Somebody is storing credit card data - how are they doing it?

Storing credit card information securely and legally is very difficult and should not be attempted. I have no intention of storing credit card data but I'm dying to figure out the following:

My credit card info is being stored on a server some where in the world. This data is (hopefully) not being stored on a merchant's server, but at some point it needs to be stored to verify and charge the account identified by merchant submitted data.

My question is this: if you were tasked with storing credit card data what encryption strategy would you use to secure the data on-disk? From what I can tell submitted credit card info is being checked more or less in real time. I doubt that any encryption key used to secure the data is being entered manually, so decryption is being done on the fly, which implies that the keys themselves are being stored on-disk. How would you secure your data and your keys in an automated system like this?

If I was storing the number, I would be a giant service provider with a massive database. That database is spread across a highly-redundant storage array consisting of multiple cabinets, in separate rooms or ideally in separate geographical locations, connected by a SAN. My biggest insider threat is the distributed physical plant, the constant stream of worn-out drives, and several daily shifts of technicians, administrators, and engineers. It's a huge threat.

Therefore I would encrypt the data on a physically-isolated computer that connects to the mass storage over a network. The software would be as simple as possible: encryption and number verification. The public interfaces and business logic goes elsewhere. Accesses would be logged to a separate SAN.

Encrypt with something like AES. The raw AES key is only ever stored in RAM. The key is wrapped in a PGP file for each administrator, who has their own passphrase to enable the server. Less-trusted personnel can be given partial passphrases to use in disaster recovery, or passphrases can be stored in a vault somewhere. For encryption, pick a unique initialization vector (IV) for each card number, AES-encrypt the number using that IV, and store the IV and encrypted number to the SAN. Decryption only occurs using a privileged client interface; normal client connections used for purchases can never get a decryption.

For vendors to process and store your credit card info, they generally have to get PCI certified. The requirements should be outlined here. Some of the requirements are very straightforward, and others are vague and open to interpretation. Going through the process is not fun, and a company having the certification doesn't mean your data is safe.

But it's better than nothing I suppose.

It's quite easy to store a salted hash of a credit card number rather than the number itself for secure lookups. For 99% of the scenarios out there, this would be sufficient credit card for storage -- fast and very secure.

If you really need reversible encryption of a credit card for some scenario (continued billing, for example), I would go with a symmetric key stored in a secure location other than the database. It's been a while since I looked at PCI specs, but I'm fairly certain that's PCI compliant.

If you need fast lookups along with reversible encryption, use both options: a hash and an encryption.

Edit: There seems to be some controversy over my answer. I would like to point out the following very interesting essay from Integrity.com (PDF):

Hashing Credit Card Numbers: Unsafe Application Practices

It details many of the issues involved in storing a hash of credit card data, but its conclusion confirms my suggestion.

Yes, a raw hash of the card is not secure; that's why we salt our hashes! But a static salt is also not secure, they allow the creation of rainbow tables for known static salts. So it's best to make our salts vary in some way that is unpredictable. In the case of passwords, it's sufficient to use a separate, random hash for each password being checked; it can even reside in the same table/row as the hashed password. For the case of credit cards, this should be the same -- a random salt for each instance of the credit card being hashed. If the credit card number is stored per transaction, a separate salt for each transaction.

There are pros and cons to this approach, but it's sufficiently secure. The pros are the lack of key management; the salt and hash are right there, and don't need to change while still allowing for audit checks of the hash; e.g. does that credit card hash match this known credit card number?

The cons are in search; it's not possible to effectively search for a particular credit card number across many transactions.

Of course, you'll have this issue with external encryption anyway; unless the database is itself encrypted (something only some databases support), you won't be able to search very well. Even then, encrypting at the database or even the table level reduces search effectiveness significantly.

The last few times I worked with creditcard payments, you never really stored the actual CC info on your own servers. You let the Payment gateway handle that. What you ended up with was a transactionID that you could use to verify that the creditcard was still both valid and had the requested amount of cash available. Then once you actually packed the stuff they bought, you'd issue a capture-command to the Payment Gateway.

This approach greatly simplified the process of integrating CC payments on a site, since all you ever needed to know was the transactionID for a particular customer. This ofcourse didn't allow you do to the amazon-"trick" of keeping your CC info for 1-click shopping. If the transactionID got compromised, all it could be used for was collecting payment early, or cancelling the transaction altogether (in which case you'd find out about it when you verified that the authorization was still valid before shipping). The transaction couldn't be used to collect a bigger sum than what the customer had approved already, nor would it allow someone to collect to a different account than what the "shop" was configured for.

Maybe not the exact answer you were looking for, but perhaps it could solve your overall issue without having to spend a fortune on security vendors.

