Security Breach

1. Summary of the Fraud Case.

A third party service provider, Global Payments Inc suffered a security breach in early March, when it discovered its system had been compromised thru illegal access. The payment processors affected were Master Card Inc, Visa Inc, American Express and Discover Financial Services (Lacapra & Mollenkamp, 2012). Big banks and other franchise were also affected because of debit and credit cards issued bearing their logos.

Global Payments Inc is a company that is a part of the payment-processing chain, the time a customer swipes a card to pay and the time the payment is delivered. The information gathered at the time of the transaction can include account numbers, expiration date and cardholder's names. This information is then sent to the credit card companies, which are often banks for authorization. The time between the transmission and the authorization process is where the weakness occurs. Global Payments Inc processes millions of these authorizations per day, and as the information is being transmitted the credit card data is supposed to be encrypted (Lacapra, et al, 2012). The breach occurred when someone gained access to the system and discovered the gap in the encryption process. The information was collected from Global Payments Inc Track 1 and Track 2 data. This data (accounts number and expiration dates) could be transferred to a magnetic strip on a card and then used on web sites. It could not be determined how many customers were affected by the breach but they estimated it could be massive and include ten million cardholders. An investigation was launched including the Secret Service and an independent data-security company. Financial losses would be covered by the Global Payments Inc, merchants and card issuers. Card holders were offered fraud monitoring services and if needed would be issued new cards to protect them from identity theft. Global Payments Inc could face fines or other penalties and litigation from potential liability claims (Gatzlaff & McCullough, 2010).

In general, security breaches impact the stock market returns considerably (Gordon, Loeb, & Lei, 2011). Investors were hit hard by this security breach. Global Payments Atlanta division, which is a credit checking middle man between merchants and card holders, saw its stock drop by over 9% and had to halt trading. Also affected were the shares of Master Card fell by 1.8%, Visa fell by 0.8%, and American express fell by 0.1% (Lacapr, et al).. In spite of the rise in information security inci¬dents, it is hard to determine the full economic effect.

2. Suggested fraud classification.

The classification of fraud, that Global Payments Inc, fell victim to would be hacking. Hacking is the unauthorized access into a company's computer system (Romney& Steinbart, 2012). Hackers find weaknesses in operating