Doesn't my bank protect my business bank account?
Not necessarily. While many banks offer "zero-fraud liability" protection to their consumer banking customers (in addition to the protections under Regulation E), businesses do not commonly enjoy this same benefit. Also, unlike major credit card companies, many banks do not have sophisticated fraud detection systems that can detect and alert business owners to suspicious or unusual activity in their business bank accounts. For example:
“If you go two states over and use your credit card to buy gas, the credit card company calls you to say it’s out of the norm, but most banks have no idea,” said Mark Patterson, whose construction company, Patco, in Sanford, Maine, was robbed of $588,000 in 2009 by ZeuS Trojan, a form of malware. “Our bank had no alarms to say, hey, over five consecutive nights, Patco’s wiring money all over the country — to California, Florida, places we don’t normally send money, and definitely not from an I.P. address outside the U.S.”2
Businesses are frequent victims of bank fraud and cyber crime. In its "2012 Business Banking Trust Study", the Ponemon Institute surveyed business owners and executives of 998 small and medium sized businesses nationwide regarding such commercial banking fraud losses. The results were revealing:
- 74% of the respondents stated their business had experienced online banking fraud.
- 52% reported their business bank accounts had been targets of both successful and unsuccessful fraud incidents in the preceding 12 months.
According to the study, of those businesses that experienced fraud:
- 85% suffered credit or debit card fraud
- 85% suffered unauthorized account access
- 19% suffered unauthorized wire transfers
- 36% also reported that information stolen from their online banking account was used to commit check fraud
When the study specifically addressed the issue of fraud losses and reimbursement, of those who reported suffering fraud incidents, only 16% of the businesses reported that their banks detected and completely stopped the fraud before money was stolen.
Of those cases in which money was stolen:
- 12% reported that their banks were able to recover all of the stolen money
- 20% of the businesses reported that their bank provided full reimbursement of unrecovered funds
- 21% of the businesses reported that their bank provided "some" reimbursement of unrecovered funds
- 59% of the defrauded businesses suffered losses without reimbursement