Many Retailers Taking Big Chances with Test Data

News Analysis: Often transmitting unencrypted confidential customer data over weakly protected connections, retailers risk privacy and create backdoors for cyber-thieves. And yet, no one's giving the merchants much of a choice.

A high percentage of retailers are using unprotected customer information when they test their credit card processing systems, leaving the door open to a host of security problems, analysts say.

The problems arise when retailers, seeking to test any system that might impact credit card processing (point-of-sale upgrades, operating system patches, database changes, and so on) use credit card numbers, expiration data and verification codes from actual customers. Tests even include the deduction of money from the customers account and the crediting of the retailers account.

Since no organization has created a set of secure, non-customer data specifically for test transactions, retailers have few options other than using real customer data. Many in the retail industry see this as a recipe for security disasters.

"Some 90 percent of the retailers out there dont even realize how big a problem test data security is because they dont know the test environment," said David Taylor, president of the PCI (Payment Card Industry) Security Vendor Alliance, in Stamford, Conn. If auditors knew what to look for, "you could easily have 75 to 85 percent of retailers fail on this criterion alone."

Although Taylor said that few retailers understand this, that ignorance is not shared by cyber-thieves looking for the easiest way to get into retail networks.

"External hackers and (ill-intentioned) internal IT people—if theyre going to attack anywhere, theyre going to attack a weak link," Taylor said. "This is one of the most well-known weak links. If youre going to attack, this is where youre going to attack."

The question of protecting customer data during retail POS testing is also a concern of Richard Simpson, a 21-year Bank of America veteran who recently took a newly created position at the Federal Reserve Bank in Richmond, Va. Simpsons new job—senior IT risk coordinator within the Feds banking supervision and regulation area—gives him the daunting task of "raising awareness of risks that might undermine public confidence in the U.S. financial system." Simpson sees retail test data procedures as just such a risk.

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"A vulnerability that the Fed has observed during supervisory reviews is the practice of retaining unencrypted test data. Often large amounts of data will be pulled into a separate file for use as test data to verify program patches, run volume tests or simulate production output or reporting," Simpson said. "The proper approach for temporary data is to destroy it immediately after use, to encrypt it if future use is planned, or to mask fields containing any customer confidential information."

But thats not typically happening, he said. "Companies often consider test data to be less vulnerable than live transaction data and, therefore, take fewer precautions. Test data may also be accessed by third parties—such as vendors and outsourcers—more frequently than live data," Simpson said. "Yet if the test data contains reusable customer information—credit card numbers, social security numbers, name and address—it can easily be used for fraudulent purposes if accessed by internal or external hackers."

Beyond the clear threat of cyber thieves accessing the data and penetrating the network—potentially leaving Trojan Horse programs to do more damage later—the use of such test data can also create problems later on when attempts are being made to both catch the thieves and identify what was taken.

"If a fraudulent intrusion occurs, companies often have a difficult time certifying what data was in old test files breached by hackers," Simpson said. "This is one of many challenges faced by TJX as it has attempted to verify the number of accounts accessed by Internet criminals who hacked into their systems."

Next Page: The myth of "old data."