Money stolen from friend's bank acct

[kramer]

A good friend of mine had money siphoned from his bank checking account over a period of perhaps 8 months and just discovered it this weekend. The bank says they will only reimburse him for what happened in the first 60 days (15% of the loss). He is leaving on a long international trip in 2 days and so is scrambling (and my own international flight leaves in 24 hours). He spent most of today (Monday) at the police station and documenting the losses in great detail on an affidavit.

The way the theft was done is that someone set up their bill pay from his checking account. It started small, what looked like a single car payment to a Capital One account. Then they started paying a couple of credit cards via Capital One. There may have been others, but these represent the bulk. The losses added up to around $35K over a period of around 8 months or so until he noticed. In fact, the perps are still probably not aware that the account has been closed, a payment to one of the credit card acccounts even went out Monday morning before he could close the account.

He runs a very successful business and was working 80 hour weeks for months and for the first time in his life was not perusing the monthly checking account statements. The account is over 20 years old so he has no original paperwork that he signed when he started it. He had purposely avoided putting the account online to reduce any chance of fraud. His credit reports look good, so this is not full on identity theft or anything.

So far his actions have been:
* Notify bank to close account and went in to talk with them
* Make police report including documentation of each transaction
* He is sort of waiting for the bank to deliver to him the first 60 days of losses before getting aggressive about being made whole for the remainder
* He has a lawyer for his business who already has power of attorney so he can handle stuff when he is traveling -- but the lawyer is clueless about this kind of crime
* He has asked the bank to get as much information as they can about the destination accounts where the money went

What else should he do? Should he freeze his credit bureau accounts to prevent any access to his credit records?

So can anyone start taking money out of your checking account and the only thing really stopping this is the customer looking over their statements? What sort of controls are normal for a bank? Does he have recourse here?

 

[Gill]

...and the only thing really stopping this is the customer looking over their statements?

Yes, if you're not reconciling your own statements it's hard to fault the bank.
Bruce

 

[photoguy]

I wonder if he made a big enough stink on social or traditional media if the bank would take notice and reimburse him even if not strictly required. Banks do not like to reveal details of fraud losses

 

[Rustward]

I checked the fine print on my account, and that 60 day window is quite clearly documented.

I hope that his very successful business made enough to compensate for this loss.
If he really is working 80 hour weeks maybe he should budget about 15 minutes/month to reconcile his statements. Personally I believe it is next to impossible to average 80 hours/week and be effective over a very long period, but maybe I am a slacker.

Is this a case in which someone logged onto his online back account and set their accounts to be paid from his checking?

 

[kaudrey]

Well, the controls are usually a log-in ID and password. Did the thief set up the account online, even though your friend didn't? If so, then he would have had to know personal information about the account - at a minimum, probably the account number, name, address and maybe SSN of your friend. I am just trying to understand how, exactly, the transactions were set up.

 

[scrabbler1]

I have alerts sent to my home email whenever an online payment is about to be made from my checking account and when it is actually paid from my account. I also get an email alert whenever an online payment is set up or is changed, so even if I don't check my online banking for a few days I would still be notified if anyone tried any hanky-panky. I make only one automatic, recurring online payment from my bank.

 

[audreyh1]

I have alerts sent to my home email whenever an online payment is about to be made from my checking account and when it is actually paid from my account. I also get an email alert whenever an online payment is set up or is changed, so even if I don't check my online banking for a few days I would still be notified if anyone tried any hanky-panky. I make only one automatic, recurring online payment from my bank.

+1

In addition to getting emails on every bank transaction above $50, I usually reconcile the transactions with Quicken weekly so anything unusual would stand out.

We also have email notification if any pay to account is added, any user changes, etc.

This is terrible for your friend, but incredible that he didn't notice the activity for so long.

Not having online access probably worked against him in this case. Someone else would have not as easily been able to set up online access if it were already set up. Plus he could have been getting notifications.

