Online Banking Fraud At $120 Million 2009 Q3

Online banking fraud involving the electronic transfer of funds has been rising since 2007 and reached more than $120 million in the third quarter of 2009, according to estimates presented Friday at the RSA Conference in San Francisco, by David Nelson, an examination specialist with the FDIC.

Computer scams which target businesses have cost US companies $25 million in the third quarter of 2009, according to the US Federal Deposit Insurance Corporation.

The FDIC uses a variety of confidential reports received from financial institutions, which allow them generate the estimates, Nelson said.

Almost all of the incidents reported to the FDIC related to malware on online banking customers' PCs. A typical victim is a person visiting a malicious Web site or downloading a Trojan horse program that enables hackers to get access to his banking passwords. Thereafter, money is transferred out of the account using the Automated Clearing House (ACH) system that banks use to process payments between institutions.

Although banks encourage clients to use several forms of authentication, hackers continues stealing money. "Online banking customers are getting too reliant on authentication and on practicing layers of controls," Nelson said. Nelsen also stated, hackers are definitely targeting higher-balance accounts and they're looking for small businesses where controls might not be very good.

That's led to some nasty legal disputes, where customers say the banks should have stopped payments, and the banks argue that the customers should have protected their own computers from infection.

That is also more bad news for businesses, which are on the hook for any losses more than ever. "Commercial deposit accounts do not receive the reimbursement protection that consumer accounts have, so a lot of small businesses and nonprofits have suffered some relatively large losses," Nelson said. "In the third quarter of 2009, small businesses suffered $25 million in losses due to online ACH and wire transfer fraud."

Avivah Litan, a Gartner analyst, feels those losses may be even higher in 2010 because computer attacks that install the password stealing botnet program, known as Zeus, have increased this year.

NCPW Week March 7-13 Internet Consumer Tips

FDIC to Provide Quick Tips for Consumers Over the Internet



New service announced in conjunction with National Consumer Protection Week

At any age or stage in life, it's important to stay informed about ways to save and protect your money. The FDIC, in observance of National Consumer Protection Week (NCPW) March 7-13 and its theme of helping people of all ages exercise their consumer rights, announced today that the agency will begin to regularly deliver timely tips on money management on the agency's Web site and through an e-mail subscription service.

"Consumer education is already a big part of what the FDIC does to increase the public's knowledge of financial issues," said FDIC Chairman Sheila C. Bair. "We believe this new service – delivering simple, practical tips on an ongoing basis over the Internet – will make it easier and more convenient for people to stay informed about issues that may affect their financial decisions."

Chairman Bair added, "The FDIC also is proud to be one of the national organizers of National Consumer Protection Week and to support this year's message that we all can become knowledgeable and empowered consumers."

The first five tips will be issued during NCPW – one each day – beginning Monday, March 8. Starting the following Monday, the tips will be provided on a weekly basis as the FDIC "Consumer Tip of the Week." Topics will range from saving and borrowing money to protecting money with FDIC insurance and avoiding financial fraud.

The FDIC's "Consumer Tip of the Week" may be found at www.fdic.gov/consumertips. Consumers, members of the media, financial educators and anyone else interested in receiving the tips automatically in e-mails should subscribe to the "Consumer Tip of the Week" using the e-mail update link on this Web page.

For more information about the FDIC's educational programs and service for consumers, including a toll-free Call Center, free videos and brochures, current and past issues of FDIC Consumer News (including the Spring 2008 special edition entitled "Money Tips for All Ages: Your Finances at Different Stages of Life"), and the Money Smart financial education curriculum (one version for adults and one for young adults), visit www.fdic.gov or call 1-877-ASK-FDIC (1-877-275-3342). The FDIC also has added a special Web page about National Consumer Protection Week at www.fdic.gov/ncpw that features quick links to several of the agency's products for consumers.

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Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,012 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed.

The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

FOR IMMEDIATE RELEASE
March 8, 2010 Media Contact:
David Barr (202) 898-6992
dbarr@fdic.gov