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PCI Hypocrisy: Citi’s Data Breach

June 14th, 2011

Will Citigroup be ordered to conduct such an investigation? A second consequence if a retailer were involved is fines. If fines were only about covering replacement costs, a fine wouldn’t make much sense. The bank would, in effect, just be paying itself the card reissuing costs. If, however, the fines are designed to punish noncompliant behavior, it might be a different story.

Sadly, what I do see are newspaper articles advising consumers on what steps to take to protect themselves. Everyone is recommending consumers change (and strengthen) passwords, check their credit reports and watch out for phishing E-mails.

All these recommendations are good. But in light of this data breach, it looks too much like the old game of blame the victim. A merchant or a bank gets hacked, and the cardholders are told to check their credit scores (at all three agencies) and go buy a paper shredder. Granted, the cardholders’ liability is virtually zero (at least for a credit card; it may not be so for a debit card). But with Citi’s breach of additional personally identifiable information (PII), identity theft is a possibility.

I have a good friend who is a very successful attorney, and she once told me she has a simple rule: She will not take on a client who thinks the world either is or should be “fair.” I sometimes have to explain that approach to merchants who are just learning about PCI. I don’t expect the world, or even the PCI part of it, to be fair. I do, however, believe it is in issuers’ own best interest to validate their PCI compliance. Citigroup’s unfortunate experience makes that case better than I ever could.

When I wrote about issuers and PCI compliance validation last year, I took the position that card issuers should not be ordered to validate PCI compliance. Instead, I made the case that issuers should voluntarily validate their compliance for three reasons: It is smart; it probably won’t be that difficult; and, most importantly, it is the right thing to do.

Today, I still believe all those things. But I find myself questioning my conclusion. I would love for Citigroup to announce publicly that it had conducted an outside PCI assessment and that at that time it was compliant. Such an announcement would reinforce to every merchant the importance of PCI compliance everyday, not just when the QSA is looking over your shoulder. Then, if Citi had been breached while compliant, we might learn more about potential new attack vectors.

It is probably too much to ask, but I would also like to know a few more details on the breach, so every issuer and merchant could learn from Citi’s experience. For example, did it result from a phishing E-mail to a helpdesk staffer (think RSA), a cross-site scripting attack or even a malicious insider?

What do you think? As a retailer or payment processor or service provider, do you think it is appropriate that issuers do not report when they validate their own PCI compliance? I’d like to hear your thoughts. Either leave a comment or E-mail me at wconway@403labs.com.


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