Banks on Trial: ACH Bank Fraud Has Its Day In Court
A new article in BankInfoSecurity by Managing Editor Linda McGlasson asks the question whether fraud cases are a black eye for banking. More and more bank customers suffering online fraud losses in the hundreds of thousands of dollars are going to court in an attempt to recover their losses. Banks large (Comerica) and small (Ocean Bank of Portsmouth VA) are on trial in court and in the court of public opinion to defend against customer claims that they (the banks) are responsible for fraudulent loses.
The article calls into question what constitutes “reasonable security” from banking institutions to protect themselves and their customers from fraud. Good question. Two factor authentication that uses the customer’s computer (device) and internet connection as a factor to mitigate risk in a banking transaction seems an obvious choice that not nearly enough banks have fully embraced (yet).
According to Rebecca Herold, an independent consultant, ACH fraud is the underlying cause to the recent incidents. She continues: “One primary reason that ACH fraud continues is because as the security “fixes” are made for the technology with the problems, new procedures are built specifically to address them. Then as the technology evolves and is implemented by the banks, new problems allow for ACH fraud to continue.”
What’s really at stake here are the reputations of the banks and whether customers will trust that they are doing all that they can to protect them from web fraud. I don’t think public court battles between banks and customers have enough candle power to really move the needle with the online banking masses. But they do nudge the needle and in time most banks will extend their security perimeter beyond traditional IT security solutions to include solutions that do more to protect against the new and growing threat of consumer facing bank fraud. A black eye from bank fraud is the new new thing for brand damage that results from media coverage on the risks of doing business online—much like the big data breach headlines of yesterday (still going today…think Heartland Payment Systems.)
Commenting on consumer trust erosion that can result from publicized bank fraud “outings,” Tom Wills, a security, fraud and compliance senior analyst at Javelin Research quotes Benjamin Franklin: “It takes many good deeds to build a reputation, and only one bad one to lose it.”
- Tom
