Chaordic Mind

Recently Nick Selby posted on FudSec his article on Showing the Oblomovs the Door.  For those who care, an Oblomov or Oblomovism is considered a lazy or apathetic person or belief.  The blog post claims that information security professionals are “well-trained, well-intentioned” but “reduced [to] a series of relentless box-ticking” due to being “saddled with compliance management.”

The blog post further claims:

The CEO who lets the Security organization become the compliance department has abdicated to the government and Payment Card Industry his responsibility to understand and manage organizational risk. That is a fiduciary breach of CEO responsibility to shareholders. In addition to firing your ass, this should also be a floggable offense.

I agree one should use compliance as a guideline but manage it with respect to the business process.  I disagree with the fiduciary statement on grounds that one cannot claim a breach based on sparse case study and singularity statements.  The writer says this to bring grandeur to their claim.

The important part of this statement is that we are focused on the individual company here and their personal responsibility.  Remember, if you ever want to get something done don’t pass the buck.

The author, frustrated with the current implementation of compliance, states, “I stomped away from trying to influence security as an analyst because compliance … has managed to suck every ounce of oxygen from the room that is the security industry.”

Let’s just remember that history has shown that in the absence of legislation there exists a downward spiral of corporate responsibility towards protection of customer/consumer information and the well being of others. To support this I point to the moments of punctuated equilibrium that lead to things such as the Food and Drug Administration (FDA), the Securities and Exchange Commission (SEC), marginally improved ecological laws in China, and the current global financial crisis — to name a few.

Let’s also take a moment to remember that regulatory compliance has been raising the bar of information security since 1999, starting with GLBA, then with HIPAA and SOX, and finally with PCI DSS.  Is it because PCI DSS impacts most all business verticals on a global basis that it receives the most abuse from those who feel burned out?

Might I remind you that without such efforts the number of data breaches would be higher, much higher, than we see now because people find it easier to blame someone or something else rather than take personal responsibility for their own work.  The Information Security Management Handbook, by Tipton and Krause, has a section on diffusion of responsibility.

People behave differently based on the perception of being part of a group as opposed to being an individual.  It has been commonly observed that people tend to work less in a group than as individuals when only group output is measured.  People, in addition, tend to feel less responsibility in a group than as a single individual.  The bigger the group, the lower the felt sense of responsibility. Social scientists call this diffusion of responsibility and the phenomenon is commonly observed across all cultures.

I believe that instead of blaming others, we as information security professionals need to become an agent of change starting with ourselves and our current environment and expanding outwards.

The blog then claims:

At this writing it’s unclear whether Black Hat and DefCon demonstrations will include the PCI-compliant account skimmers we’re heard of, but the fact that they’re out there stands testament to the Pyrrhic victory that is the PCI Data Security Standard.

Please remember, the PCI DSS is meant to protect against the electronic and paper theft of payment card data.  It is not meant in any way to prevent credit card skimming. If you wish to raise the issue of skimming, please use the correct approach which is to clarify the need for a more secure payment card.  That of course gives way to the larger question of what is proper capital allocation and the conundrum of offline transactions and backwards compatibility.

I agree, sadly, with the blog post when it says, “PCI is not the minimum standard, it’s the maximum effort that many organizations make.” The question I have is, based on historical precedent (see above): are we better off with or without a carrot-and-stick approach? What impact has HIPAA had on the security of health care records vs PCI on the payment card industry?  In which area do we see more movement?

Certainly, movement does not always imply movement in the correct direction, but I would claim that basic items such as PCI DSS Requirement 3.2 which tells merchants and service providers to not store sensitive authentication date post-authorization has done wonders to the security of our payment card data.  How better to secure the data than to remove it in the first place?  We are seeing trends in this direction more and more in this industry and others.

But isn’t it better to have a minimum standard than none?  What if the minimum was for companies to do nothing?

Jeremiah Grossman stated, “nothing did more to build webappsec awareness than pci-dss. Now we need something to improve webappsec security.” I could not agree more, but let’s please remember that without awareness of a problem you cannot bring clarity or correction. People love to lambaste and transfer responsibility to others, all the while stomping away from personal responsibility.

If your company or those around you fail to see the forest through the trees of ‘industry best practices’ when I wonder if they are fit to run the information security department.  Those who complain that ‘compliance’ is the problem are transferring responsibility to industry standards instead of working to secure their own infrastructure.

Do such standards need correction and evolution to mirror the evolving threat of attackers and the continued evolution of information security practices and technology?  Certainly!  I support Mr. Selby in his goal to drive higher standards and move towards risk management, but let’s do so by taking individual responsibility for our own management of risk.

