance process for approximately 160 card-accepting merchants across diverse card-acceptance environments in four campuses. Joe can be reached at (303) 837-2185 or

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