A closely-watched court battle over how far commercial banks need to go to protect their customers from cyber theft is drawing to a conclusion. Experts said the decision recommended by a magistrate last week — if adopted by a U.S. district court in Maine — will make it more difficult for other victim businesses to challenge the effectiveness of security measures employed by their banks.
In May 2009, Sanford, Maine based Patco Construction Co. filed suit against Ocean Bank, a division of Bridgeport, Conn. based People’s United Bank. Pacto used online banking primarily to make weekly payroll payments. Patco said cyber thieves used the ZeuS trojan to steal its online banking credentials, and then heisted $588,000 in batches of fraudulent automated clearing house (ACH) transfers over a period of seven days.
In the weeks following the incident, Ocean Bank managed to block or claw back $243,406 of the fraudulent transfers, leaving Patco with a net loss of $345,445. Because the available funds in Patco’s account were less than the total fraudulent withdrawals, the bank drew $223,237 on Patco’s line of credit to cover the transfers. Patco ended up paying interest on that amount to avoid defaulting on its loans.
Patco sued to recover its losses, arguing in part that Ocean Bank failed to live up to the terms of its contract when it allowed customers to log in to accounts using little more than a user name and password. On May 27, a magistrate recommended that the court make Patco the loser by denying Pacto’s motion for summary judgment and grating the bank’s motion.
Several readers have asked to be notified if the U.S. map showing recent victims of high-dollar online banking thefts was updated. Below is a (non-interactive) screen shot of the updated, interactive map that lives here. Click the red markers to… Read More »
Organized thieves stole more than $600,000 from the Catholic Diocese of Des Moines, Iowa earlier this month, sending the money in small chunks overseas with the help of dozens of co-conspirators here in the United States.
A business telephone equipment company in Texas is trying to force its bank into a settlement over an attack by organized cyber thieves last year that cost the company $50,000.
Attorneys for Dallas-based Hi-Line Supply Inc. recently convinced a state court to require depositions from officials at Community Bank, Inc. of Rockwall, Texas, to learn more about what the bank knew in the days and hours surrounding Aug. 20, 2009, when crooks broke into the company’s online bank accounts and transferred roughly $50,000 to four individuals across the country who had no prior business with Hi-Line.
When cyber crooks stole nearly $35,000 this year from Brookeland Fresh Water Supply District in East Texas, the theft nearly drained the utility’s financial reserves. Fortunately for the 1,300 homes and businesses it serves, Brookeland had purchased cyber security insurance, and now appears on track to recoup all of the unrecovered funds in exchange for a mere $500 deductible.
As this attack and a related case study I wrote about last month shows, cyber theft insurance can be a reasonable and effective investment in an era when ultra-sophisticated cyber thieves increasingly are defeating the security that surrounds many commercial online banking accounts.
In very few of the many stories I’ve written about online banking fraud against businesses has insurance paid for much — if any — of the losses victim companies suffered. However, several victims I’ve interviewed from recent incidents did have cybersecurity insurance coverage bundled as part of a larger business risk insurance policies; in each case, the businesses suffered fairly substantial thefts, and appear likely to recoup all of their direct financial losses.
David Green normally only accessed his company’s online bank account from his trusty Mac laptop. Then one day this April while he was home sick, Green found himself needing to authorize a transfer of money out of his firm’s account. Trouble was, he’d left his Mac at work. So he decided to log in to the company’s bank account using his wife’s Windows PC.
Unfortunately for Green, that PC was the same computer his kids used to browse the Web, chat, and play games online. It was also the same computer that organized thieves had already compromised with a password-stealing Trojan horse program.
A few days later, the crooks used those same credentials to steal nearly $100,000 from the company’s online accounts, sending the money in sub- $10,000 and sub-$5,000 chunks to 14 individuals across the United States.
Last week I traveled to Cooperstown, N.Y. to deliver a keynote address about the scourge of online banking fraud that I’ve written about so frequently this past year. I flew into Albany, and in the short, 60 minute drive west to Cooperstown, I passed through tiny Duanesburg, a town whose middle school district is still out a half million dollars from e-banking fraud. On my way to Cooperstown, I also passed within a few minutes of several other recent victims — including a wrecking firm based on Schenectady that lost $70,000 last month when organized thieves raided its online bank account.
A New Hampshire-based IT consultancy lost nearly $100,000 this month after thieves broke into the company’s bank accounts with the help of 10 co-conspirators across the United States. On Feb. 10, Hudson, N.H. based Cynxsure LLC received a voicemail message… Read More »