Too Easy For Bank Accounts To Spring a Leak

The NYTimes has a cautionary tale of automated clearing house fraud. Parties unknown siphoned money from an individual's bank account. Nothing too unusual there, except that it was an elite private banking account at JPMorgan Chase, and the account holder is out $250K — the bank will only cover $50K of his loss. The $300K came out of the account in small transactions over 15 months. The bank offered no recourse except to open a new account, a large hassle given that the account is more than 20 years old and its holder writes a thousand checks a month. The article details how the spread of electronic settlements between banks has given rise to growing automated clearing house fraud — if anyone gets hold of the magic combination of account number and bank routing number, and once has permission to withdraw funds, all bets are off. Banks are unlikely to question future withdrawal orders. Moral of the story: go over your bank statements line-by-line every month, and question anything that looks funny.

Comments

Re:Well... Why?

[larry bagina]

The FDIC $100,000 coverage is in case the bank goes bankrupt (or hits financial trouble).

Re:Well... Why?

[Creepy Crawler]

Next time, try reading the article.

Or for critical reading, read the cut-n-paste

And a retail bank statement is kindergarten arithmetic compared with the monthly statement for a private banking client. Indeed, Mr. Wyser-Pratte said that the statements have become so complicated not even a Wall Street veteran like himself could detect the continuing theft.

"I kept complaining that the bank's records showed I was overdrawn when I shouldn't be," he said. Each time, he was assured that the statement was accurate, even if he could not decipher it.

That second paragraph cues me in that he DID complain, and was given a runaround and no real answers.

Sounds like Credit Suisse

[Animats]

And a retail bank statement is kindergarten arithmetic compared with the monthly statement for a private banking client.

I used to have a Credit Suisse account, and they did, indeed, have incomprehensible statements, even for a simple situation. They had a "current account" and a "time account". The current account didn't pay interest, but the "time account" did. Interest from the time account went into the current account, and when it exceeded US$1000, it was moved to the time account in multiples of $1000. Separate statements were provided for each account, on different schedules, didn't mention what was happening in the other account, and were difficult to match up. Lots of weird fees, too, including charging commissions on their own time deposits. It all seemed to be about fee maximization.

And this was without doing much in the way of transactions on the account. If you did lots of transactions against accounts like that, it would be really tough to track what was happening. The combination of inter-account transactions and differing statement cycles confuses the issue.

Silly

[Slashdot Parent]

Seriously with a bit of work it shouldn't be hard to keep track of your financials these days, especially with instant access via the Internet.

You've obviously never seen a private banking statement. For fun, I pulled out my July statement. There were 3 actual transactions on it (not dividend/reinvestment), and the statement was 40 pages long.

These statements really scream "DO NOT READ ME". I'm just sayin'. (Yes, I read and understand my statement, but I can fully sympathize with those who cannot. I needed my banker to go through the first one with me page by page just to understand the thing, and I do not consider myself to be an idiotic or financially illiterate person.)