Mr. Selby claims, “all this compliance stuff is preventing us from addressing risk and performing, you know, security.” Why?  Did someone tell you that you cannot secure your data? Did someone tell you that by using proper the proper risk management practices you claim work so well that you cannot pass the “minimum standard”?  I support you in questioning and ferreting out anyone who makes such statements.  For the rest of the unwashed masses, we need standards.

Mr. Selby ends his rant with a statement everyone should agree with, “Compliance – the state of being – is achieved as a by-product of well-managed risk, not through a relentless ticking of boxes”, which is then followed by high-level statements of positive thinking.  The problem is that we need some tactical examples and guidelines to match the ever increasingly vague strategic statements.  GLBA says to safeguard customer information, but how?  And left to their own devices most companies will chose the cheapest possible way to implement optics of compliance.

I argue, that the PCI DSS has given concrete statements to how one secure their infrastructure, while giving the flexibility one needs to adjust for business and risk management (e.g., compensating controls, wireless and end-t0-end encryption guidelines.)

The problem lies not with our industry “best practices” but with the diffusion of responsibility that happens throughout every company.  Let’s reference back to that Information Security Management Handbook article:

The effects of de-individualization and individualization are real and play a role in how users perceive their role in an information security awareness program.  In the credit card processing call center example, de-individualization can encourage theft, carelessness, and loss of productivity.

I’d like to stop the blame game and see everyone start at home, transforming their company and being neighborly enough to share the information and results with others.  Revolution has often come from emerging evolution of ideas and conversations. I commend Mr. Selby for the conversation, but wish it involved a greater focus on personal responsibility.

Take responsibility for your own security, risk management, and data protection. Start today.

In a recent blog posting Dave Hogan, CIO of the National Retail Federation (NRF), reiterated his dogmatic stance that “PCI is little more than an elaborate patch”.  This is something he stated in a recent Congressional subcommittee meeting.

The best accounts of this testimony are by Branden Williams and Anton Chuvakin.  I highly recommend reading both of their blog posts, which deconstruct the testimony and point out flaws and fallacies in many of the statements.

Now, I want to agree with Dave, but much like conspiracy theorists he goes a little too far.  Is PCI enough to secure companies against every data compromise ever imaginable? Certainly not.  Does it raise the bar for the entire industry and make it harder for hackers to compromise payment-card data? Most certainly, and this can be shown by the increase in sophistication of attacks each year.

So, I want to agree with Dave until he makes statements like the following one during the Congressional subcommittee meeting:

What is ironic in this scenario is that the credit card companies’ rules require merchants to store, for extended periods, credit card data [PAN] that many retailers do not want to keep.

I am shocked he was not reprimanded for this one, but then again he said the same thing a few years back on 60 Minutes and few people blinked an eye.  This statement is 100% false.  The card brand operating rules and regulations have long since enabled chargebacks without the full credit card number (or PAN.)  This is further verified by Anton and Branden in their blogs mentioned above.  Walt had to restrain himself from throwing objects at his TV when he saw the 60 Minutes episode.

Dave continues in the next sentence by saying:

To many NRF members, it appears that the credit card companies are less interested in substantially improving their product and procedures than they are with reallocating their fraud costs.

Come again? The credit card companies that dominate the industry, Visa and MasterCard, are not liable for fraudulent transactions.  Do you know who is? The merchants who accept the stolen or fraudulent cards, by means of lost merchandise or goods.  In this sentence Dave is blaming the card brands for trying to reduce payment-card data loss, which in turn reduces other merchants fraud losses, many of which are members of the NRF … his employer.

Again, I want to agree with Dave when he says that we should remove the data and never store it in the first place.  <APPLAUSE>  In fact, many companies have been saying this for a long time, including: TrustCommerce, ProPay, Shift4, MerchantLink, EPX, PPI, BrainTree, Network Merchants, MagTek, Semtek, HomeATM, VeriFone, and CyberSource to name a few!

But are we to blindly accept that one-size-fits-all business models?  The benefits of many of these end-to-end encryption systems come with limitations on how the data can be used.  Internal business process must be re-engineered and some many no longer be possible since only scrambled or encrypted data will be present.

Companies must weigh the pros and cons of any security technologies before running head first into any “solution”.  I am an advocate of end-to-end encryption along with many other information security protection measures (many are listed in the PCI DSS), but we must implement each to the degree that they facilitate and support the business.

We also, need to read deeper into the mantra being told to us by experts.  We need to question the authority of others and examine the problem from all sides for ourselves.  It’s never an easy process but the more educated each of us are of both external security measures and internal business processes, the better we will be able to offer real guidance to our companies.