 

[akck]

Every time you write a check, you've given everybody who touches it your account information. All they have to do is enter that info in bill pay as the thief did. Your only option is to diligently monitor your accounts for fraudulent activity.

When I was working, we had 2 unrelated cases of fraud within a 6 month period. One was a check to a charity in Africa was intercepted and they faked a check for $25,000. In the other case, the thief used our banking information on personal checks. I figure an employee at one of 3 vendors made copies of checks and either sold them or made fake checks themselves.

I monitor our accounts at least weekly to stay on top of any fraudulent activity. At minimum, you should do it monthly, as banks will eventually make you whole once the theft is timely reported.


Sent from my iPhone using Early Retirement Forum

 

[NW-Bound]

... The way the theft was done is that someone set up their bill pay from his checking account. It started small, what looked like a single car payment to a Capital One account. Then they started paying a couple of credit cards via Capital One...

... He had purposely avoided putting the account online to reduce any chance of fraud...

Well, the controls are usually a log-in ID and password. Did the thief set up the account online, even though your friend didn't? If so, then he would have had to know personal information about the account - at a minimum, probably the account number, name, address and maybe SSN of your friend. I am just trying to understand how, exactly, the transactions were set up.

His bank has to know how the thief set up the auto-payment. And with the destination accounts known, it should not be hard to track down the thief. The thing is even with the loss of $35K, it may not be a big enough case for FBI to get involved.

Not having one's account online is not a good idea. By having as many of my accounts online as possible, I can check on all transactions once every couple of days automatically with Quicken.

I have a story you will find interesting. A few years ago, I was not able to get into a brokerage account one day. I called in to the brokerage to have the password reset, and upon logging in, found that I could have access not just to my own accounts, but also another person's account. The accounts had been linked together. While scratching my head, trying to understand what happened, the next day I lost access to my accounts again.

What I eventually learned was that there was another account holder at that brokerage with my last name. He submitted paperwork to gain power of attorney right to manage his wife's IRA account. The clerk at the brokerage linked the wife's account to my account by a stupid mistake. He should look at the full name, SS#s, addresses, and not just the same last name and a similar looking first name. And of course people can have the same full name too!

So, this guy and I ended up calling the brokerage to fight over the account access back and forth, and the clerk, perhaps sitting in India, did not know a grave mistaken identity had occurred, and kept resetting both of our passwords. It finally stopped when I escalated the call and threatened to move my money, if they could not figure out this simple problem.

What I have learned is that a dumb clerk doing bad data entries can wreak havoc with modern computer-run financial systems. And I will save the story about SS messing up my friend's account for another day.

 

[REWahoo]

Not having one's account online is not a good idea. By having as many of my accounts online as possible, I can check on all transactions once every couple of days...

+1

Even though I get email alerts of any new or changed auto pay settings, I rarely allow more than a few days to pass without checking on the activity in every one of my banking, credit card and investment accounts. This guy's losses are an example of why such frequent activity reviews are a very good idea.

 

[jetpack]

I use Mint.com to see the transactions in all my accounts in one place. Usually I look at it every day or two. Mint can also automatically notify you of hidden fees, large transactions or if you're over budget in any category. I can't imagine going 8 months with out reviewing transactions.

 

[NW-Bound]

Besides, I love to count, or let Quicken count, my money.

It does hurt though, when a big check cleared like recent ones for home repairs and remodels, and I had to console myself that if it were not for those, my stash would have set a new high.

 

[H2ODude]

Stories like this make me feel a little better about my seemingly excessive habits regarding monitoring our finances. Every couple of days I check online pretty much every account except one that sits pretty dormant with only a couple of thousand in it. Also check our Amex cc account; last week found a charge pending that we have no idea what it is and am investigating. Yeah, it's only $12 but who knows what's up with it.

