PCI compliance: What it is and why it matters (Q&A)
Bob Russo, general manager of the PCI Security Standards Council, explains what his organization is doing to keep payment card data out of the hands of criminal hackers.
If you own a bank account or use credit cards, chances are you've heard the term "PCI compliant." But you probably don't know what it means.
The term is heard more and more frequently these days as data breaches at merchants like TJX, parent of TJMaxx, and payment processorsand land millions of card records in the hands of hackers. Criminals are using the data to make purchases and withdraw money from accounts of unsuspecting victims who did nothing wrong; they just owned a card.
It's a huge and growing problem. More than 80 percent of data stolen in breaches is payment card data, according to the 2009 Verizon Business Data Breach Report.
CNET asked Bob Russo, general manager of the PCI Security Standards Council, to explain what is being done to keep criminals from accessing consumer payment card data.
Q: So, what does the PCI Security Standards Council do?
Russo: The council was formed in September 2006 by the five major credit card brands, Visa, MasterCard, American Express, Discover, and JCB [Japanese Credit Bureau]. It was formed because each one of the brands has their own compliance programs and they still do, but they all use this standard as the foundation for their programs. There was a time when you could pick up the phone and call one brand and ask a security question and get one answer and call another brand and ask the same question and get a different answer. They all now use these standards that we manage as the foundation for those compliance questions.
What is the standard exactly?
Russo: It's the PCI, which stands for Payment Card Industry, data security standard. It's a set of 12 specific requirements that cover six different goals. It's very prescriptive. It says not only that you need to be secure but it tells you how to become secure. It's more about security than compliance. The goals are things like build and maintain a secure network, protect card holder data and regularly monitor and test the networks. That's the main standard. We manage three different standards. The first one covers everything from the physical security to logical security.
The second standard is PADSS, Payment Application Data Security Standard. These are for payment applications a merchant would buy off the shelf. For example, if you went to a restaurant and you ordered your meal and the waiter used a touch-screen terminal, that puts the order in the kitchen and it's tied to an ordering database. The application also takes the credit card at the end of the meal. We make sure these applications aren't storing prohibitive data, such as data on the magnetic strip on the card. If they stored that data and someone got a hold of it then they would be able to clone credit cards. There are literally thousands of applications out there and when it's compliant with the standard it gets listed on our Web site.
The last piece we manage is called PTS, PIN Transaction System. Anytime you enter a PIN number, for example, this standard would take effect. It looks at those PIN entry devices so when you go to a large department store and you buy something and you use a debit card they'll hand you a PIN pad and you key in your number. We certify those devices as well as unattended payment terminals, such as those used at gas station [islands], ticket kiosks, and transit systems, like the Boston underground.
There have been a number of big data breaches lately. Were the companies PCI compliant or not in those cases?
Russo: It's been our experience that none of the breaches that occurred have been compliant at the time of the breach. Becoming compliant with the standard is pretty much a snapshot in time. An assessment company would come in and go through all those requirements and check that this stuff is in place. If everything is in place they issue a report on compliance. It is then your responsibility as a merchant to maintain that compliance. If there are new patches to come out for the operating system you have to install those. One piece we ask for is that you turn the logging on. Forensics find all the information in the logs so we insist you turn the logging on. Except, if nobody ever looks at these logs and they're sending out alerts, what good is it? It's up to the merchant to make sure they stay in compliance and that they are secure. For each of those [big public] breaches credit card companies looked at the logs [and found] that none of them was compliant at the time of the breach.
But I thought Heartland executives said they were compliant.
Russo: They had that piece of paper that said they were compliant but they weren't. What happened at Heartland was a SQL injection attack [in which an attacker injects commands to a back end database using input fields on a Web site]. That's an old exploit and there are myriad ways to prevent that outlined in the standards. As it turns out they were not complaint at the time of the breach. [Heartland CEO Robert Carr eventually disclosed that the assessors had incorrectly informed the company that it was PCI compliant.]
But even if the merchant is PCI compliant that doesn't necessarily mean the shop is secure, right?