And that is job security you can bank on!

Branden Williams noted last week that MasterCard has entered the world of fining merchants that do not comply with the PCI DSS standard (3.1.2.2 Noncompliance Assessments).  This should signal nothing more than the wave of security gaining momentum as more and more card brands gather behind the concept of securing electronic payments.

Branden has the breakdown here, along with a comparison of Visa vs MasterCard fines.  End result? MasterCard fines more than Visa according to his blog post.

Visa Compliance Acceleration Program (CAP) as follows:
* Level 1 Merchant: $25K/mo ($300K/yr) plus tiered merchants bumping down one tier (total $$$ unknown)
* Level 2 Merchant: $5K/mo ($60K/yr)

My understanding (though their appears to be some question about this) is that these fines are assessed quarterly until compliant1.
* Level 1 & 2: $25K, $50K, $100K, $200K ($375K/yr)
* Level 3: $10K, $20K, $40K, $80K ($150K/yr)

StorefrontBacktalk has more information here.

I don’t think this would even be on the table unless we had reached critical mass.  By all accounts, greater than 50% of merchants have taken measures to secure their payment-card transactions.  This means the card brands are standing on firm ground when they roll out fine structures that impact the stragglers who have resisted implementing sound security practices.

Spam is one of those things we have grown to live with; right up there with junk mail and infomercials.  When we think of spam we usually imagine a Nigerian 419 email or something more sexual in nature.  But today I received a spam message that topped the list of niche markets — PCI spam!

The following is an email I received that purported to help you achieve PCI compliance.

This initially looks like a legitimate company that is trying to sell some snake-oil and make a buck on the uninformed small merchant, but it’s actually much worse.

It seems PCI has become so popular that even phishers and spammers have begun to capitalize on it, ironically stealing your credit card number under the guise of helping you become PCI compliant.

By the time I clicked on the link the URL (www.merchant-sol.info) did not resolve, but a quick WHOIS lookup revealed the domain for what it was.  Under the list of DNS servers it says:

Name Server:DUMMYSECONDARY.PLEASECONTACTSUPPORT.COM
Name Server:BLOCKEDDUETOPHISHING.PLEASECONTACTSUPPORT.COM

Sigh.  It seems there is no place sacred from phishing and spam.  Worst of all, it’s meant to exchange your credit card number for PCI compliance.  Perhaps we need PCI DSS Requirement #13: Do not use your credit card to pay for PCI compliance.

One of the things I’ve noticed during my time in the (secure) payments industry is the lack of true understanding about why things are the way they are.  Some people have a perspective from a merchant, and others from that of a service provider, vendor, or analyst.  Even fewer people can give their perspective from that of a card brand.  It is this drought of information that leads to fear.  Fear of the standard, fear of the “solutions”, and fear of the unknown.

As Yoda once said, “Fear leads to anger … anger leads to hate … and hate leads to … suffering.”  I don’t want anyone to suffer longer than they have already, which is why I’m a big advocate of educating oneself, as much as possible, about the industry.  If you’re a friend of mine and have any bit of patience you have head me talk about the payment card industry.  But what if you didn’t just offer to buy me a beer?  What if you want a boot camp course on the nuances of the PCI DSS?

For this, I recommend you look at the CPISM/CPISA certification classes taught by the Society of Payment Security Professionals.  I highly recommend taking one of these courses as it is brought to you by the good people at The Aegenis Group, a company that has performed industry training on this topic for several years.

When a situation is not risky, there is little need to manage or measure the risk involved.  This applies equally to lending money to friends, reading utility meters, and until a few years ago, handling credit card transactions.  With the growing risk to financial transactions there is a need to improve the ways acquiring banks, processors, gateways, and even merchants manage and measure their risk.

In fact, prior to the PCI DSS the metrics involved in measuring the risk in an acquiring bank’s merchant portfolio were rather basic.  You look at the number of transactions per month and categorize the merchants into business categories.  One would say that online gambling would be riskier than grocery stores.  The logic seemed flawless, at least for the environment at the time.

Unfortunately the environment changed and hackers turned from fame and glory seekers to those wanting large financial payoffs from their prowess.  They began attacking merchants and even banks by finding the low-hanging-fruit never imagined by the industry.  The hackers began targeting:

• POS systems directly connected to the Internet with weak remote access methods
• Weak or insecure wireless located at physical stores
• Insecurities in partner and vendor connections to companies
• Insecure web application software

The hackers identified, by brute force, holes in the security of an industry that were never imagined by those creating the metric for managing their risk.  When the compromises reached a tipping point, the industry began to shift the focus to security.  The banks and card brands formed the PCI Security Standards Council (PCI SSC or Council) in 2006 and invited merchants, POS vendors, and other industry experts to participate (as Participating Organizations.)

