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

John Kindervag

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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Top Challenges in Enterprise Risk Management

Chris McClean

As I close out my client inquiry records for the quarter, it’s interesting to review some of the common challenges risk management professionals are currently facing. I was impressed to see how closely the issues I deal with were covered in the month’s edition of Risk Management Magazine. In an article entitled, “10 Common ERM Challenges,” KPMG’s Jim Negus called out the following issues:

  • Assessing ERM’s value
  • Privilege (of access to risk information)
  • Defining risk
  • (Selecting a) risk assessment method
  • Qualitative versus quantitative (assessment metrics)
  • Time horizon (for risk assessments)
  • Multiple possible scenarios
  • ERM ownership
  • Risk reporting
  • Simulations and stress tests

 

Negus provides good perspective on these challenges as well as some ideas for solutions. The list is fairly comprehensive, but there are several other challenges that I would have included based on the inquiries I get. First and foremost, the role of technology in risk management – whether for assessments, aggregation, or analytics – comes up very frequently, and vendor selection initiatives have been plentiful since mid-Q4 of last year.

Defining risk management’s role within the business (and vice versa) is also an extremely common topic of conversation. As rules and standards keep changing, this will remain a top challenge. Other frequent issues include event/loss management, building a risk taxonomy, and evaluating vendor/partner risk. 

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The Fear Of Four... And The Future Of Fraud Detection

Chris McClean

I had a few great conversations yesterday about the increasing role analytics will play in risk and compliance programs, which brought to mind the article, For Some Firms, a Case of 'Quadrophobia' appearing earlier this week in the Wall Street Journal and referenced yesterday by the NY Times’ Freakonomics blog.

The article covers a study of quarterly earnings reports over a nearly 30 year period, which found a statistically low number of results ending in four-tenths of a cent. The implication here is that companies fudge their numbers slightly to report earnings ending in five-tenths, which can then be rounded up... clever. Even more interesting, authors of the study found that these “quadrophobes” are “more likely to restate financials and to be named as defendants in SEC Accounting and Auditing Enforcement Releases (AAER)”... not clever.

The report encourages the SEC to enhance its oversight with a new department dedicated solely to detailed quantitative analysis that might catch this type of behavior. It also occurs to me that many corporations would like to identify such trends within their four walls to detect and prevent potentially damaging behavior.

Clearly, the cultural/human aspects of risk management and compliance – policies, attestations, training, awareness, whistleblowing, etc. – are essential. But as the number and complexity of business transactions continue to grow, companies will be looking more and more for ways to analyze massive amounts of data for damaging patterns and trends.

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Don't Sign Here Please

John Kindervag

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

John Kindervag

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

John Kindervag

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!

John Kindervag

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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The changing nature of governance, risk, and compliance

Chris McClean

In my ongoing work with clients, I try as often as possible to stress the importance of flexibility in GRC programs. Internal processes and technology implementations must be able to accommodate the perpetually fluctuating aspects of business, compliance requirements, and risk factors. If GRC investments are made without consideration for likely requirements 1 to 2 years down the road, decision makers aren’t doing their job. And if vendors don’t offer that flexibility, they shouldn’t be on the shortlist.

News outlets over the past year have given us almost daily examples of change in the GRC landscape. The recent stories coming out of Davos have been no exception... giving us some truly fascinating debates on the necessity and detriment of regulations. As quoted in a Wall Street Journal article on Sunday, Deutsche Bank AG Chief Executive Josef Ackermann argued against heavy-handed regulation, saying, "We should stop the blame game and we should start looking forward... if you don't have a strong financial sector to support the this recovery... you're making a huge mistake and you will regret that later on," he said. French President Nicholas Sarkozy summed up the opposing argument in his keynote, explaining, "There is indecent behavior that will no longer be tolerated by public opinion in any country of the world... That those who create jobs and wealth may earn a lot of money is not shocking. But that those who contribute to destroying jobs and wealth also earn a lot of money is morally indefensible."

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Is 3-D Secure Insecure?

John Kindervag

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?

John Kindervag

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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