Posted by: David Schneier
Audit, FDIC, GLBA, PCI, regulatory, Regulatory Compliance, SOX
I was away from the office last week trying squeeze in a family vacation before the kids head back to school. Despite taking the occasional phone call and replying to a number of emails, there was still plenty waiting for me today when I returned to my normal schedule.
It wasn’t until somewhere mid-morning after catching up with my partner that the incongruity of my professional life was revealed in an odd pattern. I’d read about a number of bank closings having been announced on Friday (sort of becoming a weekly ritual at this point) and two new reported credit card breaches (also fast becoming a same old, same old scenario) by the time I called into the office to touch base. Turns out we had a busy week beyond what I’d already knew about and we were discussing one proposal in particular to conduct an IT general controls audit (more on that in a few weeks) when the strangeness of the morning finally dawned on me.
Everyone is still working on trying to keep up with their regulatory compliance obligations, companies that participate in credit card processing are still pushing to obtain/maintain PCI compliance, and it just doesn’t seem to be making much of a difference. Despite our practice being busier than ever and there being a heightened sense of regulatory awareness out on the street there’s a general lack of evidence that it’s making a difference.
I’ve already beaten the PCI horse to death with regards to how the PCI-DSS by itself does not really go far enough (nor was it intended to be an be-all to end-all solution). I’ve long griped about how so much of what matters is missed by regulators due to too few budgeted hours available and lack of appropriately skilled and trained resources. So really nothing new about any of this.
But still, with a reasonably fresh perspective and clear head on this, my first day back to reality, it all seems that much more, I’m not sure what the right word would be…. depressing, frustrating, baffling?
How important can GLBA compliance be to a bank that’s just about out of financial options and on the verge of closing? And really, how much money should a company spend to be PCI compliant if that compliance doesn’t go far enough to actually mitigate the associated risks? I was just reading a story about how Intel turned things around in the 1980’s because their two senior most executives (Andy Grove and Gordon Moore) got together and stepped outside of their roles and imagined what someone new, with a fresh perspective would do with their company to address increasing competition and decreasing market share. Forcing themselves to obtain that perspective lead the way to a change in direction that would transform not only Intel’s fortunes but drive an entire industry into the future. So why can’t we do something similar for our financial institutions?
The short answer is that we can but it would require an act of bipartisan politics typically only observed during a true crisis such as acts of war and natural disasters. Of course it wouldn’t be too hard to make the argument that our banking crisis is a disaster, man-made or otherwise, but somehow when one party can blame the other there’s little chance of forging a common peace even if it benefits the citizens.
I’ll likely lose this perspective as the week moves ahead and get back to less of the “Big Picture” thinking and more of the nuts and bolts focus typically required of me, but still, I’m hoping someone, somewhere is reading this and thinking I’m right.