In order to realize the importance of this change you have to first understand that people do things based on incentives, and for most companies security is not something they are very willing spend money on.  This can be seen in the ever increasing number of data breaches that occur every day.  Anyone who has had teenagers can tell you that in order to “encourage” a person to do the right thing you need to properly incent them.  Regulatory compliance has been the thing that has incented companies to place an importance on information security for the last 10 years, and PCI DSS compliance has been the leading force for the last three years.

This might pass over as just another regulatory issue like GLBA or SOX if not for the fact that it’s not specific to a business vertical.  The payments industry is sometimes called a “horizontal” because it cuts across so many areas such as banking an finance, travel and entertainment, health care, power and energy, etc.  In fact PCI DSS is the first globally enforced, industry regulated, cross-industry compliance program.  It’s goal is simple: prevent the electronic and paper theft of payment card data.

But why?  Don’t you like it when we ask why?  The reason was not to do this because it’s the right thing.  We all like to say we are acting “green” by composting when really it’s just a way of reducing the cost of our garbage bill.  We want to prevent the loss of this data because someone is paying for the fraud: other merchants, acquiring banks, and many more.

So, we begin to understand that acquiring banks use the binary aspect of PCI DSS compliance as a measuring stick to determine the risk within their merchant portfolio.  Sure there are still the number of transactions, type of business, and size of the organization, but now there is the check box of security.  What does this really mean in practical terms?

Well, of all the PCI DSS requirements, the most important by all accounts is 3.2 which mandates that sensitive authentication data should not be retained post-authorization.  The other requirements for security act to protect this data from being intercepted in the first place.  The end result is that hackers should never have any access to this sensitive authentication data.

OK, so the standard exists to protect the super secret data so banks can measure how risky their merchants are to them.  This acts much like the credit rating agencies such as Moody’s and Standard & Poors.  The question is, “Are the current  metrics sufficient for measuring risk in a merchant portfolio?”

I would argue that, much like the credit rating that says “AAA”, the PCI DSS is only one part of the holistic approach merchant banks should take to measuring risk within their portfolio.  Think back to the collateralized debt obligation (CDO) market that just exploded.  People were packaging mortgages together into one security that people could then trade against.  The problem is understanding the impact that all those thousands of mortgages and the people behind them will have on the value of that one security.

In a similar way, banks need to look at PCI DSS as just one factor in analyzing the risk to their portfolio.  I’d argue that to keep the model working one should look to the Verizon Data Breach report and analyze attack vectors to determine what areas should be measured.

If we look at the data breach landscape we see the following numbers:

• 74% resulted from external sources
• 20% were caused by insiders
• 32% implicated business partners
• 39% involved multiple parties

The metrics companies and banks should use for measuring risk should include:

• Third Parties and the data they share (all three types)
• Deployment of a wireless network (proximity to acceptance channels such as POS)
• Number and size of business processes (POS network, databases, applications)
• Connected business units (call center, data warehouse, or physically insecure locations)

Individual merchants need to prioritize attack vectors.  If we know that more hacking events occur due to weak passwords or default passwords we should focus on eliminating things like “<blank>” or “password” or “<vendor name>” rather than focusing on achieving 7 character, alpha-numeric ones (which for the record are no better than 5 character ones in theory.)

I argue that we need more focus on attack vector trending threat models for regulatory compliance before we focus on the broad spectrum of security best practices.

Recently, Brandon Williams alerted many of us that MasterCard Worldwide adjusted its validation criteria for Level 2 merchants.  Both Visa and MasterCard, the industry leaders in global market share for locations payment-cards are accepted, had a validation criteria that matched this:

• Level 1 Merchants must validate using an external Qualified Security Assessor (QSA)*
• Level 2-3 Merchants must validate using an internal Self-Assessment Questionnaire (SAQ)
• Level 4 Merchants have no validation criteria at this time (though they must still comply like all other levels)

(* The well trained eye will counter that Visa permits L1 Merchants to self-assess but this was only with permission from the Acquiring bank and has been removed from the Visa website.)

Recently, MasterCard changed their validation criteria to reflect a stricter stance on the matter.  They noted that “All Level 1 and Level 2 merchants must use a PCI SSC certified Qualified Security Assessor for an onsite assessment.” Since most merchants that accept MasterCard also accept Visa, one can assume that (almost) all Level 2 Merchants must hire an external QSA.

