Bank Sued for Unauthorized Transaction
This story is interesting:
A Miami businessman is suing Bank of America over $90,000 he says was stolen from his online banking account in a case that highlights the thorny question of who is responsible when a customer’s computer is hacked into.
The typical press coverage of this story is along the lines of “Bank of America sued because customer’s PC was hacked.” But that’s not it. Bank of America is being sued because they allowed an unauthorized transaction to occur, and they’re not making good on that mistake. The transaction happened to occur because the customer’s PC was hacked.
I know nothing about the actual suit and its merits, but this is a problem that is not going away. And while I think that banks should not be held responsible for what’s on their customers’ machines, they should be held responsible for allowing unauthorized transactions to occur. The bank’s internal systems, however set up, for whatever reason, permitted the fraudulent transaction.
There is a simple economic incentive problem here. As long as the banks are not responsible for financial losses from fraudulent transactions over the Internet, banks have no incentive to improve security. But if banks are held responsible for these transactions, you can bet that they won’t allow such shoddy security.