arrests made in Heartland data breach?

Three men in Florida were arrested earlier this week on multiple charges of credit card fraud, and some of the card numbers they allegedly used are tied to the Heartland hack.

The Leon County, FL. Sheriff’s office arrested area residents Tony Acreus, Jeremy Frazier and Timothy Johns, who had allegedly used stolen credit card numbers since November, according to Sgt. Tony Drzewiecki,
spokesman for the sheriff’s office.

According to the Tallahassee, FL. Democrat, the suspects were running “a very sophisticated and complex criminal enterprise.” Law enforcement is investigating how the three men were able to obtain credit card numbers
from the Heartland breach, which was first announced on January 20.

NOTE: The above article and similar ones are being posted around the internet. Is it true? I have found no evidence yet that it is. Here is the official press release regarding the arrest- no connection to the Heartland Data Breach is mentioned.

Leon County Sheriff’s Office, Tallahassee Police Department and United States Secret Service Shut Down Stolen Credit Card Ring

Heartland Data Security Breach- what they didn’t say

When your read their press release, their is barely a hint that any harm occurred.  But what the press release doesn’t spell out is the data that has been compromised and how it was compromised.

Visa and MasterCard received reports of fraudulent card use by their issuing banks last November and subsequently notified Heartland, according to a Washington Post report. Heartland didn’t even realize they had a problem.

The problem was internal. It was not an external attack, but the result of spyware being placed within their own internal systems.  Heartland’s CEO says a piece of spyware stole payment card data as it passed through the company network. Everyone passes encrypted data to their processor, but what happened to the data once it reached Heartland? Why is this an important difference? We like to think our databases our secure from certain outside hacker attacks into companies that have installed specific systems and software solutions for protection. If an outsider can hack into a secure system that has done everything correctly, then the world of data security is lost.

You really have to read between the lines to figure out what was compromised. Their press release is all about what wasn’t lost. Those behind the breach intercepted and stole 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.

IMPLICATIONS FOR CONSUMERS:

If you visited a merchant who uses  Heartland for payment processing, and you have no way of knowing this, your card data may have been compromised. Your card could be cloned and presented for payment to other merchants. Identity theft is not expected to be an issue. Watch your statements for improper activity or replace your card. Heartland has over 250,000 merchants, many of whom are restaurants and hotels. Consumers have no financial liability.

IMPLICATIONS FOR MERCHANTS:

Merchants have no financial liability. Merchants may have to download a software update, though there has been no release of any information related to this from Heartland yet. It’s possible there may be none. If a download is needed, this could be a nightmare with so many merchants needing to simultaneously update. Since many use third party solution in the restaurant industry, the burden shifts to those third party suppliers in some cases.

Do merchants have an obligation to notify customers? No, the data breach is not theirs and they would have no way of knowing personal information about their shoppers.

Should merchants change processors. That’s a personal decision. Read the next section.

IMPLICATIONS FOR HEARTLAND:

What will it cost? If a merchant is non-compliant at the time of a breach, merchants can be fined up to $500,000 per incident and face remediation costs between $90 and $302 per card. With over 100,000,000 transactions monthly, there are probably at least that many cards exposed- do the math. The cost could be astronomical unless they are protected by safe harbor.

Safe Harbor

Visa defines safe harbor as the following:
“Safe harbor provides members protection from Visa fines and compliance exposure in the event its merchant or service provider experiences a data compromise. To attain safe harbor status:

1. A member, merchant, or service provider must maintain full compliance at all times, including at the time of breach as demonstrated during a forensic investigation.

2. A member must demonstrate that prior to the compromise their merchant had already met the compliance validation requirements, demonstrating full compliance.”

If they are protected by Safe Harbor, they still must pay to replace all cards.

If they are not protected by Safe Harbor, can they afford the fines and costs? If not, what will happen to the merchants processing with them?

Heartland Payment Systems Uncovers Malicious Software In Its Processing System

Company Release – 01/20/2009 09:00

No merchant information or cardholder Social Security numbers compromised.

PRINCETON, N.J., Jan. 20 /PRNewswire-FirstCall/ — Payments processor Heartland Payment Systems has learned it was the victim of a security breach within its processing system in 2008. Heartland believes the intrusion is contained.

“We found evidence of an intrusion last week and immediately notified federal law enforcement officials as well as the card brands,” said Robert H.B. Baldwin, Jr., Heartland’s president and chief financial officer. “We understand that this incident may be the result of a widespread global cyber fraud operation, and we are cooperating closely with the United States Secret Service and Department of Justice.”

No merchant data or cardholder Social Security numbers, unencrypted personal identification numbers (PIN), addresses or telephone numbers were involved in the breach. Nor were any of Heartland’s check management systems; Canadian, payroll, campus solutions or micropayments operations; Give Something Back Network; or the recently acquired Network Services and Chockstone processing platforms.

After being alerted by Visa(R) and MasterCard(R) of suspicious activity surrounding processed card transactions, Heartland enlisted the help of several forensic auditors to conduct a thorough investigation into the matter. Last week, the investigation uncovered malicious software that compromised data that crossed Heartland’s network.

Heartland immediately took a number of steps to further secure its systems. In addition, Heartland will implement a next-generation program designed to flag network anomalies in real-time and enable law enforcement to expeditiously apprehend cyber criminals.

Heartland has created a website – www.2008breach.com – to provide information about this incident and advises cardholders to examine their monthly statements closely and report any suspicious activity to their card issuers. Cardholders are not responsible for unauthorized fraudulent charges made by third parties.

“Heartland apologizes for any inconvenience this situation has caused,” continued Baldwin. “Heartland is deeply committed to maintaining the security of cardholder data, and we will continue doing everything reasonably possible to achieve this objective.”

About Heartland Payment Systems

Heartland Payment Systems, Inc., a NYSE company trading under the symbol HPY, delivers credit/debit/prepaid card processing, payroll, check management and payments solutions to more than 250,000 business locations nationwide.

Heartland is the founding supporter of The Merchant Bill of Rights, a public advocacy initiative that educates merchants about fair credit and debit card processing practices. For more information, please visit www.heartlandpaymentsystems.com and www.MerchantBillOfRights.com.

Forward Looking Statements

This press release may contain statements of a forward-looking nature which represent our management’s beliefs and assumptions concerning future events. Forward-looking statements involve risks, uncertainties and assumptions and are based on information currently available to us. Actual results may differ materially from those expressed in the forward-looking statements due to many factors. Information concerning these factors is contained in the Company’s Securities and Exchange Commission filings, including but not limited to, the Company’s annual report on Form 10- K, or Form 10-Q as applicable. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this release.

For More Information:
Nancy Gross
Phone: 215.519.7367
Email: Nancy.Gross@e-hps.com
SOURCE Heartland Payment Systems, Inc.