The number of Level 1-4 merchants varies and there’s no real numbers that I know of that can peg the market precisely, as merchants are always growing and changing.  That being said, it is generally assumed to have the following break down (within the United States only)

• Level 1: 300-500
• Level 2: 1,500-2,000
• Level 3: 3,000-5,000
• Level 4: 4.7-4.8m

(The numbers are entirely different for other global regions such as Europe, South America, Canada, Asia, etc.)

If we look at these numbers one can assume that currently 300-500 merchants are required to engage an external QSA annually to perform their PCI DSS audit.  If we group Level 2 merchants into this fold we would have 2,000-2,500 merchants annually that require this level of scrutiny.

Or as Anton Chuvakin put it, “Obviously, awesome news for security!Now folks who are hell-bent on not having any concerns for customer data will need to deceive an actual live QSA rather than simply lie on their SAQ…”

If we assume that many Level 2 merchants are already engaging QSAs to assist them on their projects, we still see a market size increase of anywhere from 2-4 times for the QSAs.

I’d generally agree with Anton, and Branden Williams who says, “Level 2 merchants are extremely significant in size, many of which being household names. Unfortunately, PCI self-assessments are typically poorly handled simply due to the complexity of the standard and lack of training provided to those individuals performing the assessment.”

Sure the number of QSA companies is increasing, but I’m actually more concerned about the currently overworked assessors having their workload added to.  Martin McKeay notes the following: “I’m hoping that the quality of the assessors doesn’t fall because of the huge influx of QSA’s we’re needing to handle the work”

I will continue to push for a higher quality of work within the industry.  I know there are a number of people out there who are doing some very quality work, but I want to take this chance to push for higher quality, not higher levels of security.

In a recent presentation from Peter Tippet of Verizon Business (ICSA Labs), he talked about the different between aiming for perfect security and better “synergistic” security.  Instead of trying to make a seat belt 3% better for 300% of the cost, we add airbags to a car that makes it 40% safer for only 10% additional cost.  Let’s start thinking smarter not harder.

Since my goal is to make your arguments better, here are a few of my personal problems I have with the current PCI-Wars debate.  For those not familiar with logical reasoning, please read up on some of these fallacies.

The following is a list of unbalanced flaws in conversational logic that should be avoided when having a conversation with me about PCI.

1. Companies got hacked so PCI must not work

People like to point at recent data security breaches and claim that because companies have been compromised then of course the standard must not work.  Under the same logic if any company gets compromised then the entire information security industry must have somehow failed us.  People forget to remember that it’s all about: people, process, and technology, not just the industry standard.

2. The PCI DSS is all about “risk transference”

I have to restrain myself physically when people say those naughty two words.  Let’s take a walk down the life cycle of a fraudulent transaction for a moment, completely independent of PCI or compliance.

Merchant “A” accepts a fraudulent payment card and delivers the product to the client.  If a cardholder denies the charge, it’s a charge back and Merchant A must absorb the fraud.  (This is why merchants should maintain strong fraud reduction measures.) In the event of a CPP designation on Merchant “B”, the Issuer may apply for reimbursement from the compromised Merchant B.  To do so they need to apply, through the card brands and Acquiring bank, for reimbursement.  If Merchant B can cover the cost then they will pay for the fraud due to their losing data.  If Merchant B cannot cover the cost, then responsibility resides on their Acquiring bank to pay for the fraud.  In many instances it’s not the compromised merchant that pays for all the externalities resultant from lost or exposed payment card data.

So you can see, a compromised merchant is usually the last one to pay for fraud resulting from data that they lost.  They have always been responsible and PCI DSS does not change that in any way.  Instead, the PCI DSS serves as a metric by which the Acquiring banks can begin to measure their potential exposure to financial loss.

3. PCI compliance is all about making money for someone else

Whoa there cowboy!  Remember that the card brands, issuers, and acquirers all spend money on trying to keep merchants and service providers secure.  They put time, money, and resources into developing the program and educating others about it.

The participants: the QSAs, ASVs, infosec vendors, etc. all already existed before PCI ever came alone, they were just called “security consultants”, “Internet vulnerability scanners”, and “product vendors”.  Changing the name of a company doesn’t change the game.  Most merchants forget a small fact that every level of merchant is allowed to self assess if they wish.  Level 1 merchants can use their internal audit group or a QSA, and Levels 2-4 all use the Self-Assessment Questionnaire (SAQ).  The reason companies pay consultants to help them out is the same reason I hire an electrician to rewire my house.  They have experience with it.

I’ve got a deal for you.  You promise to never lose or expose payment card data then I’ll wave my hand and say “this isn’t the non-compliant company you are looking for.”

