It’s Official: Pre-Authorization Data Is In Your PCI Scope

Written by Walter Conway
August 6th, 2012

A 403 Labs QSA, PCI Columnist Walt Conway has worked in payments and technology for more than 30 years, 10 of them with Visa.

Like many QSAs, I frequently get asked whether pre-authorization cardholder data—that is, card data written on paper or stored electronically before the transaction is authorized—is in scope for PCI. My answer has always been that if you have any cardholder data, you must handle it in a PCI-compliant manner. That advice applies whether the data is pre-, post- or somewhere in the middle of the authorization process.

Unfortunately, some vague wording and a quote from the very first PCI Community Meeting caused some merchants to question my conclusion. They argued that cardholder data only comes into PCI scope after the transaction is authorized. We now can put this question to rest. The PCI Council has come out with an official statement to QSAs that all cardholder data is in scope, whenever and wherever it is.

The issue of pre-authorization data came up at the first PCI Community Meeting in Toronto in 2007, where a representative of one of the card brands stated that it felt pre-authorization data was not in scope for PCI. The statement, and subsequent misinterpretation of it, led to questions and a ton of electronic ink in the PCI blogosphere at the time. It also launched the urban myth that merchants do not need to protect pre-authorization data.

Some merchants took this position even further, arguing that they could retain sensitive authentication data, such as card security codes, presumably because those codes would be “pre-authorization” data for future transactions. The myth was reinforced by the wording in Requirement 3.2: “Do not store sensitive authentication data after authorization” (emphasis added).

Even though the rest of Requirement 3 (which addresses protecting stored cardholder data) does not have any “before” or “after” references, some merchants, security experts and even QSAs held that pre-authorization data was not in scope for PCI. They held to this position even though Council representatives stated regularly that PCI applied any time cardholder data is stored, processed or transmitted and that pre-authorization data is included.

In the July 2012 issue of the PCI Council’s Assessor Update, which is sent to all QSAs, the Council has finally resolved the issue. The “FAQ of the Month” addressed the issue head-on, with a formal statement that pre-authorization data is in scope. The Council’s statement says:

PCI DSS applies wherever cardholder data (CHD) and/or sensitive authentication data (SAD) is stored, processed or transmitted, irrespective of whether it is pre-authorization or post-authorization. There are no specific rules in PCI DSS regarding how long CHD or SAD can be stored prior to authorization, but such data must be protected according to PCI DSS while being stored, processed or transmitted.

That seems to settle this issue pretty clearly. As for sensitive authentication data, such as the contents of the magnetic stripe and the security code, the Council added this:

With respect to SAD, PCI DSS Requirement 3.2 prohibits storage of SAD AFTER authorization, even if encrypted. Whether SAD is permitted to be stored prior to authorization is determined by the individual payment brands, including any related usage and protection requirements. Any permitted storage of SAD prior to authorization would be subject to strict conditions and controls above those defined in the PCI DSS. Additionally, several payment brands have very specific rules that prohibit any storage of SAD and do not make any exceptions. To determine payment brand requirements, please contact the individual payment brands directly.

The bottom line is that cardholder data is in your PCI scope from the time you get it to the time you purge it from your systems (or file cabinets). This conclusion applies to POS devices that are in offline mode, faxes, MOTO or call-center order forms, electronic scans and yellow sticky notes with handwritten PANs.

I’d like to hear what do you think. Either leave a comment or E-mail me.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) 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. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.