Security and Compliance

Security Fundamentals

Membership programs handle valuable digital assets (points, vouchers) and sensitive personal information, making them attractive targets for fraud and abuse. Robust security controls protect both the business and members while maintaining usability and convenience.

Threat Landscape

Account Takeover (ATO) Unauthorized access to member accounts to steal points or personal information through credential theft, phishing, or social engineering.

Points Fraud Illegitimate point accumulation through fake transactions, exploiting system loopholes, or insider manipulation.

Redemption Fraud Unauthorized redemptions, voucher duplication, or exploitation of redemption processes to obtain value without legitimate point earning.

Identity Theft Creating fraudulent accounts using stolen identities to abuse new member bonuses or tier benefits.

Insider Threats Staff members abusing access privileges to credit unearned points, manipulate balances, or steal member data.

Data Breaches Unauthorized access to member databases exposing personal information, purchase histories, and account credentials.

Account Security

Authentication and Access Control

Member Authentication Methods

Phone Number Verification (Recommended Primary):
  Method: One-time password (OTP) via SMS
  Security Level: Medium-High
  Use Cases:
    - New account enrollment
    - Login from new device
    - Password reset
    - High-value transactions
  Implementation:
    - Generate 6-digit OTP
    - Validity: 5 minutes
    - Maximum attempts: 3
    - Rate limiting: 5 OTPs per hour per number

Email Verification:
  Method: Verification link via email
  Security Level: Medium
  Use Cases:
    - Account recovery
    - Email address confirmation
    - Secondary verification
  Implementation:
    - Unique token in email link
    - Validity: 24 hours
    - One-time use only

Password-Based Authentication:
  Security Level: Low-Medium (depends on password strength)
  Requirements:
    - Minimum 8 characters
    - Mix of letters, numbers, symbols
    - Not in common password lists
    - Cannot reuse last 5 passwords
  Enhancement:
    - Two-factor authentication (2FA) option
    - Biometric authentication (fingerprint, Face ID)

Biometric Authentication (Mobile App):
  Method: Fingerprint or facial recognition
  Security Level: High
  Use Cases:
    - Mobile app login
    - In-app redemptions
    - High-value transactions
  Implementation:
    - Device-level biometric
    - Fallback to PIN/password

Multi-Factor Authentication (MFA)

For high-value accounts or sensitive operations, require multiple authentication factors.

MFA Triggers:
  - Tier 3+ members (high point balances)
  - Login from new device or location
  - High-value redemptions (>5,000 points)
  - Account detail changes (email, phone)
  - Password reset requests

MFA Implementation:
  Factor 1: Something you know (password, PIN)
  Factor 2: Something you have (phone for OTP, email)
  Factor 3: Something you are (biometric)

Example Flow:
  1. Member enters password (Factor 1)
  2. System sends OTP to registered phone (Factor 2)
  3. Member enters OTP within 5 minutes
  4. Access granted if both factors correct

Session Management

Session Security Best Practices

Session Creation:
  - Unique session ID for each login
  - Cryptographically random session tokens
  - Secure cookie flags (HttpOnly, Secure, SameSite)
  - Bind session to IP address (with geo-flexibility)

Session Timeout:
  Mobile App:
    - Idle timeout: 30 minutes
    - Absolute timeout: 24 hours
    - Biometric: Extend to 7 days

  Web Browser:
    - Idle timeout: 15 minutes
    - Absolute timeout: 4 hours
    - Remember me: 30 days (lower privilege)

  In-Store Kiosk:
    - Idle timeout: 3 minutes
    - Absolute timeout: 10 minutes
    - Auto-logout on navigation away

Session Invalidation:
  - User logout: Immediate
  - Password change: All sessions invalidated
  - Email/phone change: All sessions invalidated
  - Suspicious activity: Automatic logout

Device Management

Track and manage devices associated with member accounts.