4. Credit card theft is part of identity theft

Pardon? Ok, in the metaphysical world where everyone sings coombyya then, yes, credit card theft is part of identity theft.  In that same world so is automobile theft, library card theft, and friends using your Costco membership.  I read recently that, “The Federal Trade Commission (FTC) estimates that 50 billion is lost annually due to identity theft and credit card fraud.”  Without context we have no way of understanding this number.  We need to define “identity theft” or else we should include the automobile theft statistics, because if someone steals your car and gets ticketed, isn’t that your identity as well?

Credit card theft has so little impact on the cardholders that almost every issuing bank waves the $50 service fee, and reissues a card within 7-10 days.  If someone steals my SSN, and uses it, the cost to me could take years of work to reverse.

5. PCI just enables checklist security

Yes, just like every other security checklist that ever came before it.  That’s like saying a wheel is only a tool.  Correct, but if that wheel is a racing tire and put on a Formula-1 car it can do good things.  If you hang that wheel on your front door hoping it will ward off evil, I suggest altering your philosophical beliefs.  Companies need to learn how to use the PCI DSS to enable security within their payment card environment and not follow it alone.

The problem occurs on the implementation side when companies with no prior security adopt the PCI DSS as their information security management system, which it was never designed to be (IMHO).  Companies must integrate the PCI DSS into their overall security framework and not use it to replace one.

6. A “compliant” company was compromised so the standard must not work

This is not true.  Please see also: compliance vs validation.  The Visa website provides a “Global List of PCI DSS Validated Service Providers“.  I don’t see the word compliant in there once.  In fact, if we open the PDF and read the first sentence it says, “The companies listed below were validated as being PCI DSS compliant by a QSA as of the ‘VALIDATION DATE’.”  What this means is that a company validated they were compliant one day of the year.  What that company does the other 364 days of the year is an unknown, until the forensic investigation team shows up.

7. Merchants are required to maintain the PAN

Ugh… In late 2007 60 Minutes did a broadcast that contained some misinformation.  One of the people being interviewed claimed that the credit card brands require companies to store the Primary Account Number (PAN), one of the basic elements in authorizing credit card transactions.  I know one person who had to restrain himself from throwing things at his TV after hearing this.  The payment card brands (i.e. Visa) had long since changed their rules and do not require merchants to retain the PAN after authorization and settlement of transactions.  This informaiton has not been widely disseminated to the pupulation.

Regarless, this is still a weak argument, since we know that the vast majority of payment card fraud has nothing to do with just the PAN, but instead the resale and illegal use of sensitive authentication data (track data, CVV2, PIN block).  And this, everyone universally agrees, should not be retained or available to hackers.

8. PCI is reactionary and not preventative

The PCI SSC has stated they will update the PCI standards on a 2-year basis.  When updating these standard, I assume, they will use data breach information and feedback from the industry itself to keep the document as up-to-date and usefull as possible.  When we saw web-application data breaches on the rise, the PCI DSS was updated to include Requirement 6.6 which helped address the problem.

Only by understanding the patterns of attack can be better help companies repel these forces.

Please also remember that the PCI SSC is contributed to by the Participating Organizations who provide feedback on a regular basis.  If you want to get involved then join as a member.

9. PCI is too much! or PCI sucks!

Let’s all chant together, “Tastes great! Less filling!”  Most people get less 5th grade about it and say, “PCI is too specific” and others say, “PCI is too vague”, while still other cynics claim, “… no, it’s specifically vague!”  Wrong, wrong, wrong.  If PCI is too much then why don’t you just secure your data and call it a day.  If your security foo is so good then validate as such.  Also, remember #5.

Jack Daniel said it this way, “PCI sucks. But it sucks less than doing nothing, which is the normal alternative. Real security would be better. So would unicorns.”  If PCI is painful then I begin to wonder why.  Perhaps you don’t fully understand the scope, intent of requirements, or how to best secure your infrastructure?  Perhaps you understand all these but still cannot achieve compliance due to a flat network topology or other scope issues.  This is when I remind you that the overall intent of the PCI DSS is to prevent the paper and electronic theft of payment card data.  If you can understand and achieve this, then it’s all you need.

10. PCI is not enough!

To this I agree, but not that we need more regulation or more security products.  I think people need to expand their insight into the intent behind the requirements and the standard itself.  In the last paragraph I stated that meeting the intent facilitates compliance.  Let’s take this to the next logical conclusion.

While many security people are happy to help you “carpet bomb security” by securing every system to the 9′s, why don’t we start talking about scope reduction and eliminating systems from scope.  The PCI Answers blog lists for us several product vendors that support end-to-end encryption.  Other people have begun creative ways to remove data from scope instead of securing it.

