Washington And PCI Are A Terrifying Combo

GuestView Columnist David Taylor is the Founder of the PCI Knowledge Base, Research Director of the PCI Alliance and a former E-Commerce and Security analyst with Gartner.

The fallout continues from last month's U.S. congressional hearings about PCI.Based on quite a few retailers I've talked with since the hearing, about one third of the PCI managers are beginning to sense that their upper management will use these hearings, and the breaches of Heartland and RBS WorldPay, as excuses to cut PCI compliance spending.

Even worse, they plan to use those events as reasons to generally back off from their security focus, based on the assumption that Visa and their acquirer are playing defense and won't issue fines while they are under such close government scrutiny. This is absolutely the wrong conclusion.

Bob Russo, head of the PCI Security Standards Council, testified during that panel and he likened it to a colonoscopy: the preparation is worse than the procedure. By the way, whether you are friend or a foe of the PCI standards, it's certainly worth reading the testimony or, better yet, watching the video. But one of the comments Russo made is that the PCI standards are all about security, not compliance. From the perspective of the guy who runs the standards committee, that may well be the case.

But if all the PCI standards consisted of was a set of "guidelines" to help companies secure credit card data, then they would have about as much impact on merchants as ISO 17799 (the international standards from which much of the PCI standards were derived). So, do you have an "ISO 17799 Manager" position? No, of course you don't.

PCI DSS has the mindshare (and budget) it has because of compliance, enforcement and avoiding fines imposed by Visa. So even as the PCI standards council seeks to emphasize the "participatory" aspects of the standards-making process, what is really driving PCI is the review process managed by the acquirers and Visa's fines.

  • The PCI Compliance Fines are Not Going Away
    One might reasonably expect that, given the economy and the government scrutiny of the payment card industry, that the card networks would want to keep a "low profile" and not issue fines or be more lax about enforcement, but our research indicates this is not, in fact, the case. The vast majority of the fines for non-compliance are still originating with Visa, not MasterCard (who ought to adopt the phrase "the quiet card company" when it comes to PCI), but we are hearing more merchants complain about their processor (especially the largest processors) passing on fines, mostly in the range of $5000 to $25000 per month, to level 3 and 2 merchants, as well as level 1s. We've talked with some Level 4 merchants who are being fined $100 — $200 per month, which is a pretty big deal for some of them. In short, there is no sign that it is "safe" to slack off on compliance efforts, just because some subcommittee held a hearing and a couple of politicians said some not nice things about the PCI standards.

  • When to Start Paying Attention to Washington
    I don't have a lot of faith in the ability of the government to set data security standards. When I compare HIPAA to PCI DSS, and the respective audit / enforcement processes, I quickly reach the conclusion that if the government were to "take over" the PCI standards, as some have suggested is a possibility, I don't believe they would have a positive impact or add value to the protection of confidential data. The value of PCI DSS is contained in the very specificity that makes them so easy to pick on and the audit process that ensures they are in place.

    That said, it may not be long before Rep. Barney Frank of the House Committee on Financial Services or Sen. Christopher Dodd, of the Senate Committee on Banking, Housing & Urban Affairs, decides that they want to "investigate" these industry standards that are meant to protect their constituents from fraud. At that point, you can expect some serious lobbying by the banks and the card networks, as well as the Retail, Restaurant, Convenience Store and other industry associations for control of who keeps what data and who has the responsibility and legal liability for protecting it. Until then, keep the faith, and fear the fines.

    We would very much like to talk with more people, from all sides of this issue, on the "Politics of PCI." One of the things we've been contemplating is adding a discussion forum on this topic to the PCI Knowledge Base. If you have suggestions or would like to discuss this, please visit our site and post a comment, or send E-mail to [email protected].