Banking Law

Business Goes Back to Paper Checks After Losing $345K and Liability Ruling by Federal Magistrate

It’s less convenient. But a business in Maine that lost $345,000 in 2009 when cyber crooks tried to siphon well over half a million from its online account has now gone back to paper checks to try to keep its funds secure.

Deciding cross-motions for summary judgment last week, a magistrate judge is recommending that a federal court require Patco Construction Co. to take the loss, because the security breach apparently occurred as a result of malware inadvertently installed on the computer system for the business rather than the bank, according to Computerworld.

The construction company also didn’t monitor its bank account on a daily basis. In addition to the $345,000 Patco lost, crooks tried to steal another $243,000 more in Automated Clearing House (ACH) transactions that the bank caught and stopped.

Patco contended that that the defendant, People’s United Bank, doing business as Ocean Bank, was negligent in implementing security measures and misrepresented its security measures to the construction company.

Bank Info Security provides a copy of the magistrate’s written opinion (PDF) recommending a resolution of the case. A federal district court judge must still approve a summary judgment in the bank’s favor before it would become final.

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