08/18/2014

Financial Services/Technology

 
 
On August 7, 2014, the PCI Security Standards Council (PCI SSC) published an information supplement entitled Third-Party Security Assurance (the Guidance), which provides guidance to organizations in relation to their engagement of third-party service providers (TPSPs) with whom cardholder data is shared or that could impact the security of cardholder data. The Guidance assists organizations and TPSPs in understanding how to meet new requirements for managing service providers in version 3.0 of the Payment Card Industry Data Security Standard (PCI DSS).
 
As we reported in our December 2013 Blakes Bulletin: New Standard Provides Guidance on Cardholder Data Security, PCI DSS version 3.0 became effective on January 1, 2014 (with the exception of certain requirements that are not effective until July 1, 2015). PCI DSS was developed to enhance cardholder data security and facilitate the broad adoption of consistent data security measures globally. PCI DSS applies to all entities involved in payment card processing, including merchants, processors, financial institutions, and service providers, as well as all other entities that store, process, or transmit cardholder data and/or sensitive authentication data.
 
The Guidance is intended as supplemental and does not supersede, replace or extend PCI DSS requirements.
 
 
WHO SHOULD READ THE GUIDANCE
 
The Guidance will benefit all organizations – including issuers, merchants, acquirers and service providers – that engage TPSPs for the storage, transmission, or processing of cardholder data, or for services that control or impact the security of cardholder data. Further, the Guidance is intended to assist TPSPs in understanding their responsibilities to the organizations that have engaged them, as well as how best to engage with downstream service providers engaged by the TPSPs themselves. 
 
 
EXAMPLES OF THIRD-PARTY SERVICE PROVIDERS
 
The Guidance provides a number of examples of the different types of TPSPs an organization may engage. Four categories of TPSPs are identified:
 
  • Organizations involved in the storage, processing and/or transmission of cardholder data, such as call centres, e-commerce payment providers, gateway processors and credit reporting service providers
  • Organizations involved in securing cardholder data, such as secure storage facility providers and companies that tokenize or encrypt cardholder data
  • Organizations involved in the protection of the cardholder data environment, such as infrastructure service providers and data centre hosting providers
  • Organizations that may have incidental access to cardholder data or cardholder data environments, such as software developers and application maintenance providers
 
The four categories underscore how broad an organization’s spectrum of TPSPs may be.
 
 
DUE DILIGENCE
 
The Guidance urges organizations to develop an appropriate due diligence program for TPSPs that it is seeking to engage to understand the overall risk assumed by the organization.
 
Scope of Services
 
The Guidance emphasizes the importance of determining the scope of the services to be provided by the TPSP with regard to storing, processing or transmitting cardholder data and the effect on the security of the cardholder data environment.
 
Due Diligence Research
 
Once the scope of services to be provided by the TPSP has been determined, an organization is to undertake due diligence research to determine the impact the TPSP will have on the organization’s PCI DSS compliance.
 
Acquirer/Payment Card Brands
 
An organization is encouraged to inquire with its acquirer or payment card brand to ensure that the services to be provided by the TPSP have been approved for use and that no restrictions have been imposed by the acquirer or payment card brand with respect to the engagement of the TPSP.
 
Validation Documentation
 
The Guidance proposes that an organization consider requesting documentation from the TPSP that demonstrates the TPSP has achieved PCI DSS compliance. The payment card brands define how and whether a TPSP must validate PCI DSS compliance; hence the required validation documentation may vary. The documentation should confirm that the services to be provided to the organization are covered by the TPSP’s PCI DSS assessment and identify the PCI DSS requirements that were assessed to be in place. The Guidance provides a helpful list of documentation that an organization may wish to obtain from a TPSP in order to validate the TPSP’s PCI DSS compliance and explains how such documentation should be reviewed by the organization.
 
If the TPSP has not attained compliance with PCI DSS, the organization must determine whether or not to accept the risk of engaging that TPSP. The organization should understand the gap and its impact on the organization’s own environment. If the organization’s environment is affected, the organization should establish a plan of action with the TPSP for remediation. The organization may wish to consult with its acquirer at this point to ensure the gap does not present any issues.
 
If an organization engages a TPSP that does not intend to validate PCI DSS compliance or that is not required to do so, the organization will be required to cover the applicable systems and processes of the TPSP under the organization’s own PCI DSS compliance assessment.
 
Risk Assessment
 
The Guidance suggests that an organization perform a thorough risk assessment on its TPSPs based on an industry-accepted methodology. A high-level list of some of the questions and subject matter that may be appropriate for consideration in such a risk assessment – including security, governance and risk management, human resources practices, physical security, logical security and malware controls – is provided.
 
Documenting Results
 
An organization is encouraged to fully document the results of its due diligence of a TPSP’s compliance status.
 
