Security – Using a whitelist too large for an AWS VPC Security Group

First, DON'T capitulate. He is not only an idiot but DANGEROUSLY wrong. In fact, releasing this information would violate the PCI standard (which is what I'm assuming the audit is for since it's a payment processor) along with every other standard out there and just plain common sense. It would also expose your company to all sorts of liabilities.

The next thing I would do is send an email to your boss saying he needs to get corporate counsel involved to determine the legal exposure the company would be facing by proceeding with this action.

This last bit is up to you, but I would contact VISA with this information and get his PCI auditor status pulled.

Referencing the default security group is possible using:

{ "Fn::GetAtt" : ["VPC", "DefaultSecurityGroup"] }

Where "VPC" is your VPC resource name.

With AWS::EC2::SecurityGroupIngress and AWS::EC2::SecurityGroupEgress, you can augment the permissions of this default security group.

I think this is what you want:

"VPCDefaultSecurityGroupIngress": {
  "Type" : "AWS::EC2::SecurityGroupIngress",
  "Properties" : {
    "GroupId": { "Fn::GetAtt" : ["VPC", "DefaultSecurityGroup"] },
    "IpProtocol":"tcp",
    "FromPort":"22",
    "ToPort":"22",
    "CidrIp":"0.0.0.0/0"
  }
},

As mentioned by @artbristol and @gabriel, this allows Ingress/Egress rules to be added to the default security group for the VPC in a single stack deployment.

I'm pretty sure that the self-referential problem still impacts any attempts at changing any of the other properties on the default security group of the VPC. A good example of this would be adding Tags, or a Description. If you wish to change these things, you'll have to deal with extraneous security groups laying around.