By removing data from scope, and finding more creative ways of securing the data we do store, we are going well beyond simple compliance into the realm of sound security practices.  The PCI DSS exists as a minimum bar to which those who have little security in place can aspire.

Many people debate the efficacy, effectiveness, and overall utility of the Payment Card Industry Data Security Standard (PCI DSS).  Some people involved in this debate suffer from a bounded rationality, wherein their rationality is bounded by the few articles they read online, their perspective as a merchant, or their view as an information security professional.

I’d like to outline the good, the bad, and the ugly about the PCI DSS.  I do this not to condemn or defend any one party but instead to raise the level of conversation and debate beyond some of the fallacy ridden discussions we have been having up until now.

The Good

One thing that people do not realize is that the Payment Card Industry is unlike any other.  The reason we all talk about it is because it is more of a “horizontal” than it is a “vertical” industry.  Instead of talking about the banking & finance, agriculture, or even retail industry we are talking about just about every company that utilizes credit cards in some way.  It is the case that regulatory compliance has driven the dollars behind information security since 2001, and the greatest motivator in the past few years has been the PCI DSS.  If we like it or not, this standard has been the carrot (and stick) necessary to making companies care about securing your payment card data.

Until the PCI DSS was created (and the CISP/SDP before it) there was little to no standardized way for acquiring banks to measure the risk present in their merchant population. Sure, they could have reviewed varying security reports but none of these went to the heart of the risk matter by eliminating the retention of sensitive authentication data.  In fact, it was not until the PCI mandates for not storing such data that we saw real change in the payments industry.

Thought the original PCI DSS compliance deadlines were September 30, 2004, it was not until the Visa Compliance Acceleration Program (CAP) in 2007 that substantial movement occurred.  The CAP program provided the motivation necessary to make merchants validate they were not retaining sensitive authentication data.

Information security writer and reporter, George V Hulme, gets it and says, “I still contend, PCI DSS has done much to raise merchant security from the dismal state it was in — to the better state it is in today.”  Things are certainly getting better.

The PCI DSS has given acquiring banks, merchants and service providers a method of measuring their exposure to electronic and paper data compromise, the most important of which is keeping hackers from accessing the payment card data.  This is something that no other security standard specifically calls out.  (There exist many other information security programs but none define industry terms such as “sensitive authentication data” or “cardholder data”.)

So where would we be without the specific PCI mandate to eliminate sensitive authentication data and protect the remaining cardholder data?  Well, I argue we would have even more data breaches than we see today.  In the most recent (3.31.09) Visa Inc statistics, we see that within the U.S. all of the top two merchant levels have either validated compliance or are in the process of remediation.  This is a big change from even 3-4 years ago where many merchants had only begun to protect their payment card data.

Additionally, there has been significant work done to help the medium and smaller merchant levels.  Visa spearheaded the PA-DSS program, formerly the PABP, in an effort to provide secure payment applications to merchants who may not otherwise care about security or compliance.  If we follow the 80/20 rule, it is easy to imagine that 80% of the small (Level 4) merchants use the top 20% of payment applications/terminals.  If the industry can verify these payment terminals are secure they can help reduce the risk of data loss for 80% of the small merchant market.

The Bad

The PCI SSC has put in place a structured 2-year cycle for updating and improving the PCI standards.  These changes hope to move the standard in the direction of protecting data compromises based on evolving attack and threat patterns.  In the move from v1.1 to v1.2 we saw the addition of Requirement 6.6 in direct response to the rise in the number of web application attacks.  These are very positive moves, but I would not say everything is roses.

The PCI DSS references the need for a “risk based” approach but it is buried deep in Requirement 12.1.2, which states, “[security policies must] include an annual process that identifies threats and vulnerabilities, and results in a formal risk assessment.”  I like that it is here, but I think this sentence should be the overarching measure by which all requirements are addressed.

There have been many positives moves in this direction.  In April 2008, Bank of America released a document titled Beyond Minimum Compliance: PCI Risk Management.  Though not a risk management framework, this document outlined some Top 10 PCI Best Practices that included: becoming compliant, using secure payment applications, reducing the scope of data, validate compliance, and maintain a state of security throughout the year.  In 2009, the PCI Security Standards Council released a Prioritized Approach to Pursue PCI DSS Compliance.  This takes the PCI SAP and prioritizes each requirement based on, what I assume is, that which may prevent the exposure of payment card data to the greatest number of attacks.

The executive summary of the PCI Security Audit Procedures (SAP) should clearly state the need for a risk management methodology and approach.  Moreover, it should designate a call for action that companies create and maintain a capability and maturity model (CMM) to track their progress in reducing risk.

