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Is Sony Making The Business Case For PCI?
The company does not have a lot of good choices. It could decide to trust its encryption, assume the keys were not compromised and do nothing. The risk is that the hacker(s) or someone even more sophisticated breaks it and gains access to about 77 million cleartext PANs. The potential fraud losses for which Sony could be liable—pick your favorite number: $25, $50, $100 per account—would be devastating to the company.
Alternatively, Sony could try to get ahead of the curve and recommend that users contact their banks and cancel their cards. In this case, the issuers are likely to have no sense of humor, and they will want to be compensated. Using a very rough estimate of $10 to $20 to re-issue a card, this cost would approach or even exceed $1 billion. Paying for credit monitoring instead may be a third option. However, I doubt it will be much cheaper, given the large number of users who would need to be covered.
What we see so far is a dropping stock price, measurably lower corporate profits and brand damage in the eyes of customers that could crimp revenue and profits for years and that may, ultimately, be unrecoverable. In other words, we are gathering hard data for the costs of a very large and very visible breach and potential data compromise.
Was Sony PCI compliant at the time of the breach? We do not know, and I expect we will not know for a while. The answer will have to wait until we learn the outcome of the forensic investigation that is sure to happen (trust me, losing 77 million accounts will get the card brands’ attention, and they and Sony’s acquirer will want some answers).
Everyone, including the individuals affected, needs to know that Sony properly encrypted the payment card database (PCI Requirement 3.4), that it had compliant key management processes (Requirements 3.5 and 3.6), that it did not store the security codes as reported (Requirement 3.2) and that it minimized its cardholder data storage (Requirement 3.1). I’m particularly interested in that last part, given the magnitude of the breach, and I don’t know how many others are paying attention to it.
As we follow the slow-motion train wreck that is the Sony PlayStation data breach, it is easy to miss the bigger data security and PCI lesson that applies to every retailer. That lesson is: If you think PCI compliance is expensive, noncompliance can cost even more. Another lesson: Every retailer should re-examine its risk assessment (PCI Requirement 12.1.2) and ensure it reflects the company’s changing business realities and vulnerabilities. For what it’s worth, this is the same advice I offered after the RSA breach.
I have always agreed with the PCI Council that PCI is a worthwhile investment and that the cost of noncompliance is higher than the cost of being compliant. With the unfortunate experience of Sony, we may have more hard evidence to support that argument.
What do you think? I’d like to hear your thoughts. Either leave a comment or E-mail me at wconway@403labs.com.
Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code.
-Marc
