Anti-carding compliance policies

[Student]

To comply with anti-carding regulations, including PCI DSS standards, payment system rules (Visa, Mastercard, etc.), and local laws, companies must implement comprehensive internal policies. These policies are aimed at minimizing payment card fraud, protecting cardholder data, and ensuring regulatory compliance. Below is a detailed description of the key internal policies that a company should develop and implement, with an emphasis on educational aspects. Each policy includes a purpose, key requirements, practical steps, and examples to ensure understanding of their importance and implementation.

1. Access Control and Authentication Policy​

Objective: To restrict access to payment card processing systems and data to authorized employees only to prevent unauthorized access, data leakage, or abuse.

Key requirements:

• Least Privilege: Access is granted only to perform specific work tasks (for example, a cashier does not need access to the customer database).
• Multi-factor authentication (MFA): Mandatory use of at least two factors (e.g. password + code from an app) to access critical systems.
• Disable Default Credentials: Devices and software (e.g. POS terminals) should not use factory default passwords.
• Regularly update passwords: Change passwords every 90 days with a minimum complexity (e.g. 12 characters including letters, numbers and special characters).
• Access Logging: All login attempts should be logged for analysis.

Practical steps:

1. Create a register of employees indicating their roles and required access levels.
2. Implement access management systems such as Active Directory or similar for centralized control.
3. Set up MFA via apps (Google Authenticator, Microsoft Authenticator) or hardware tokens.
4. Conduct regular account audits to check for outdated or unused accounts.

Example: At a retail store, a cashier only has access to the POS terminal interface for transaction entry, but not to the server where card data is stored. An IT administrator, on the other hand, has access to the server, but only through MFA and with all actions logged.

Why is this necessary? Unauthorized access is one of the leading causes of data breaches. For example, the 2013 data breach at Target resulted from the compromise of a contractor's credentials, highlighting the importance of strict access controls.

2. Data protection policy (encryption and storage)​

Objective: To protect sensitive cardholder data (PAN, name, expiration date) from theft or compromise.

Key requirements:

• Data encryption:
  • Card data in transit (for example, when transmitted over the Internet) must be encrypted using TLS 1.2 or higher protocols.
  • Data at rest (e.g. in databases) should be encrypted using algorithms such as AES-256.
• Prohibition on storing sensitive data: Once a transaction has been authorized, it is prohibited to store CVV, PIN or full magnetic stripe data.
• Data masking: Show only the last 4 digits of the card number in interfaces and reports.
• Network segmentation: Systems that process card data (CDE, Cardholder Data Environment) should be isolated from other networks via firewalls.

Practical steps:

1. Conduct an audit of all systems where card data is stored or processed to identify CDEs.
2. Install encryption software (for example, databases with TDE (Transparent Data Encryption) support).
3. Configure firewalls and VLANs to isolate the CDE from other networks.
4. Implement vulnerability detection systems (e.g. Nessus) and perform scans at least quarterly.

Example: An online store uses tokenization: instead of storing the card number, it stores a token provided by the payment gateway (e.g., Stripe). This reduces the risk of a breach, as the token is useless to attackers.

Why is this necessary?: PCI DSS (requirement 3) requires the protection of cardholder data. A violation can result in fines (up to $500,000 per incident) and loss of customer trust.

3. Fraud Monitoring and Detection Policy​

Objective: To promptly identify suspicious transactions and prevent fraud, such as the use of stolen cards or chargeback attacks.

Key requirements:

• Implementation of transaction analysis tools such as address verification (AVS), CVV code and geolocation.
• Real-time monitoring using AI-based systems (e.g. Fraud Detection Systems from Visa or Mastercard).
• Setting transaction limits (for example, limiting the amount or number of transactions per day).
• Logging of all transactions and employee actions to enable retrospective analysis.

Practical steps:

1. Connect to fraud prevention systems such as 3D-Secure (Verified by Visa, Mastercard SecureCode).
2. Set up alerts for anomalies, such as multiple transactions from the same card from different countries.
3. Use SIEM systems (such as Splunk) to analyze logs and identify threats.
4. Conduct periodic checks (surprise audits) to manually analyze transactions.

Example: If a customer from Russia suddenly makes a purchase in the US with the same card, the system sends an alert, and the transaction is temporarily blocked until the cardholder confirms it.

Why is this necessary? Card fraud accounts for a significant share of financial losses (according to the Nilson Report, global fraud losses in 2023 amounted to $32.3 billion). Monitoring helps minimize chargebacks and preserve a company's reputation.

4. Incident Reporting and Response Policy​

Objective: To ensure rapid response to fraud incidents and compliance with regulatory notification requirements.

Key requirements:

• Developing an Incident Response Plan (IRP) that includes steps to identify, contain, and eliminate threats.
• Notifying stakeholders (acquiring banks, payment systems, clients) within 24–72 hours upon detection of a data breach.
• Filing Suspicious Activity Reports (SARs) in accordance with local legislation.
• Documentation of all incidents and measures taken for subsequent analysis.

Practical steps:

1. Create an incident response team including IT specialists, lawyers, and a compliance officer.
2. Develop notification templates for clients and regulators.
3. Conduct incident simulations (e.g. data leaks) to train the team.
4. Keep incident documentation for at least 3 years (PCI DSS requirement).

Example: Upon detecting a database compromise, a company immediately isolates the affected system, notifies the acquiring bank, and conducts an investigation with forensic experts.