I set up an Amex online savings account last year to take advantage of their whopping 0.85, now 0.8% interest. It blew me away that from that new account I could reach over to our Fidelity account and help myself to over $100,000 in cash....pfft. Convenient? Absolutely. Scary? Very much. IIRC it was all done from the new Amex account, no OK given at Fido. So I'm convinced that now retired, spending a few minutes every few days checking on this stuff is well worth the time. That and having the credit reports locked.

 

[audreyh1]

Stories like this make me feel a little better about my seemingly excessive habits regarding monitoring our finances. Every couple of days I check online pretty much every account except one that sits pretty dormant with only a couple of thousand in it. Also check our Amex cc account; last week found a charge pending that we have no idea what it is and am investigating. Yeah, it's only $12 but who knows what's up with it.

I set up an Amex online savings account last year to take advantage of their whopping 0.85, now 0.8% interest. It blew me away that from that new account I could reach over to our Fidelity account and help myself to over $100,000 in cash....pfft. Convenient? Absolutely. Scary? Very much. IIRC it was all done from the new Amex account, no OK given at Fido. So I'm convinced that now retired, spending a few minutes every few days checking on this stuff is well worth the time. That and having the credit reports locked.

My AMEX savings has no access to my Fidelity account. I only initiate transfers from Fidelity, and Amex has no account info. It only knows about my checking accounts.

You must have funded your Amex savings account from Fidelity when you first set it up.

 

[H2ODude]

My AMEX savings has no access to my Fidelity account. I only initiate transfers from Fidelity, and Amex has no account info. It only knows about my checking accounts.

You must have funded your Amex savings account from Fidelity when you first set it up.

You lookin' over my shoulder? I believe that's exactly what I did. But still, as I recall, I did nothing on the Fido side to OK that.

 

[W2R]

Stories like this make me feel a little better about my seemingly excessive habits regarding monitoring our finances. Every couple of days I check online pretty much every account except one that sits pretty dormant with only a couple of thousand in it.

I check my bank accounts online every single day, and have done so for 14 years or more. In fact, I just did that before coming to the forum today. Occasionally I might skip a day, but never two.

I might SAY it is to prevent fraud, and I suppose it is a big help. But really, the reason why I do this is because it is free data about something that matters to me - - my financial well being. I love knowing exactly how much I have in the bank, at any given moment.

I still remember the days when doing this was important, since there was a fee for falling below a certain balance ($50? I have forgotten).

 

[audreyh1]

You lookin' over my shoulder? I believe that's exactly what I did. But still, as I recall, I did nothing on the Fido side to OK that.

Right. They did check that the names on account matched, FYI. But I suppose someone could open an account in your name with all the pertinent info including SS#, but they couldn't transfer funds to another account without your name on it.

 

[NW-Bound]

... I do this is because it is free data about something that matters to me - - my financial well being. I love knowing exactly how much I have in the bank, at any given moment...

Another who loves to count money...

 

[W2R]

Another who loves to count money...

You noticed! It helps me to cope with the irrational financial insecurity that I sometimes have(engendered by years of being broke and in debt).

 

[Katsmeow]

It boggles the mind to me that someone wouldn't notice $35,000 missing from their accounts. Like others have said, I monitor my accounts frequently. Vanguard and my main bank account I usually log into every business day (occasionally I'll miss a day but not more than that). Amex I log in to frequently. I do have alerts set up for transactions above a certain amount (when our son's credit card was apparently counterfeited and used on the other side of the country -- he is an authorized user on our account -- I knew within the hour due to the alerts). Even for less often used accounts I log in periodically and would receive an email confirmation of any significant activity.

And, yes, anyone you have written a check to (or who has seen one of your checks to get the routing number and account number) could plug that info into an autopay field. Your defense against that is to monitor your account....

 

[NW-Bound]

I am right now looking at my Quicken screen: [-]27[/-] 26 accounts.

Schwab alone has 7 of our accounts (his/her IRA, Roth, Educational accts for children, etc...). There are other brokerages, including 3 accounts at Vanguard. There are a couple of MF accounts. Then, there are credit cards, Amex, Discover, B of A checking, etc... One click on Quicken and everything gets downloaded and updated.

