Visa Suspends Heartland: A Little Revisionist History?

Written by Evan Schuman
March 13th, 2009

Visa struck back at Heartland on Thursday (March 12), suspending the data breach victim and removing it from Visa’s online list of PCI DSS compliant providers. Visa’s chief enterprise risk officer, Ellen Richey, told banks the news in an E-mail Thursday.

Richey described Heartland’s status as being “in a probationary period,” during which it can still accept payments, assuming it meets various new requirements. Heartland “is now in a probationary period, during which it is subject to a number of risk conditions including more stringent security assessments, monitoring and reporting. Subject to these conditions, Heartland will continue to serve as a processor in the Visa system.”

Heartland issued a statement Friday (March 13) that didn’t address Visa’s suspension, but was clearly prompted by it. “Heartland Payment Systems is pleased to continue our long relationship with Visa. Heartland is cooperating fully with Visa and other card brands and we are committed to having a safe and secure processing environment,” the statement said, which added that Heartland was certified as PCI-DSS compliant in April 2008 and “expects to continue to be assessed as PCI-DSS compliant in the future. We’re undergoing our 2009 PCI-DSS assessment now, which Heartland believes will be complete no later than May 2009 and will result in Heartland, once again, being assessed as PCI-DSS compliant.”

In Richey’s E-mail, she also referenced Heartland’s comments to Visa that it hopes to assessed PCI compliant soon. Heartland “will be relisted once it revalidates its PCI DSS compliance using a Qualified Security Assessor and meets other related compliance conditions.”

Fines Issued To Banks

Visa also used one of the few other weapons in its PCI arsenal, issuing fines to various Heartland sponsoring banks. Said Richey: “Such fines are part of the program Visa uses to assure compliance with system rules.”

Visa also officially “has determined that this event qualifies for the Account Data Compromise Recovery (ADCR) program,” which will allow some issuers “to recover a portion of their losses (and it will be) based on a percentage of magnetic stripe-read counterfeit fraud and specified operating expense liability amounts,” Richey wrote, giving issuers until May 19 to report those losses to Visa.

The Visa move is interesting, but it appears to be much less about protecting data and card accounts than protecting Visa’s public persona. If the suspension prevented Visa transactions from going through Heartland, that would have sent a very loud message. But that didn’t happen.

What has happened with Visa are some delicious attempts at rewriting history. In presentations that have been given this month by two top Visa data risk executives, Eduardo Perez and Hector Rodriguez, Visa’s party line is now “As of today, no compromised entity has been found to be compliant at the time of the breach.” And it shall forever be so.

Being Compliant And Being Certified Compliant

Why? Because, as we’ve written before, there is a huge difference between being PCI compliant and being certified PCI compliant. The differences go way beyond the “one point in time argument” (although that is also a very valid argument). It speaks to the fact that an assessor only knows what he/she is told by the retailer or processor and can only examine what he/she is shown. No assessor is going to ask every possible question, nor envision every possible hole.

As Anthony Freed wrote in his wonderful analysis of the Visa suspension, this is akin to a restaurant inspector. Just because the inspector found the kitchen to be acceptable on Tuesday morning doesn’t mean that the chef won’t leave the eggs unrefrigerated for five hours later that day. Hence, a good health inspection report certainly does not necessarily mean that it’s safe to eat there, just as a PCI certification does not necessarily mean that a retailer is safe to do business with.

Why revisionist history? Because after a major breach, the victim is visited by large teams of Secret Service agents, Visa’s top assessors, representatives from their bank and investigators for every lawyer filing a lawsuit against that retailer. I guarantee you that no retailer or processor can undergo that process without someone in that group finding something–especially a trivial something—that somehow deviates from a strict interpretation of the PCI rules. And bingo! That retailer or processor is suddenly declared no longer PCI compliant and Visa can say that no PCI compliant entity has ever been breached.

PCI is serious business and this kind of political posturing has a greater potential to undermine payment security—by undermining confidence in the system—than a crew of the best cyber thieves on the planet.


5 Comments | Read Visa Suspends Heartland: A Little Revisionist History?

  1. Rob Martell Says:

    Haha. In my past life, when dealing with auditors, we always figured that if we thought something was questionable (expense or asset sort of thing) then we would do a best-guess and let the auditors find it. Mostly because if auditors don’t find SOMETHING to quibble about, they will get so anal that it wasn’t even mentionable in public.

    Just for Grins,

  2. Howard Falcon Says:

    Would anyone expect anything else? Did anyone expect that Hartland would have to stop taking transactions? Does anyone believe that the credit card associations care about anything other than their own Brand?

    Altbough PCI is a valuable organization in that controls are need to protect card holders and their data, should the card associations be controlling it or is it objective enough to faily provide regulations at all levels regardless of it size and service?

    Major Point… If you are hacked, by definition you can’t be PCI compliant.

  3. Greg Says:

    The question to me seems to be this: During the post-breach investigation, was the breach possible because of a failure to properly implement a PCI requirement? That is the important question.

    The next, much less important question may be: Were there any MATERIAL PCI requirements not met that DID NOT contribute to the breach.

    And then, finally, Were there any NON-Material PCI requirements not met (like a signature missing from an acceptable use policy).

    The binary view of PCI complaince does not serve very well when trying to understand how high the wall is built to keep the bad guys out.

  4. Anton Chuvakin Says:

    â€œAs of today, no compromised entity has been found to be compliant at the time of the breach.â€ And it shall forever be so.”

    Why do you think that, about the “forever” part? Today “change after the assessment” scenario is the one leading to breaches, but in the future it might well change: for example, if some co is breached via a mechanism not covered by PCI than the above will not longer be true.

    Thus, â€œAs of today, no compromised entity has been found to be compliant at the time of the breachâ€ might well represent today’s reality, not simply marketing posturing…

  5. Anthony M. Freed Says:

    I think it will be sometime later this year that we finally find out that there have been multiple breaches across the entire industry, and they are most likely related.

    The extent of the breach is so pervasive that to suspend any one processor would be precedent to suspend them all once the full impact of this complete undermining of PCI DSS is revealed.

    I’ll throw out another prediction: Bob Carr of Heartland is going to resign shortly, and it may be due to the SEC/FTC investigation.

    As of the 3-11-09, Robert O. Carr is completely divsted from the company he built.

    Yes, there was a recent “forced sale” of stock that was collateral for HPY loans, but there is obviously more to all of this than we know now.

    One more, just for luck: The cost to HPY to replace the compromised cards, even if only at $2 a pop, could easily reach levels that rival their market cap – and that would be big trouble.

    If the costs, fines, and lawsuits add up to around $100 Million, HPY would very likely go into bankruptcy.

    If HPY is BK – then it’s number one creditor, Key Bank, takes a big hit.

    So, theoretically, the breach at Heartland could cause a stable bank like Key to become a another TARP sucking blight on our nation, and more shareholders will have been unnecessarily harmed.

    And there are way worse processors than Heartland – where will their clients turn?



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