In June, Frank Robertson could be sentenced to spend the next 15 years in a New Jersey state prison as punishment for his role in one of the biggest payment-card frauds pulled off to date. Robertson and 13 other men were arrested in December in connection with a heist that stretches across the U.S. and into Eastern Europe, with more than $3 million in goods stolen along the way, mostly high-end electronics. The repercussions of this crime will ripple throughout the financial services, retail, and IT industries long after Robertson is put away.Visa, banks issuing Visa-branded cards (including Bank of America, Citibank, Washington Mutual, and Wells Fargo), and merchants that accept Visa and other payment cards have been shaken in recent months by the theft of PINs that caused the banks to re-issue about 200,000 debit cards, Gartner VP Avivah Litan said during a data privacy seminar held Tuesday in New York.

It's obvious that banks, merchants, payment system providers such as Visa and MasterCard, and other organizations will have to pay closer attention not just to how they secure their data but to the type of data they're protecting. "Half the time, companies don't know what they're storing," said Litan, who prior to her eight-year tenure at Gartner worked as a director of financial systems at the World Bank. "There's no business reason for a company to store PINs."

Who's going to take the fall for this? Two companies are already sprinting to keep from being thrown under the bus. OfficeMax has repeatedly been accused of possibly being the merchant from whom PIN data was stolen, although the company denies the claim. Fujitsu Transaction Solutions Inc. has also been fingered for making the point-of-sale software that hackers broke into to steal the PIN data, although Fujitsu denied that its software was storing customer data.

Although Visa would not confirm that it has warned retailers about Fujitsu software, the company did issue a statement indicating that "Visa provided a confidential alert to a limited number of acquiring members advising that a particular configuration of certain software could result in the storage of sensitive cardholder data. The alert also included information regarding the availability of a software upgrade to address the potential for inappropriate data retention."

The arrests in New Jersey were the result of a joint investigation by the U.S. Postal Inspectors in Newark, N.J., the Manhattan District Attorney's Office, the New York Police Department, and a number of federal agencies, Hudson County Prosecutor Edward De Fazio told me Tuesday, adding, "The investigation is being followed up by the Secret Service, which is looking into the international aspects of the case." These arrests could be just the beginning. De Fazio said there's a "clear connection with Eastern Europe, in terms of the source of the information used to make the counterfeit cards."

The men arrested, all of whom were U.S. citizens, several of whom were out on bail during the time they were apprehended, have been charged with theft by deception, credit-card fraud, and conspiracy, De Fazio told me. Their crime ring covered about a dozen states. "There was an extraordinary amount of theft that took place here in terms of credit-card and debit-card fraud," he said, adding that this is the largest case he's aware of, in terms of the total value of the items stolen.

If financial service providers and other companies thought 2005 was a bad year for data security, it's only going to get worse unless sweeping changes are made in the way data is protected. "2005 was the year of the breach," during which 10 million U.S. adults were victimized by identity theft, amounting to about $15 billion in losses, Litan said Tuesday. Gartner's research revealed that 50 million individual financial accounts were compromised last year. The good news is that consumers got most of that money back. The bad news? Banks and other financial institutions had to cover these losses.

In addition to being fodder for a future episode of Law & Order, this payment-card fraud case has put financial services companies and banks on notice. They're going to have to face up to the flaws in their security systems and processes sooner rather than later.

Banks are seeing mounting losses resulting from having to respond to data theft, in the form of reissuing cards, replenishing fraud-stricken bank accounts, and even offering free credit reporting services for victimized customers. Litan estimates that banks must pay about $90 per breached customer account, covering legal expenses, reissued cards, public relations, and other costs. "This is something to worry about," she said. "If you're not going to worry about it, the regulators will." Are you worried?