Payments processor discloses massive data breach

Company says an intrusion of its processing system may be part of a broader fraud operation.

Payments processor Heartland Payment Systems Inc. said on Tuesday that its processing system was breached last year in what company officials said may be a global fraud operation.

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It was unclear how many credit cards were affected by the breach. Princeton, N.J.-based Heartland Payment Systems provides payment card processing, payroll and other payment services to more than 250,000 business locations nationwide. The company said it handles about 100 million credit card payments a month and more than 4 billion transactions per year, making it one of the top five processors of payment transactions in the United States.

Visa and MasterCard alerted the company to suspicious activity associated with card transactions, prompting Heartland to hire several forensic auditors to investigate. Last week, investigators uncovered malware that compromised data crossing the company's network. 

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"We found evidence of an intrusion last week and immediately notified federal law enforcement officials as well as the card brands," Robert H.B. Baldwin, Jr., Heartland's president and chief financial officer said in a prepared statement. "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."

The company said the breach did not affect merchant data or cardholder Social Security numbers, unencrypted personal identification, addresses or phone numbers. Heartland's check management systems and its Network Services and Chockstone processing platforms were also unaffected by the intrusion.

In the wake of the breach, Heartland said it boosted security of its systems and will install a program to quickly flag network anomalies.

"Heartland apologizes for any inconvenience this situation has caused," Baldwin said. "Heartland is deeply committed to maintaining the security of cardholder data."

Security industry analysts and experts said the breach could be larger than the massive TJX data security breach in which at least 45.7 million credit and debit cards were stolen over an 18-month period. It was the largest data security breach on record.

Gartner analyst, Avivah Litan questioned the timing of Heartland's disclosure and the amount of information that the payment processor released as part of its disclosure. The processor said it found evidence of a breach last week and made a public announcement Tuesday, when all eyes were on the Presidential Inauguration. 

"There's no reason for this speculation," Litan said. "They have the data and could tell the public how many records were affected, but they're not doing that."

Litan said the breach could be massive in scale, far surpassing the likes of Hannaford and TJX. It comes at a time when those in the credit card industry was starting to relax a little, believing merchants and processors had implemented some of the best security defenses, Litan said.

"This is clear evidence to me that the criminals know how to bypass the traditional security controls in place today," Litan said. "It's clear that they're targeting the processors now because there's much more data there. [Processors] are more centralized and the thinking is that more attention is paid to their security, but they are at the nerve center of processing systems."

Rich Mogull, an independent consultant and founder of security consultancy Securosis LLC said that the breach is evidence that attackers are finding their way into massive payment systems using stealthy malware to avoid detection systems.

"By our estimates is the most common vector of massive breaches," Mogull said in a Securosis blog posting. "TJX, Hannaford, and Cardsystems, three of the largest previous breaches, all involved installing malicious software on internal networks to sniff cardholder data and export it."

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