I’ve found that one of the major roadblocks to compliance adoption is the confusion about to what degree each requirement should be implemented.  These fears could be lessened if the risk management dialogue happened at the beginning of the standard.  Similar approaches have been seen in COBIT and even the ISO27001 (with the ISO27005 framework) to name a few.

The Ugly

What I find ugly about the industry is the continual flame wars that erupt around the standard itself.  I find that many, if not all of these, have to do with the improper implementation of the standard, or the lack of a deeper insight to the industry and the history of regulatory compliance.

Anyone who has worked in a cross section of regulatory compliance arenas can tell you that there is a major difference between government regulated industries and self-regulated industries.  With the exception of NAR’s REALTOR® Secure Program, I don’t know any other industry self-regulation that exists other than the PCI DSS.  (Branden Williams, Alex Hutton and David Mortman remind me of the HiTRUST program for the health care industry.)  This is a welcome anomaly in the world of government mandates.  Those who think PCI DSS is hard to comply with may not have dealt with GLBA or SOX.  With the GLB Act, if the Fed gives you a low rating (higher number) on your bank, they don’t fine you, they just shut you down.  The payments industry is trying to enable commerce in a more secure way than it was done before.

A favorite topic of Dan Geer is that of punctuated equilibrium.  The historical context of punctuated equilibrium has shown that without incremental action, a buildup of force can result in great reactionary action.  The simplest example of this is that of a volcano or earthquake.  In public policy and the payments industry this buildup has been noted several times.  We can see this historically where the government has intervened after the industry itself could not properly self-regulate.  The Great Depression gave rise to the Securities and Exchange Commission (SEC), the once poor food standards gave rise to the Food and Drug Administration (FDA), and we are now asking if the lack of personal data privacy will give way to a government managed compliance standard.  I argue that self-regulation with continual improvement will make faster strides towards data protection than will omnibus legislation.

People complain that the 2-year life cycle of the PCI DSS is too slow, but they must not be that familiar with the 4-year life cycle for other government mandates.  Also, changing a standard any faster would cause merchants’ heads to spin!  Though the payments industry is trying to self-regulate, this never seems to be enough for some people.

The “ugly” side of the industry is that which everyone becomes a pundit, spinning the story to meet their specific pain.  People say that PCI DSS is all about “risk transference” which is a flat out fallacy of belief.  The truth is that Issuing banks have always picked up the tab for fraud, and have long been able to recover that money from merchants via the various card brand issuer reimbursement programs (i.e. Visa ADCR).  The only thing the PCI DSS ever did was give acquiring banks (and all organizations handling payment card data) a measure against which to protect the payment card data.

This angry snarl of punditry is really the sad conclusion to our state of affairs.  I fully support those who wish to improve the industry but many times people feel that change should be revolutionary and not evolutionary.  They are quick to call your baby ugly and then tell you how to parent your child.  Everyone has their own input, and I just wish people would be more constructive with their comments, feedback, and advice.  We are listening!  I am listening!

As a final note, I’d like to remind the implementers of the PCI standards (merchants and service providers) to take responsibility for their own actions.  The PCI DSS should not be used as a stand alone tool.  Companies need to wrap the DSS in a comprehensive risk management program that is measured through time by a proper capability and maturity model.  Only by staying vigilant and continuously reevaluating our current security posture can we properly protect against the ever changing attack vectors that confront us.

Additional Reading

I also highly recommend PCI Shrugged: Debunking Criticisms of PCI DSS.  Please suggest others in the comments.

I wanted to capture a list of Payment Card Industry (PCI) and Secure Payment Blogs that are run by individuals (not-for-profit) and exist to increase the level of knowledge in the industry.

Here is one such list:

• Anton Chuvakin, Security Warrior
• Martin McKeay, Network Security Blog
• David Bergert, Payment Systems Blog
• Trey Ford, Security Spin Control
• James DeLuccia, Payment Card Security & IT Controls Explained
• Chris Hayes, Risktical Ramblings
• Broox Peterson, Payments Industry Regulation

The following are a list of notable corporate bloggers, skilled individuals in their own right:

• Branden William, Security Convergence
• Walter Conway, Treasury Institute for Higher Education
• Glenbrook Partners, Payments News
• Evan Schuman, StorefrontBacktalk
• Element Payment Services, PCI DSS Compliance Blog
• SPSP, PCI Answers Blog

Martin McKeay also has a list of PCI related blogs. Please let me know if you have others that should be on the list. The goal here is to highlight the work of individuals and not corporations.