Device Registration:
  - First login from device: Register and verify
  - Store device fingerprint
  - Track: OS, browser, IP, location
  - Member can view registered devices

New Device Detection:
  - Detect login from unrecognized device
  - Send alert to registered email/phone
  - Require additional verification (OTP)
  - Option to block device

Suspicious Activity:
  - Multiple failed logins: Lock account temporarily
  - Login from unusual location: Require MFA
  - Rapid device changes: Flag for review
  - Impossible travel (login from different continents within hours): Block

Fraud Detection and Prevention

Points Fraud Prevention

Transaction Velocity Limits

Prevent abnormal point accumulation or redemption patterns.

Earning Velocity Limits:
  - Maximum 3 transactions per member per day (configurable)
  - Maximum points earned per day: 10,000 (configurable by tier)
  - Alert if member earns 50% above normal pattern in single day
  - Flag accounts with consecutive maximum transactions

Redemption Velocity Limits:
  - Maximum 2 redemptions per day
  - Maximum redemption value: 50% of available balance per day
  - Cooling period: 24 hours between large redemptions (>5,000 points)
  - Alert if redemption pattern deviates from history

Store-Level Limits:
  - Maximum points issued per store per day (detect insider fraud)
  - Alert if store exceeds threshold by 20%
  - Flag stores with high adjustment frequency

Manual Adjustment Controls

Strict controls on manual point adjustments prevent insider fraud.

Adjustment Approval Workflow:
  Amount < 500 points:
    - Staff member can adjust
    - Reason code required
    - Member notification
    - Audit log entry

  Amount 500-2,000 points:
    - Supervisor approval required
    - Detailed justification
    - Member verification (phone call)
    - Email notification to member

  Amount > 2,000 points:
    - Manager approval required
    - Written justification document
    - Member identity verification
    - Headquarters notification
    - Fraud team review

Adjustment Monitoring:
  - Daily report of all adjustments
  - Flag staff with high adjustment frequency
  - Alert on pattern of small adjustments (salami attack)
  - Monthly audit of adjustment rationale

Return and Refund Abuse Prevention

Prevent fraudulent returns to accumulate points.

Return Detection:
  - Track purchase-return cycles per member
  - Flag members with return rate >20%
  - Alert on returns without corresponding purchase in system
  - Block returns on different payment method than original

Points Reversal on Returns:
  - Automatic point deduction on confirmed return
  - Prevent negative balance (flag for review)
  - Reverse tier progression if return causes drop
  - Alert member of point adjustment

Fraud Patterns:
  - Buy-return-rebuy cycle (same items, different stores)
  - Returns at different locations than purchase
  - High-value returns without original receipt
  - Returns after tier qualification (to retain tier but get refund)

Actions:
  - Warning after 3 suspicious returns
  - Account review after 5 suspicious returns
  - Account suspension after confirmed fraud

Redemption Fraud Prevention

Voucher Security

Prevent voucher duplication and unauthorized use.

Voucher Generation:
  - Unique cryptographic code per voucher
  - QR code with embedded security token
  - Barcode with check digit
  - Expiry date prominently displayed
  - Member ID embedded (invisible to member)

Voucher Validation:
  - Real-time validation against database
  - One-time use only
  - Check expiry date
  - Verify member account active
  - Confirm voucher not reported stolen
  - Log all validation attempts

Fraud Prevention:
  - Cannot screenshot and reuse (rotating QR with timestamp)
  - Cannot share (tied to member account)
  - Cannot forge (cryptographic verification)
  - Invalidate on first scan
  - Alert on multiple scan attempts

POS Redemption Controls

Prevent fraudulent redemptions at point of sale.

