Dialoging About Tokenization And Transaction Encryption

Last week I published two research reports on the hottest topic in PCI: Tokenization and Transaction Encryption. Part 1 was an introduction into the topic and Part 2 provided some action items for companies to consider during their evolution of these technologies. Respected security blogger, Martin McKeay, commented on Part 1. Serendipitously, Martin was also in Dallas (where I live) last week and we got an opportunity to chat in person about the report and other security topics.

Martin’s post highlighted several issues that deserve some response. He felt that I, “glossed over several important points people who are considering either technology need to be aware of.” Let me review those items:

Comment: “This is one form of tokenization, but it completely ignores another form of tokenization that’s been on the rise for several years; internal tokenization by the merchant with a (hopefully) highly secure database that acts as a central repository for the merchant’s cardholder data, while the remainder of the card flow stays the same as it is now.”

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Stop the Madness! Payment Apps are on the iPad too soon.

Even though the iPad is barely birthed, there is already a push to provide payment applications for the device. It's time to pull the emergency brake on this trend. Are these applications PA-DSS certified? Do they have swipe devices with crypto hardware built-in? Has the Pin Entry Device been rigorously tested and meet all the PIN Transaction Security Guidelines? There are so many things consumers should know about the security of these new methods of payments *before* they allow their credit card to be captured by an iPad or iPhone. Is the card's Personal Account Number (PAN) encrypted at the moment it is swiped by the device? Does the device establish an encrypted tunnel to transport the transaction to the payment gateway? Doe the iPad store the PAN? Is that storage encrypted or unencrypted? Does the processor support a tokenization scheme to keep the iPad out of PCI scope? Is the payment app the only thing running on the iPad?

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Don't Sign Here Please

Visa just announced the expansion of their No Signature program. Citing its "popularity", Visa notes that: "According to a Visa Inc. survey, 69 percent of participants surveyed cited either convenience or speed as the primary reason for using their credit or debit card."  Wow.

What this seems to signal is that Visa, and perhaps the other card brands, feel that they will make more money by eliminating barriers to the sale, such as the 2.2 seconds needed to sign your name, than it would lose in fraudulent transactions, considering this program is for transactions of US$25 or less. Also, it appears that people no longer know how to sign their names.

I have often heard (in low, barely audible whispers) that US consumers were too lazy to care about security, which is why the US will probably never have CHIP and PIN transactions for enhanced credit card authentication.  We Americans are too darn busy to push 4 numbers on a key pad (4.3 second).  This drives folks in the other parts of the world crazy as they are in love with CHIP and PIN and, mistakenly, think that this technology eliminates all transaction risk.  CHIP and PIN cards still have a mag stripe that can be scanned, and skimming is still a problem. It's a great authentication method, however, and would really help reduce some of the smaller, card-present CC frauds were we to adopt it.

Americans need more paranoia about credit card theft. We are much more likely to suffer some type of credit card fraud or be affected by a major credit card breach than a terrorist attack, but for some reason we are unwilling to punch in a few numbers to help protect ourselves.

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Trends in Mobile Payments Are Frightening

Question: Do I really want someone with an iPhone taking my credit card info?
Enormous
buzz lately about all of the new players trying to turn iPhones and other mobile devices into credit card swipe terminals. Very scary. Just because someone can create a website does not mean they understand payments.
So many questions:

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Online Shopping Sites May Be Sharing Your Credit Card Data

The Attorney General of New York is investigating a large group of online retailers to see if they have been sharing your credit card data with third parties without your knowledge or permission. In a press release, the AG's Office details the scheme, including the fact that you may unknowingly be giving someone other than the retailer you are shopping with your credit card number:

"Information about joining the membership program and its ramifications, including the fact that the consumer is agreeing to transfer his or her credit or debit card account information, is buried in fine print and cluttered text."

My gut tells me that this violates the spirit, if not the letter, of the PCI Data Security Standard.  According to the PCI DSS:

"Additionally, merchants and service providers must manage and monitor the PCI DSS compliance of all associated third parties with access to cardholder data."

