September 25, 2006 by tim.

We are a small company or organization with a fairly low volume of transactions. Do we have to comply with PCI?

Absolutely. The credit card companies have made it clear that ANY entity that stores, processes, or transmits cardholder data must comply with the PCI requirements. Furthermore, the merchant agreement typically has language that binds the merchant to comply with PCI. The specific PCI compliance requirements for merchants vary based on the transaction volume of the merchant.

While the compliance requirements are somewhat relaxed for smaller merchants, there are still many complexities that even a small merchant should consider, and I will mention only three major ones here. First, every merchant must comply with all of the various card companies’ requirements (see this post for more detail), so someone in the organization must invest time in understanding and complying with the maze of these requirements. Second, every merchant must validate compliance by hiring an Approved Scanning Vendor and completing a security compliance assessment. The scanning vendors charge widely ranging fees for their services, and many merchants may find it necessary to hire a security consultant to complete the assessment, not to mention the costs of purchasing hardware, software, or consulting to meet the PCI standards. Third, every merchant is subject to the data breach laws of any state whose resident(s) the merchant has collected information that is subject to these laws. Clearly, the costs of PCI compliance should be considered before a merchant undertakes any project involving cardholder data.

Is there any way for a merchant to avoid complying with PCI?

Well, sort of. Visa and the other companies have made it clear both on their websites and in their merchant agreements that the merchant has primary responsibility for complying with the PCI requirements. The easiest way for a merchant to comply is to outsource the handling of cardholder information to a Service Provider that is fully PCI compliant. The best way to find such a company is the List of Compliant Service Providers published by Visa.

We already use a service provider for accepting online payments. Does this ensure that we are PCI compliant?

It depends. Unfortunately, many service providers do not fully understand PCI compliance. In fact, some service providers that claim to be PCI compliant have not completed the validation and registration requirements. The only way to ensure that you are complying with the PCI requirements is to use a Service Provider that is on the List of Compliant Service Providers published on Visa’s website.

We already use SSL on our website pages that transmit cardholder data. Does this make us PCI compliant?

No. The Payment Card Industry (PCI) Data Security Standard (DSS) is comprised of twelve general requirements. SSL encryption is essential, but it merely satisfies only a small part of one of the twelve requirements (#4).

We do not store any cardholder data. Does this make us PCI compliant?

No, even if you do not store cardholder data, you must still be fully compliant with all of the PCI DSS. Visa directly states this in their Frequently Asked Questions (see question 3).

We process credit cards on a server that is behind a firewall on our in-house network. Does this make us PCI compliant?

No. A firewall is certainly required for PCI compliance, but it only addresses one of the twelve general requirements. Furthermore, the PCI DSS places very rigorous requirements on the functionality of the software applications on that server and on the configuration and management of that server. Visa does publish a List of Validated Payment Applications, yet the document includes a blatant disclaimer that use of an application on the list does not yield PCI compliance. Although running payment applications on an in-house server may offer some business advantages, this approach may substantially increase the complexities of PCI compliance because it then mandates compliance for the entire internal network.

What advantages does a merchant gain by using a validated PCI-compliant Service Provider?

To be clear, any service provider that has completed the PCI compliance process is named on Visa’s List of Compliant Service Providers. By using one of these Service Providers, a merchant is deemed to be fully PCI compliant. Furthermore, by using such a Service Provider, a merchant can qualify for Safe Harbor, thereby eliminating liability in the event of a data compromise.

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September 22, 2006 by tim.

What is the Payment Card Industry Data Security Standard? 

The Payment Card Industry (PCI) Data Security Standard (DSS) is the industry-mandated standard for protecting credit card account data that is stored, transmitted or processed electronically. The PCI Security Standards Council, the organization that owns, develops, maintains and distributes the PCI Data Security Standard (DSS), was jointly founded by American Express, Discover Financial Services, JCB, MasterCard Worldwide, and Visa International.

Who has to comply with the PCI DSS?

Compliance with the Payment Card Industry Data Security Standard (PCI DSS) is mandatory for any entity that stores, processes, or transmits cardholder data. For more detail, visit the Visa USA compliance website.

Does PCI replace the security programs of Visa, MasterCard, and the other credit card companies?

No. The PCI DSS is an industry-wide standard that has been adopted by Visa, MasterCard, and the other major credit card companies. However, each of the companies still has its own security program, which may include additional requirements and distinct processes for compliance and registration. This is probably one of the most confusing aspects of PCI. While complying with PCI is challenging enough, it is still necessary to work with each of the credit card companies individually to abide by their specific rules. Below are links to more information about the security programs of some of the major credit card companies:

Visa Cardholder Information Security Program (CISP) 

MasterCard Site Data Protection (SDP) Program

Discover Information Security and Compliance (DISC) Program

American Express Data Security Requirements

Who enforces compliance with the PCI DSS?
Each of the credit card companies has its own enforcement programs. Furthermore, each company has its own registration process and reporting requirements. See the previous question for links to each company’s security program.

Why should my organization comply with PCI?

If you are a merchant with a merchant account for accepting credit cards, then it is very likely that your merchant agreement has a provision that requires you to comply with PCI. In fact, Visa has revised its agreement to explicitly state that the merchant has primary responsibility for complying with PCI requirements (see article in June 2006 edition of The Green Sheet). The agreement may also specify penalties for non-compliance. More significantly, given the media attention that is focused on information security issues, you should take all commercially reasonable measures to protect your customers’ data from being compromised.

What are the liabilities for failure to comply with the PCI DSS?

Just as each of the credit card companies has its own enforcement programs, they also each have their own rules and penalties for failure to comply (see links above for more details). In general, a non-compliant entity may face restrictions on its ability to process transactions or to receive funds from transactions. In the event of a data compromise, the credit card companies have a demonstrated record of assessing substantial fines and terminating processing privileges. Keep in mind that a data breach may also lead to lawsuits and damages associated with the theft of personal information. Furthermore, there are a myriad of data breach disclosure laws passed by numerous states that mandate prompt notification of consumers whose data may have been compromised.

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