Keylogging software used by hackers presents an increased security risk to small businesses. As a Business Attorney Clearwater FL I can’t emphasize to my clients enough of how vigilant they need to me. This software records keystrokes on your keyboard and is used by hackers to obtain banking credentials to transfer money out of bank accounts. A sophisticated network of hackers that non-technical accounting people in a small business would not know they are up against are usually behind this security threat. This goes far beyond controlling spam and viruses on your office computer.
Banks on the other hand have much more sophisticated security systems and procedures to help prevent electronic theft of your money. Banks have back-end systems that identify transactions that are out of the ordinary. You may have taken a call from your credit card company to confirm whether suspicious activity was authorized and intended. For consumers, banks carry the liability for such unauthorized transactions that cause you loss.
This is not the case for businesses and corporations. A bank can avoid civil liability for commercial transactions under the Uniform Commercial Code, or UCC, so long as they use a “commercially reasonable” method to authenticate their business customers. The fine print in commercial account service agreements simply provides that the bank must follow their standard security protocol to satisfy the duties owed to the account holder. If they do, you can’t sue. Contact your Business Attorney Clearwater FL if you think you have a problem.
However, like all technology today’s security processes quickly become obsolete. So as hackers up their game, standard bank protocols may no longer be sufficient. In a federal case that dealt with exactly this problem, the First Circuit ruled in favor of a business reversing a lower court and finding liability where none previously would have been found.
Business Attorney Clearwater FL Case Review
The case is Patco Construction Company vs. Ocean Bank wherein Patco was a victim of keylogger hackers. Over a week, Ocean Bank, a southern Maine community bank, cleared six fraudulent withdrawals totaling $588,851.26 from Patco’s account. The hackers correctly answered Patco’s unique security questions having obtained the answers from keylogging software after hacking into Patco’s computers. The bank’s security system flagged each of the transactions as unusual because they were inconsistent with the timing, value, and geographic location of Patco’s regular payments. Still, neither the bank nor its security system software notified Patco.
The court held that the bank could be sued for damages because its security software, while perhaps capable of preventing the fraud, was not deployed correctly. The bank could therefore be liable for security software that was not “commercially reasonable” and did not take into account “the circumstances of the customer.” In particular, the court noted that “one-size fits all” implementations of security software is not sufficient. This is a case your Business Attorney Clearwater FL should be aware of.
It follows that banks are no longer likely to play a passive role in applying their security controls for business clients. Further, what is reasonable in use and extent of security systems will continue to be a moving target as technology advances. As a result, Florida commercial litigation in this area of business law will likely grow. If you have any questions, please call Business Attorney Clearwater FL Nickolas Ekonomides.