Redemption Validation:
  - Member must be identified before redemption
  - Real-time balance check
  - Validate redemption limits (min/max)
  - Confirm member authorized the redemption
  - Receipt must show redemption clearly

Staff Controls:
  - Cannot redeem to staff member accounts during shift
  - Manager override required for large redemptions
  - Alert on high redemption frequency by cashier
  - Random audit of redemption transactions

Offline Mode:
  - Disable redemption in offline mode (earning only)
  - Queue redemption requests for online approval
  - Alert member that redemption pending online verification

Data Security and Privacy

Data Encryption

Data at Rest

Database Encryption:
  - Full database encryption (AES-256)
  - Encrypted backups
  - Key rotation: Quarterly
  - Key management: HSM or cloud KMS

Field-Level Encryption (Sensitive Fields):
  - Phone numbers: Encrypted
  - Email addresses: Encrypted
  - Addresses: Encrypted
  - Dates of birth: Encrypted
  - Payment information: Encrypted (PCI-DSS)

Encryption Keys:
  - Separate encryption keys per environment
  - Keys stored in hardware security module
  - Access to keys strictly controlled
  - Key rotation without downtime

Data in Transit

Transport Security:
  - TLS 1.2 or higher for all connections
  - Strong cipher suites only
  - Certificate pinning for mobile apps
  - No mixed content (HTTP/HTTPS)

API Security:
  - API authentication tokens
  - Token expiry and refresh
  - Rate limiting
  - IP whitelisting for partner APIs

Access Control and Auditing

Role-Based Access Control (RBAC)

Staff Role Definitions:

Cashier:
  - View member information
  - Process points earning
  - Process redemptions <500 points
  - Cannot adjust balances
  - Cannot view other stores' data

Store Manager:
  - All cashier permissions
  - Process redemptions <2,000 points
  - Adjust balances <500 points (with reason)
  - View store-level reports
  - Cannot access headquarters data

Program Administrator:
  - View all member data
  - Configure program rules
  - Generate reports across all stores
  - Adjust balances <2,000 points (with approval)
  - Cannot directly access database

System Administrator:
  - Full system access
  - Database access
  - Configuration changes
  - Must follow change management process
  - All actions logged and reviewed

Fraud Analyst:
  - View all transactions
  - View fraud alerts
  - Investigate suspicious activity
  - Recommend account actions
  - Cannot modify balances directly

Audit Logging

Comprehensive logging enables forensic investigation and compliance.

Events to Log:

Authentication Events:
  - Successful login (user, time, location, device)
  - Failed login attempts
  - Password changes
  - MFA events
  - Account lockouts

Transaction Events:
  - Points earned (member, amount, location, staff)
  - Points redeemed (member, amount, location, staff)
  - Manual adjustments (staff, amount, reason, approval)
  - Tier changes
  - Account status changes

Access Events:
  - Staff accessing member data (who, when, which member)
  - Report generation (report type, parameters, user)
  - Configuration changes (what changed, who, when)
  - Export of member data

Security Events:
  - Suspicious activity detected
  - Fraud alerts triggered
  - Account lockouts
  - Permission changes

Log Retention:
  - Transaction logs: 7 years (legal requirement)
  - Security logs: 3 years
  - Access logs: 2 years
  - System logs: 1 year

Log Protection:
  - Append-only storage
  - Tamper-evident (cryptographic hash chain)
  - Separate log server
  - Regular backup
  - Restricted access (security team only)

Compliance Framework

Regulatory Compliance

Personal Data Protection Act (PDPA) - Malaysia

Key Requirements:

Consent:
  - Explicit, informed consent for data collection
  - Separate consents for different purposes
  - Easy to withdraw consent
  - Record of consent maintained

Data Protection:
  - Security controls to prevent unauthorized access
  - Encryption of sensitive data
  - Access controls
  - Regular security audits

Data Retention:
  - Retain data only as long as necessary
  - Delete upon request (right to erasure)
  - Legal retention (7 years for financial records)

Data Subject Rights:
  - Right to access data
  - Right to correct data
  - Right to withdraw consent
  - Right to deletion
  Response within 21 days

Payment Card Industry Data Security Standard (PCI-DSS)

If storing payment information linked to membership:

Compliance Requirements:
  - Never store full card numbers (use tokens)
  - Never store CVV
  - Encrypt cardholder data
  - Maintain secure network
  - Regular vulnerability scans
  - Quarterly compliance reports

Industry-Specific Compliance

Retail/Consumer Protection

Fair Trading Act:
  - Clear terms and conditions
  - No misleading representations
  - Honor advertised benefits
  - Fair point expiry policies
  - Transparent tier qualification rules

Consumer Protection:
  - Point value clearly stated
  - Expiry warnings provided
  - No unreasonable redemption restrictions
  - Complaint handling process
  - Member dispute resolution

Financial Reporting

Points represent a liability that must be tracked for financial reporting.

