Banks, Credit Card Firms Wait For The Other Shoe To Drop Amid Reports Of Another Payment Processor Breach

Brace yourself for another payment-processor breach: A second U.S.-based payment acquirer/processor has been hit with a network hack that exposed consumers' credit card accounts.

As of this posting, the victim firm's identity had not been revealed. According to several credit unions, Visa recently alerted them that another payment processor had discovered a data breach. Among the credit unions issuing alerts about the breach on their Websites are The Tuscaloosa VA Federal Credit Union and the Pennsylvania Credit Union Association. The Open Security Foundation has a notice posted on its DataLossDB site.

The latest breach follows that of Heartland Payment Systems, which went public on Jan. 20 about discovering malware on its processing system; some security experts have called it the largest security breach ever. Heartland processes 100 million payment card transactions per month for 175,000 merchants.

While details on the latest hack are still emerging, there is one known difference between it and Heartland's: This latest breach exposed so-called card-not-present transactions -- online and call-based transactions -- and not magnetic-stripe track data. Primary account numbers and expiration dates were stolen from the firm's settlement system, according to the Tuscaloosa VA Federal Credit Union.

"As the entity involved has not yet issued a press release, Visa and MasterCard are unable to release the name of the merchant processor. It is important to note that this event is not related to the Heartland Payment Systems breach," the credit union post says.

The accounts were exposed from around February 2008 until August 2008, according to credit card firms, and the breach is likely "significant" but not as large as that of Heartland's. Some cards that were compromised in the Heartland breach may also have been victims of the latest one, reports say.

Security experts, meanwhile, say the similarities between the two attacks are interesting.

"All of my sources indicate a breach, most likely at an acquiring bank/merchant processor. Rumor is it is very similar to the Heartland breach. Based on the attack trends we are seeing, I am highly recommending to my end-user clients that they revise their outbound/egress monitoring and filtering," says Rich Mogull, founder of Securosis. "I also highly suspect we'll see some changes in the next revision of PCI to address this type of attack."

Chris King, director of product marketing for Palo Alto Networks, says these types of attacks will continue to be commonplace until enterprises begin properly managing the applications that run in their networks. And that takes more than complying with PCI. "You have to do more if you want to protect your brand," he says.

In most of the latest high-profile breaches, the threat was found only after the forensics team came into the picture. "Existing network security mechanisms remained clueless," King says."So we've got to get a lot more proactive -- without creating additional impedance for transactions."

Details about the hack remain under wraps for now, and it's unclear how the malware got on the payment processor's systems. "Much of the malware we analyze daily is designed to attack banks. If an employee of the processor logged into the Net from a coffee shop, for example, then this could be one way they got infected with the malware. Once they go back to corporate, the malware is now on the 'inside,'" says Greg Hoglund, CEO of HBGary.

Visa had not responded as of this posting to requests for an interview or comments on the breach.

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