The accounts that I have to log in manually each month include the Treasury Direct accounts, and an MM account at Ford Credit. My wife's 401K has to be logged in daily to get the funds' price. It's a pain that the latter has no Quicken access, and I have been debating for a while about doing an IRA rollover.

My wife keeps track of a couple of accounts by hand, such as the HSA and some credit cards she uses but I don't.

 

[kramer]

Thanks for the information so far.

The current understanding is that this was set up as a bill pay. The perps did not set up any kind of online access.

So it sounds like anyone who knows your account number and your bank (e.g., anyone who has received a check from my friend over the last 20 years, in this case) can simply start paying their bills from his account. And there is no verification by the bank that names match, no trial deposits, etc.? The bank simply approves any and all incoming requests?

When I set up money transfers to/from my brokerage accounts there were two trial deposits of random amounts under $1.00 (there is only a 1 in 10,000 chance you can guess these) that had to be reported back before approval and the names had to match. But I don't recall doing any of that for a bill pay.

 

[NW-Bound]

When I set up money transfers to/from my brokerage accounts there were two trial deposits of random amounts under $1.00 (there is only a 1 in 10,000 chance you can guess these) that had to be reported back before approval and the names had to match...

I went through that trial deposit once to link my checking account with a brokerage account. Vanguard wanted more: a signature guarantee from B of A. I thought Vanguard was silly; I opened the account with them using a check from the same bank account.

Here's an interesting story. I once observed 2 small deposits into my checking account. While wondering what that was all about, I got a voice message on my phone recorder, asking to know the values of these small random deposits!!!

I reported this to the bank, and I did not know what they did with it. However, I am sure that some innocent naive people might just tell a stranger on the phone about the amounts, which then let them validate the link and steal all the money!!!

 

[Helios]

Banks r regulated thru the state they r located in. The dept of the respective state has a complaint process. Friend needs to file a complaint about the bank.

 

[MichaelB]

So far his actions have been:
* Notify bank to close account and went in to talk with them
* Make police report including documentation of each transaction
* He is sort of waiting for the bank to deliver to him the first 60 days of losses before getting aggressive about being made whole for the remainder
* He has a lawyer for his business who already has power of attorney so he can handle stuff when he is traveling -- but the lawyer is clueless about this kind of crime
* He has asked the bank to get as much information as they can about the destination accounts where the money went

What else should he do? Should he freeze his credit bureau accounts to prevent any access to his credit records?

Kramer, sorry for your friend's bad luck. He has little recourse, the law is clear here. Only consumer accounts are covered and the bank liability is 60 days from the date the monthly account statement was mailed. In fact, the bank is under no legal requirement to even investigate. The Electronic Funds Transfer Act is governing regulation (see here). Freezing his credit report won't help, but it also won't hurt. The police report may help.

He should not take a confrontational position with the bank. He needs them to investigate and provide him with details, pursue the possibility that some funds may be recovered. He will have time later to file a complaint.

If this is indeed bill pay, there is an audit trail to the payee's bank account and the payee's identity must have been established. It could be an error by the payee's bank that the payee exploited, if so, your friend can initiate funds recovery through his bank.

If the payee's account is bogus and it was fraud from day 1 it will be difficult to claim negligence because the account holder did not report it in a timely way. Still, it might help his case to file a complaint to the bank regulator (Comptroller of the Currency if it's a national bank).

So can anyone start taking money out of your checking account and the only thing really stopping this is the customer looking over their statements? What sort of controls are normal for a bank? Does he have recourse here?

No, not anyone can withdraw from your account. Entities that have established themselves as legitimate businesses with the bank can attest to preauthorization and submit debits to your account. This is one way to set up automatic bill. If a payee does not have a relationship with the bank there usually needs to be some confirmation device that confirms to the bank the account holder authorization.