Your assumption that the merchant must store the card somehow is incorrect. Most likely, the merchant is storing a token that it received from the payment processing gateway the first time you used the card. The token uniquely identifies the combination of merchant and card. Subsequently, you can make purchases from that merchant without supplying your card number again. If the merchant's database is compromised, the tokens are of little value to the attacker. They're only valid for that merchant, and they can all be canceled at once when the breach is detected.

In some situations, encryption keys are stored not on disk but on some hardware device. Either a special encryption server is used to do the encrypt/decrypt or the decrypt is done using a key stored on, say, a hardware dongle. This way, a hacker cannot steal the decrypt keys without stealing the physical device containing them (since the key never leaves the device).

Another method I have seen is to store encrypted data in a database/datacenter that has no direct connection to the outside world (you can't hack what you can't access). An interface server sits between the "secure" part of the network and the "Internet-facing"/"insecure" part of the network as a proxy. Forcing secure traffic to funnel through this security choke point can make it more difficult for an intruder to access the secured data.

Neither of these mean your data is perfectly secure, of course.

As an merchant you can choose to store the CC data in your own database or outsource it to third party providers.
Third party providers like IPPayments or major banks like Westpac in Australia are level 1 PCI compliant. For web applications you can choose to use a payment acceptance web page (presented somewhere in your customer's workflow) from them branded for your company. For windows apps (e.g. you company's CRM app) and recurrent payments they generally have a gateway usable using their API that provide a tokenisation service, that is they accept a CC number, registers it and return an unique token that just looks like a CC number. The token can be safely be stored in your DB and used for any further transactions, batch payments, reconciliation etc with the bank. Of course they big issue is operational cost per transaction. For a utility that takes monthly credit card payment from a million customer the transaction cost can be substantial.

If you choose to store the CC number in your own DB triple DES encryption is sufficient. A better option is to you transparent encryption in DB as offered by Oracle advanced security or SQLServer where even the DBA cannot decrypt the CC number. Then there are onerous responsibility for key management, backup, physical security, network security, SSL transmission, changing default settings of all server equipments and firewall, anti virus, auditing, security cameras and on and on ...

First of all if you deal with credit card numbers, you will need to become PCI-DSS compliant, and once you store numbers all 12 sections of the PCI-DSS spec will apply to you. Thats a major cost to most organisations, and if you don't have the time, resources and financial means, you should not go down the path of storing credit card numbers.

We have gained PCI-DSS compliance on a Windows based e-commerce system that stores credit cards. It uses a 256 bit AES encryption. The key itself is encrypted using Windows DPAPI meaning it can only be decrypted by a process running under the same user account as the one that encrypted it. The encrypted key is stored in the registry.

The key is rotated every 12 months, and a backup key copy is stored broken into 3 parts A,B,C and spread over 3 USB drives, each held by a different person. Drive 1 has A+B, Drive 2 has B+C, Drive 3 has A+C. So any 2 drives are required to construct a full key (A+B+C). This scheme is tolerant to the loss of any 1 of the drives. Key parts themselves are encrypted with a password known only to the drive owner.

To answer your specific question, it is possible to store the credit card encryption key encrypted on disk. The key encrypting key can derived from a passphrase that must be entered when the server is started. Shamir's secret splitting scheme can be used so that k out of N shares are required to construct the secret that will be used as key encrypting key. The decrypted encryption key/secret is then stored in memory. If the server has to be restarted, then you need k shares. This is of course a big overhead and most merchants I know do not implement this. They do however usually store the key separately from the encrypted data for some intermediate security, so access to one does not automatically mean access to the other in entirety (still very bad though).

I deleted contents of my original post since that did not directly answer the question. Suffice it to say that key management and correct encryption are an important piece but still a small part of the story.

PCI auditors cannot possibly ensure that everything is done correctly.

If you want to eliminate any credit card stealing headaches, hash them using salt values not stored in the database (in addition to salt values stored in the database). Hashing them with any modern hashing algorithm will pretty much put to rest most issues with credit card theft but it does mean consumers must re-enter their credit card on each purchase. Having worked on a project that dealt with storage of credit card numbers, I found that hashing them cut security review costs by an order of magnitude (granted that project was before PII concerns).

If you are going to use symmetrical encryption, then you enter a new realm of complication that all comes down to management and control over the decryption keys. I will say that even if you hash the credit card numbers you will still need to deal with reversible encryption since all PII(Personally Identifiable Information) must be encrypted. SQL Server 2008 has a new Extensible Key Mangement plugin architecture which lets use third-party vendor programs to manage control over the decryption keys including split keys.

For more info: Deploying SQL Server 2008 Based on Payment Card Industry Data Security Standards (PCI DSS) Version 1.2.

any automated system for decrypting encrypted information is going to be completly insecure. By automating the process you are defeating the encryption. Any encrypted data should only be decrypted by a user entered secret key.