 
ENGAGING THIRD-PARTY SERVICE PROVIDERS
 
Following completion of due diligence, organizations are instructed to consider a number of specific items when first engaging a TPSP and during the term of the engagement, including:
 
  • Setting expectations with respect to the engagement, including with respect to the parties’ respective PCI DSS compliance, the TPSP’s responsibility to safeguard the organization’s cardholder data in the possession of the TPSP in an agreed-upon manner, the services to be provided by the TPSP and the primary points of contact at both the organization and the TPSP
  • Gaining clarity and transparency of the scope of the TPSP’s responsibility in safeguarding the organization’s cardholder data or cardholder data environment and validating that the scope presented by the TPSP is applicable, appropriate and accurate
  • Establishing effective communication between the organization and the TPSP, including changes made by the TPSP
  • Requesting evidence to validate that changes made by the TPSP followed appropriate procedures and were subject to appropriate controls
  • Obtaining information about the TPSP’s PCI DSS compliance status
  • Reviewing the engagement items set forth above on a regular basis and as changes occur
  • Mapping services to be provided by the TPSP to the applicable PCI DSS requirements so that the organization can determine the security impact to its cardholder data environment
 
WRITTEN AGREEMENTS, POLICIES AND PROCEDURES
 
Once due diligence has been completed and a TPSP has been selected for engagement, an organization is encouraged to document its agreement with the TPSP in writing.
 
Where a TPSP claims that its services are PCI DSS compliant, an organization should, according to the Guidance, document such compliance in its written agreement with the TPSP by attaching a copy (or a redacted copy) of the applicable validation documentation.
 
Where a TPSP has not established its own PCI DSS compliance, an organization will need to include some of the TPSP’s cardholder data environment in the organization’s own PCI DSS assessment. As a result, an organization should consider including in its agreement with the TPSP:
 
  • Processes and mechanisms that allow the organization to have access to systems, facilities and processes, along with the right to review the applicable policies, procedures and other documentation of the TPSP
  • Provisions to clarify which portions of the cardholder data environment managed by the TPSP are in-scope for the organization’s PCI DSS compliance assessment and to allocate responsibility for handling and securing cardholder data in a compliant manner
 
The agreement between an organization and its TPSP should also reflect appropriate legal and regulatory requirements, industry-specific considerations, requirements mandated by an organization’s acquirer related to engaging a TPSP and requirements mandated by the applicable payment card brand’s compliance programs.
 
Other items highlighted in the Guidance for such agreements include:
 
  • The use of a “responsibility matrix” to set out in detail the respective roles and responsibilities of both parties
  • Data breach notification and followup obligations
  • Post-termination obligations of the TPSP, including storing or destructing cardholder data and keeping the organization’s sensitive information confidential
 
Finally, an organization’s agreement with a TPSP that claims its services are PCI DSS compliant should address what happens in the event the TPSP loses its PCI DSS compliant status. The Guidance urges an organization to consider mechanisms intended to keep it apprised of changes in the TPSP’s compliance status and to allocate responsibility for loss of compliance status. Suggested mechanisms include notification of changes in compliance status being provided by the TPSP, plans and procedures for remediation by a set date, and other measures intended to help ensure accountability and responsibility for non-compliance.
 

RELATIONSHIPS WITH THIRD-PARTY SERVICE PROVIDERS
 
The Guidance emphasizes the importance of establishing and maintaining a program to monitor TPSP compliance. The purpose of the monitoring program is to allow an organization to monitor the compliance status of the applicable TPSP and determine whether a change in status requires a change in the relationship. The PCI SSC reminds all organizations that outsourcing services to a TPSP does not relieve an organization of its responsibility for the security of its cardholder data.
 
According to the Guidance, a TPSP monitoring program should be fully documented to ensure there is a common understanding of the program across the organization, facilitate delegating portions of the process if required and allow outside parties to review the process when necessary. The program should include processes, policies and procedures, and assignment of responsibility to specific people within the organization. Program documentation should be revisited regularly, reviewed at least on an annual basis and approved by management. The Guidance identifies a number of areas that should be covered by the program documentation, including defining the cardholder data environment scope and the role of each TPSP, maintaining a current list of TPSPs and setting out the TPSP monitoring procedure.
 
 
SUMMARY
 
The Guidance assists organizations to better understand the requirements in PCI DSS version 3.0 dealing with managing service providers. 
 
An organization’s procurement and risk functions should take note of the practical guidelines regarding the performance of due diligence on TPSP candidates.
 
An organization’s legal function should familiarize itself with the portions of the Guidance that sets out items that should be considered for inclusion in agreements with TPSPs. While a number of the points are common to outsourcing agreements generally, there are other points covered in the Guidance that are unique to agreements with TPSPs, particularly those relating to compliance status.
 
Organizations that seek to engage with TPSPs should endeavour to investigate TPSPs and develop future agreements with the Guidance in mind.
 
For further information, please contact:
 
Christine Ing            416-863-2667
 
or any other member of our Financial Services or Technology groups.
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Tags: Financial Services Regulatory, Information Technology


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