It is probably safe to assume that the business agreement around the data sharing identified by the New York AG's office did not include language surrounding PCI compliance.
An MSNBC story on the investigation puts it this way:

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MiFi Pwned!

Wireless hacking Guru, Josh Wright,has just announced that he has created havoc with a MiFi personal access point.MiFi is a little device that turns 3G wireless signals into WiFi.  The cool thing is that the wireless signal can be shared with other nearby computers.  According to Josh, he has found a way that, "An attacker can recover the default password from any MiFi device." This is big news because anyone who is involved with wireless ne

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Is 3-D Secure Insecure?

Security Researchers in the UK say that the 3-D Secure (3DS) system for credit card authorization, a protocol that was "developed by Visa to improve the security of Internet payments," has significant security weaknesses. It is used by both of the ginormous card brands, known as "Verified by Visa" and "MasterCard SecureCode."

This could be a big deal.

In a recent paper, the researcher calls out 3-D Secure as a security failure that was pushed on consumers by financially incentivized merchants because, "its use is encouraged by contractual terms on liability: merchants who adopt 3DS have reduced liability for disputed transactions. Previous single sign-on schemes lacked liability agreements, which hampered their take-up."

According to the authors:

"3-D Secure has lousy technology, but got the economics right (at least for banks and merchants); it now boasts hundreds of millions of accounts. We suggest a path towards more robust authentication that is technologically sound and where the economics would work for banks, merchants, and customers - given a gentle regulatory nudge."

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Virtual Network Segmentation for PCI?

Several clients have recently been asking about "Virtual Network Segmentation" products that claim to segment networks to reduce PCI compliance. They may use ARP or VLANs to control access to various network segments.  These type of controls work at Layer 2 and the hacker community is well versed at using tools such as Ettercap or Cain & Abel to bypass those controls.  We've recently written about Network Segmentation for PCI as part of the PCI X-Ray series.
While rereading the PCI Wireless Guidance document, I came across this nugget that puts a nail in the coffin of using VLANs as a security control:"Relying on Virtual LAN (VLAN) based segmentation alone is not sufficient. For example, having the CDE on one VLAN and the WLAN on a separate VLAN does not adequately segment the WLAN and take it out of PCI DSS scope. VLANs were designed for managing large LANs efficiently. As such, a hacker can hop across VLANs using several known techniques if adequate access controls between VLANs are not in place. As a general rule, any protocol and traffic that is not necessary in the CDE, i.e., not used or needed for credit card transactions, should be blocked. This will result in reduced risk of attack and will create a CDE that has less traffic and is thus easier to monitor."

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More Prognostications for 2010

Several of my Forrester colleagues have already weighed in with their 5_carsoninsightful 2010 predictions. I recently chatted with Shamus McGillicuddy at TechTarget where I shared my thoughts on the upcoming year. You can read the article here.  

2010 is going to be an interesting year with economic concerns impacting the security business. I suspect that businesses will need to regroup and think about their security spend again next year. Companies will probably remain gun-shy and hold budgets close to their vests. This could set up a shootout between increasing security threats and the desire to continue to control costs. Who will win? Your thoughts?

Happy Holidays y'all and here's wishing you a Secure New Year!

Hacking the In-Human Drone

A while back, I blogged on how researchers have developed tools to intercept streaming video from video conferencing systems and IP surveillance cameras. Today I feel so prescient with the Wall Street Journal's article on how Iraqi insurgents are using similar software to intercept the video feed of Predator Drones.

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The article has the catchy subtitle "$26 Software Is Used to Breach Key Weapons in Iraq; Iranian Backing Suspected." It discusses how the insurgents are using the software to intercept the Drone's unencrypted video stream, "potentially providing them with information they need to evade or monitor U.S. military operations."

According to the article, the military has been aware that this type of attack was posssible for some time: "The potential drone vulnerability lies in an unencrypted downlink between the unmanned craft and ground control. The U.S. government has known about the flaw since the U.S. campaign in Bosnia in the 1990s, current and former officials said. But the Pentagon assumed local adversaries wouldn't know how to exploit it, the officials said."

Let's hope that the Pentagon has learned what happens when you ass-u-me things...

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