Russo: Exactly. That's why we say it's about security not compliance.
If that's the case, shouldn't the standard be improved so it is more effective?
Russo: That wasn't the case here. We have seen no evidence that if someone were compliant that they would have been breached. The standard is working. You only read about the one or two or four big breaches that happen. You don't hear about the thousands of merchants who aren't getting breached because they are compliant.
If a merchant is found to be not PCI compliant, what are the consequences?
Russo: Ninety percent of consumers don't understand the difference between credit card fraud and identity theft. If they hear that their credit card has been stolen, like at Heartland or TJX, many of them believe their identity is at risk. If that's the case many of your customers won't shop with you anymore because they are afraid you are not protecting their data and someone is going to steal their identity. That's the worst thing that can happen. The biggest problem would be if your customers walk away. There are reputational damages they have to deal with, which nine times out of 10 cannot be measured in terms of dollars.
There are also fines levied by card brands. There are lawsuits coming out of the woodwork when something like this happens, like shareholder lawsuits and class action customer lawsuits. They are paying to issuing banks for reissuing cards. And the government might now get involved. They're looking to find if stolen credit card information is being used to finance terrorism. You've got myriad people on your back if you suffer a breach. You may have FTC involved, and they require 20 years of audits. Every other year you would have to go through a complete audit. It's very expensive to suffer a breach. It's much better to be compliant and secure and not have to worry about this.
How much are the fines?
Russo: The brands set those; we're not responsible for the fines. We just set the standards and they are enforced by the brands and the federal agencies.
What part of the standard is mandatory and what is voluntary?
Russo: It's all mandatory. Nothing is voluntary. The rule is if you store, process, or transmit credit card data you must be compliant with the PCI standards. And that's a global rule.
What can consumers do to protect themselves?
Russo: Consumers need to take a little bit of responsibility now. You can watch your credit card activity online. I can watch all my credit cards online to see what I'm spending, and what my wife and my kids are spending. You really should be monitoring your credit card statements. If you have to, do it when the statement comes in the mail. If you do it online you can do it more often and set up alerts via email. Consumers by and large don't have a lot of liability when it comes to credit cards. A lot of credit cards are zero-liability. You just call the company and say this was not my charge and they won't hold you responsible for it.
Debit cards are treated differently than credit cards, right?
Russo: Debit cards are somewhat different. With a debit card you're actually using your own money coming out of your own checking account. The liability will vary depending on the card and the bank.
What are the biggest challenges for the industry?
Russo: Education is a big issue. Some of the smaller merchants that just come into the business don't really know what their responsibilities are with regard to handling credit cards.
Why do entire databases continue to get stolen?
Russo: All the information is contained in the logs so alerts are being set off to let you know something is going on, and if you're not looking at the logs on a regular basis somebody could be in there for weeks or even months stealing this data and you're not aware of it. There was a big merchant that got breached but they caught it immediately in their logs and they only lost four or five credit cards. So they did suffer a breach, but it was contained to only a few cards.
Is that the biggest problem? Ignoring the logs?
Russo: That's one of the things they're doing. In one case mentioned earlier if they were complaint there would have been no way for somebody to get in and get that data.
So it's a matter of failing to follow standard security policies?
Russo: Yes. They're not following basic security practices.
With the rise of credit card attacks being harvested via browsers, will PCI ever get into the business of certifying that the browser is secure? If you can certify what it takes to secure a Web site, why not the browser?
Russo: We're concerned about where credit card data is being collected and stored, not so much how you can get to see it. My browser does not need to be secure; the server holding the data does [for PCI compliance purposes].
If someone suspects a vendor is violating PCI requirements, how can that be reported?
Russo: Consumers can call the toll-free number on the back of their credit card.
What is your ultimate take-away message for readers?
Russo: Ultimately they need to make sure the merchants they're dealing with are PCI compliant. And if you're a merchant you really have to be careful because consumers are getting smarter and smarter and if they find out you are not protecting their data, credit card data or personal data, they're going to walk away. And that's going to be the downfall of your business.