This post clarifies an earlier one “Considering an Opt-Out Program on PCI Validation“ and helps explain how PCI compliance validation is changing based on risk measures present in the merchant’s environment. Regulation and deregulation cycles happen in response to market forces. In this case selective deregulation is happening in the form of reduced validation based on risk and fraud reduction measures present in merchant organizations.
When many companies think of PCI compliance they immediately think of a third-party QSA auditor. For mature organizations this is the old way of thinking as both Visa and MasterCard permit merchants of any level to self-assess.
- Visa (Inc. and Europe) permits a report on compliance from an internal auditor provided it is signed off by an officer of the corporation.
- MasterCard permits self-assessments but internal auditors must “attend PCI SSC ISA Training and pass the associated accreditation program”
Although organizations must validate annually, they are relieved of this in the following situations (as noted by Simon Sharp):
- Visa Inc.: merchant does 75%+ EMV transactions = no requirement for ongoing external assessment (major abbreviation)
- Visa Europe: merchants meet 1-4 milestones of Prioritized Approach are in a safe harbor even if breached (major abbreviation)
- Visa Asia: merchants who implement end-to-end encryption or process EMV chip transactions in countries where iCVV penetration is >75% have the following options:
- Validated compliance with milestones 1-4 of the PCI SSC’s Prioritized Approach are recognized as fulfilling Visa PCI DSS validation requirements.
- Attested to not storing prohibited data and process EMV chip transactions in markets where iCVV penetration is higher than 75 percent – you may define merchant level by the annual volume of non-chip transactions.
Reducing Risk = Reduced Validation
Visa Inc’s Technology Innovation Program (TIP) notes organizations that reduce fraud risk using technologies such as EMV (Chip/PIN) no longer need to validate compliance annually. Visa Europe has their own version of TIP that goes a step further to say that for merchants who validate against the Prioritized Approach 1-4, Visa Europe will:
- waive penalties for non-compliance or non-progression
- grant ‘safe harbour’ from penalties and allocation of incremental counterfeit fraud losses in the event of a data compromise
Sure there are caveats and I’m not certain what “allocation of incremental counterfeit fraud losses” entirely means, but the idea that a merchant will achieve safe-harbor from anything is a pretty big carrot with which to lead merchants.
Certainly the pendulum has moved from encouraging compliance to encouraging risk and fraud reduction. To this end the Visa has changed from incentivizing compliance, via the Visa CAP program in 2007, to incentivizing risk and fraud reduction, via the Visa TIP programs in 2011.
Perhaps it’s premature to say that PCI compliance as an industry is in a deregulation phase. Clearly PCI compliance for regions that have not seen wide adoption such as Asia/Australia still need movement towards full compliance and validatoin. Conversely, if a merchant has >95% of transactions using EMV (Chip/PIN) with iCVV and CDA authentication – the need for PCI compliance may be limited.
Although deregulation may never fully occur, the need for annual third-party validation is no longer necessary for companies that have either: reduced the risk to payment card data or have highly-mature internal controls and validation capabilities.