Points Liability Accounting:
  - Outstanding points = financial liability
  - Value points at redemption value
  - Adjust for expected breakage (unredeemed points)
  - Monthly liability calculation
  - Financial statement disclosure
  - External audit trail

Breakage Estimation:
  - Analyze historical redemption patterns
  - % of points never redeemed
  - Expiry rate
  - Industry benchmarks (20-30% typical)
  - Conservative estimates for financial reporting

Incident Response

Security Incident Response Plan

Incident Classification

Severity Levels:

Critical:
  - Data breach affecting >1,000 members
  - System compromise with data access
  - Widespread fraud affecting program integrity
  - Payment system breach
  Response: Immediate, 24/7 team activation

High:
  - Data breach affecting <1,000 members
  - Significant fraud pattern detected
  - Unauthorized access to admin functions
  - Service disruption affecting redemptions
  Response: Within 4 hours, business hours escalation

Medium:
  - Individual account compromise
  - Isolated fraud incidents
  - Data quality issues
  - Minor configuration errors
  Response: Within 24 hours, normal priority

Low:
  - Individual member complaints
  - Small point discrepancies
  - General inquiries
  Response: Within 72 hours, standard process

Incident Response Process

1. Detection and Reporting:
  - Automated alerts from fraud detection
  - Member reports of suspicious activity
  - Staff observation of anomalies
  - Security monitoring alerts

2. Initial Assessment:
  - Verify incident occurred
  - Classify severity level
  - Identify scope and impact
  - Activate response team

3. Containment:
  - Lock affected accounts
  - Disable compromised access
  - Isolate affected systems
  - Prevent further damage

4. Investigation:
  - Review audit logs
  - Identify root cause
  - Determine full extent
  - Collect evidence

5. Remediation:
  - Fix vulnerability
  - Restore affected accounts
  - Reverse fraudulent transactions
  - Update security controls

6. Communication:
  - Notify affected members
  - Regulatory notification if required
  - Internal stakeholder update
  - Public disclosure if appropriate

7. Post-Incident:
  - Document incident fully
  - Update response procedures
  - Implement preventive measures
  - Staff training on lessons learned

Member Communication During Incidents

Breach Notification

Notification Triggers:
  - Confirmed unauthorized access to member data
  - Suspected compromise of >100 accounts
  - Regulatory requirement (PDPA: within 72 hours)

Notification Content:
  - What happened (clear explanation)
  - What data was affected
  - What we're doing about it
  - What members should do
  - How to get help
  - Apology and commitment

Notification Channels:
  - Email to affected members
  - In-app notification
  - SMS for critical breaches
  - Public statement if widespread
  - Media notification if required

Support Resources:
  - Dedicated hotline
  - FAQ document
  - Account security review
  - Credit monitoring (if severe)

Continuous Security Improvement

Security Monitoring and Testing 

Continuous Monitoring:
  - Real-time fraud detection alerts
  - Anomaly detection on transactions
  - Failed login attempt tracking
  - Unusual redemption pattern alerts
  - Data access monitoring

Regular Testing:
  Quarterly: Penetration testing of web/app
  Bi-Annual: Fraud scenario testing
  Annual: Comprehensive security audit
  Continuous: Automated vulnerability scanning

Security Metrics:
  - Fraud incident rate (target: <0.1% of transactions)
  - Account takeover incidents (target: <0.01% of accounts)
  - Average detection time (target: <1 hour)
  - Average remediation time (target: <24 hours)
  - Member data access violations (target: zero)

This security and compliance framework provides the foundation for protecting member accounts, preventing fraud, ensuring regulatory compliance, and maintaining program integrity while balancing security controls with member convenience and usability.