Why is this necessary?: Failure to respond promptly can lead to increased damages and fines. For example, GDPR requires notification of a data breach within 72 hours, while PCI DSS requires immediate notification of payment systems.

5. Training and Awareness Policy​

Objective: To increase employee awareness of fraud risks and anti-carding regulations to reduce the likelihood of errors.

Key requirements:

• Mandatory training for all employees working with card data, including cashiers, developers, and managers.
• Training topics: phishing recognition, secure data handling, PCI DSS rules.
• Regular training (at least once a year) and knowledge testing.
• Specialized programs for different roles (for example, for IT - network protection, for merchants - chargeback minimization).

Practical steps:

1. Develop training materials with examples of real-life fraud cases.
2. Use online platforms for training (e.g. KnowBe4 for cybersecurity training).
3. Conduct quizzes or simulated phishing attacks to test vigilance.
4. Document employee participation in training.

Example: A call center agent undergoes training on how to recognize a suspicious return request to avoid return fraud.

Why is this necessary? Human error is the leading cause of security breaches (according to Verizon DBIR, 68% of data breaches are due to human error). Training mitigates these risks.

6. Returns and Chargeback Policy​

Goal: Reduce the number of disputed transactions (chargebacks) and ensure transparency for customers.

Key requirements:

• Transparent returns policy published on the website and at points of sale.
• Fast processing of return requests (ideally within 24-48 hours).
• Verifying the authenticity of transactions before returning them (e.g. checking against card details).
• Monitoring the chargeback level (no more than 1% of the total transaction volume, according to Visa/Mastercard rules).

Practical steps:

1. Place the return policy on the website in the FAQ section and on sales receipts.
2. Implement a CRM system to track return requests and their status.
3. Train call center employees to handle customer complaints.
4. Use tools to automatically check returns (such as Chargeback Gurus).

Example: An online store publishes clear rules: returns are possible within 14 days as long as you keep your receipt. This reduces the number of unjustified chargebacks.

Why is this necessary?: High chargeback rates can lead to penalties from payment systems and even exclusion from the merchant program.

7. Internal Control and Audit Policy​

Objective: To provide independent verification of compliance with anti-carding regulations and identify potential vulnerabilities.

Key requirements:

• Conducting internal and external audits at least once a year.
• Independence of auditors (they should not be subordinate to the units being audited).
• Review of financial statements, transaction logs and corporate card usage.
• Implementation of the dual controls principle (for example, large transactions are confirmed by two employees).

Practical steps:

1. Appoint an internal auditor or engage an external company (e.g. QSA for PCI DSS).
2. Conduct surprise audits to analyze transactions.
3. Use PCI DSS checklists to assess compliance.
4. Document audit results and implement corrective actions.

Example: An internal audit reveals that an employee is using a corporate card for personal purchases. This leads to a review of card issuance policies.

Why is this necessary? Regular audits help identify violations before they result in a fine or data breach.

8. PCI DSS Compliance Policy​

Objective: To ensure full compliance with PCI DSS standards, which are mandatory for anyone processing card payments.

Key requirements:

• Compliance with all 12 PCI DSS requirements, including data protection, access control, monitoring and security testing.
• Annual SAQ (Self-Assessment Questionnaire) completion for small businesses or QSA audit for larger companies.
• Appointment of a person responsible for compliance (Compliance Officer).
• Regular reporting to acquiring banks and payment systems.

Practical steps:

1. Determine the PCI DSS level (from 1 to 4) depending on the transaction volume (e.g., level 1 – more than 6 million transactions per year).
2. Conduct a gap analysis to identify non-compliance with standards.
3. Implement necessary changes (e.g. software updates, employee training).
4. Prepare documentation for audit (policies, logs, test results).

Example: A small online store completes the SAQ-A because it uses a third-party payment gateway (e.g., PayPal), which reduces the requirements.

Why is this necessary?: Failure to comply with PCI DSS can result in fines (ranging from $5,000 to $100,000 per month) and the loss of the right to accept cards.

Implementation and support​

1. Documentation: All policies should be documented, approved by management, and accessible to employees. Use a centralized system (e.g., Confluence) for storage.
2. Integration into risk management: Policies should be part of the overall risk management program, including regular review (at least annually).
3. Management Engagement: Senior management must demonstrate commitment to compliance with anti-carding regulations.
4. Collaborate with experts: For complex issues, engage certified specialists (QSA, compliance lawyers).

Consequences of non-compliance​

• Financial penalties: Payment systems may impose penalties for non-compliance with PCI DSS or high levels of chargeback.
• Reputational risks: Data breaches or fraud undermine customer trust.
• Legal implications: Violation of the GDPR or local laws may result in legal action.
• Loss of merchant status: Acquiring banks may terminate the agreement with the company.

A practical example​

In 2019, British Airways was fined £183 million under the GDPR for leaking 500,000 customer data due to inadequate website security. This underscores the importance of implementing all the above policies, especially encryption and monitoring.

Recommendations​

To tailor policies to your business:

1. Conduct an audit of current processes with the assistance of a QSA (Qualified Security Assessor).
2. Refer to the PCI Security Standards Council (pciSecuritystandards.org) for templates and guidelines.
3. Please consult with your acquiring bank to clarify requirements.
4. Consider using third-party services (e.g. Stripe, Adyen) to minimize the amount of data stored by the company.

These policies, when properly implemented, not only ensure regulatory compliance but also enhance customer confidence, reducing the risk of fraud and financial loss.