Heartland data breach could be bigger than TJX's

Potentially over 100 million cards have been compromised in attack on one of the largest payment processors in the country

A data breach disclosed Tuesday by Heartland Payment Systems may well displace TJX Companies' January 2007 breach in the record books as the largest ever involving payment data with potentially over 100 million cards being compromised.

Heartland, a N.J.-based provider of credit and debit card processing services said that unknown intruders had broken into its systems sometime last year and planted malicious software to steal card data carried on the company's networks. The company, which is among the largest payment processors in the country, claimed to have discovered the intrusion only last week after being alerted by Visa and MasterCard of suspicious activity.

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The card companies' alerts triggered a subsequent investigation by "several forensic investigators" during which the intrusion was discovered, Robert Baldwin Jr., Heartland's president and CFO, said in the statement. The company said the intrusion may have been the result of a "widespread global cyberfraud operation".

Heartland claimed that no merchant data, cardholder's Social Security numbers, or unencrypted personal identification numbers (PIN), addresses, or telephone numbers were compromised.

As with most data breach notifications, Heartland offered no explanations on when it was first informed of the breach by the card companies, when in 2008 the company had been breached, how long the intruders had remained undetected, or how many cards might have been compromised in the intrusion. A company spokeswoman did not immediately respond to requests for comment.

But given that Heartland processes more than 100 million card transactions per month, it is very possible that the number of compromised credit and debit cards is at least that much, if not more, said Avivah Litan , an analyst with Gartner. "It does look like the biggest ever," Litan said. The TJX breach involved the compromise of over 45 million cards.

It also appears that those behind the breach "made off with the gold" by intercepting and stealing the so-called Track 2 data from the magnetic stripe on the back of cards, which is all that's needed to create counterfeit cards, Litan said.

Dan Clements, president of CardCops , an identity protection service of Affinion Group, said that he has noticed activity in underground chat rooms that suggested a major compromise at a processor such as Heartland.

Typically when a card is stolen, crooks first check to see if the cards are still active by using it for some transaction -- often a very small donation to a charitable organization -- to see if it works. This sort of validity check has increased by nearly 20 percent over the past few months, suggesting a major compromise. But it's not clear yet if it is related to the Heartland breach, Clements said.

The Heartland compromise is the second involving a large payment processor over the past few weeks. One Dec. 23, RBS WorldPay, the payment processing division of The Royal Bank of Scotland Group, announced that its systems had been breached by unknown intruders, resulting in the compromise of personal information belonging to about 1.5 million card holders. The compromised information included the Social Security numbers of 1.1 million individuals using payroll cards, the company said.

The incidents suggest that cybercrooks are increasingly beginning to target payment processors, Litan said. "Attacking a processor is much more serious than attacking a retailer. A processor sits at the nerve center of the payment process,"and processes far more payment card data than any retailer, she said.

"More radical security moves" need to be taken by payments industry as a whole to address the problem, she added. Such incidents show that the security requirements of the Payment Card Industry Data Security Standard (PCI DSS) being pushed by the major card companies is clearly not enough, Litan added.

Computerworld is an InfoWorld affiliate.

This story, "Heartland data breach could be bigger than TJX's" was originally published by Computerworld.

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