../Morning Post
Posted March 15 , 2010
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Banking

Furor over plunder of SMB online bank accounts

TORONTO - Following the large-scale theft of their online accounts several small and mid-sized businesses have filed lawsuits against their banks. The banks are arguing that the thefts occurred because the victims failed to adequately protect their credentials.

The unabated plundering of online bank accounts belonging to small and midsize businesses is raising significant questions about the authentication and fraud-detection mechanisms now used by financial institutions.

Such cyberthefts have led multiple businesses to file lawsuits against their banks and prompted government regulators to call on financial institutions to improve their security systems.

The FDIC recently disclosed that during the final 2009 quarter alone, cyberthieves stole more than $150 million from small and midsize business accounts. In most of those cases, the FDIC said, thieves obtained a business's valid banking log-in credentials by illegal means. The hackers used the stolen credentials to send money from the accounts to overseas bank accounts via wire transfers.

Banks, by and large, have mostly contended that the thefts occurred because the victims failed to adequately protect their banking credentials.

Since banks are not required to reimburse commercial accounts for losses resulting from such thefts, most of the impact has been on public relations.

On the other hand, the thefts have led to tens and even hundreds of thousands of dollars in losses for numerous small businesses, which now have little hope of recovering the money. Some have filed lawsuits against banks, charging that they failed to detect and stop transactions that were patently fraudulent.

Earlier this month, for example, Hillary Machinery Inc. filed a lawsuit against its bank, PlainsCapital, after online crooks used stolen credentials to transfer more than $800,000 from its account last year.

The bank later recovered about $600,000 of the stolen funds but has so far refused to compensate the Plano, Texas-based manufacturing firm for the remainder.

Submit press release to pressrelease@exchangemagazine.com - Editor Jon Rohr - Content published on this site represents the opinion of the individual/organization and/or source provider of the Content. ExchangeMagazine.com is non-partisan, online journal. Privacy Policy. Copyright of Exchange produced editorial is the copyright of Exchange Business Communications Inc. 2009/*.*. Additional editorials, comments and releases are copyright of respective source(s) and/or institutions or organizations.

 


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