Payment systems belonging to several customers of point of sale vendor NEXTEP SYSTEMS have been compromised, exposing credit and debit card data belonging to an unknown number of people.

Fraud Pattern

Law enforcement authorities recently notified the Michigan-based point of sale (POS) vendor of the issue after noticing a pattern of fraud on payment cards used at soup eatery chain Zoup, one of NEXTEP’s largest customers, Krebs on Security reported earlier this week. NEXTEP supplies POS systems to restaurants, corporate food services, grocery stores and food service outlets at airports and other retail venues. Many of its terminals are used at self-service and drive-through kiosks.

Tommy Woycik, president of NEXTEP, confirmed the problem in an email, saying payment data at some of its customer locations had been compromised. The POS vendor is investigating the matter and cooperating with law enforcement and data security experts who have been tapped to determine the root cause of the issue, Woycik said.

“We do know that this is not affecting all NEXTEP customers, and we have been working with our customers to ensure that any issues are addressed,” he said. “This remains an ongoing investigation with law enforcement.”

Point of Sale Vendor Breach Potentially Wide-Ranging

Krebs described the breach as potentially wide-ranging, but according to Woycik, the POS vendor is still working to determine the full extent of the breach.

Woycik did not offer any explanation on the security issue that resulted in the compromise. However, it is quite likely the incident is similar to breaches at several other POS system vendors over the past year, Krebs noted. Many of the incidents have involved cybercriminals gaining access to the login credentials used by POS vendors such as NEXTEP to remotely support and manage their payment terminals at customer locations. Cybercriminals have used the credentials to gain access to payment systems at customer locations and plant data-stealing malware on them.

One example where this happened was at Information Systems and Supplies, a POS system supplier to restaurants and bars in the Vancouver, Washington, area. In this incident, cybercriminals gained access to the company’s LogMeIn credentials and used them to break into the payment systems of several of its customers. The compromise allowed cybercriminals to pilfer credit card data belonging to an unknown number of people who paid for purchases using the compromised POS terminals.

Third-Party Security Risks

Security researchers often point to such incidents as reasons why companies need to keep an eye on the security practices of their third-party suppliers and technology vendors. Both Target and Home Depot are believed to have been victims of security lapses at business partners to whom they had granted privileged network access. In Target’s case, intruders first gained access to its networks using an account that belonged to a company that provided heating, air conditioning and ventilation services to the retailer. The Home Depot intrusion is believed to have stemmed from a similar failure.

Concerns over third-party security risks have prompted organizations such as the Payment Card Industry Security Standards Council to mandate specific security requirements for companies that use outside services to store, process or transmit cardholder data. The rules also apply to firms that outsource their security functions such as routers, firewalls and databases to third parties. Under the rules, retailers and other companies that handle credit card data are required to implement a third-party assurance program to properly vet service providers and ensure they have adequate controls to protect card data.

Under these standards, covered entities are required to obtain written agreements from third parties about their commitment to security. Companies that handle a large volume of card transactions or data are also required to monitor their third-party suppliers for compliance with security requirements.

Banks and health care organizations have similar risk management requirements for protecting sensitive customer data against breaches stemming from third-party security failures.