Online banking fraud: can funds be recovered after compromise?

Internet fraud is becoming more and more common nowadays. A few months ago, one of my family members fell for fraudsters and fraudulently transferred money to the scammer from his bank account. The likelihood of successfully recovering lost funds these days is slim, but there are certain steps you can take to reduce the risk of online banking fraud.

Banks don't take responsibility

Banking institutions are absolving themselves of liability in a tough economy, despite laws protecting the interests of customers. The previous practice of refunding customers affected by fraud is now being seriously questioned. Combined with the financial losses suffered by banks in recent difficult years and the millions of dollars being withdrawn from customer accounts by fraudsters each month, financial institutions are taking a tough stance. The current state of affairs means that you can no longer rely on banks to support you in the event of fraud. Instead, it is important to remain vigilant and take steps to prevent fraud.

Calls and texts from scammers

When it comes to text and phone scams, scammers use a variety of methods, including spoofing phone numbers to make you think it's your bank. They initiate the interaction by claiming that an illegal transaction has occurred and offer to help prevent it. By coaxing and guiding you through online banking, they essentially lead you away and force you to transfer your own money to the scammers under the pretense of recovering stolen funds. By acting quickly, they speed up the process of taking control of your bank account and transferring funds to the fraudsters.

How can I protect myself from fraudsters? 

To avoid possible fraud, it is recommended that you be vigilant and cautious about incoming communications. Refrain from answering incoming calls and text messages and avoid clicking on links or interacting with senders until you are sure who you are actually communicating with.

If you receive a message that appears to be from your bank, don't click on links. Better yet, use an online banking app or go to the bank's official website to check your account. Remember that all transactions must be displayed on your app or on the bank's website. Therefore, it is highly recommended that you log in and do the verification yourself.

For added protection, it is advised to call your bank or contact your banker using the phone number provided on your checks or on the bank's official website. Ask if there is any suspicious activity on your account that might have been reported.

Don't be lazy and take the risk of assuming that an incoming message from your bank or with the correct Caller ID/email address is genuine. Remember that time spent calling or checking options will be justified if it helps you avoid financial loss in the event of fraud.

Also, remember that if it is a really important message from your bank or credit card issuer, you are not obligated to respond immediately. The Federal Deposit Insurance and Consumer Fraud Protection Corporation provides protection in the event of actual theft or fraud. Therefore, don't feel obligated to respond immediately to any messages or calls.

Remember that problems may arise if you have already initiated an interaction or taken certain actions when asked. In such a case, banks may refuse to return your money, so it's important to take your time to respond and do your due diligence first.

What should I do if your account has been compromised or fraudulent? 

If your account has been compromised or you've been the victim of fraud, you should take action immediately. Here's what I've learned in helping people deal with these situations:

1. Contact your financial institution: Contact your bank or other financial institution to see if your funds can be stopped from being transferred. While it may be too late in most cases, you don't want to miss the chance. Call to see if you can prevent the loss of funds.

2. File a fraud report: Assuming the money has already been transferred, it is important to file a fraud report within two days. Check your financial institution's website, call them, or look for information on how to file a report. Be sure to keep any confirmation codes to prove that you filed your claim within the specified time frame after the fraud occurred.

3. Wait for the claim to be processed: Depending on your financial institution's policy, most organizations will review your claim and reimburse your losses within 10 calendar days if they decide to help.

Remember, speed of response is key in these situations, so act quickly and decisively.

In case of financial fraud: When your balance is simply reduced without your active participation, banking or financial institutions are usually obligated to return the lost funds (it's spelled out in small letters, but banks and credit companies take this responsibility). 

Fraud is when someone steals your bank card, online banking access information, your credit card number, or hacks the bank or credit card company directly, etc., which is through no fault of your own and it's like a mystery to you how someone was able to get your information. In such cases, it is likely that you will get your money back. When you go to court, point out that if you did not provide your information yourself, make it clear that you DO NOT KNOW how this could have happened! If at any point you admit, "Well, maybe I gave my information to my spouse" or "Maybe I gave my credit card to my friend," these are actions that may have jeopardized your safety, in which case the financial institution may not consider it fraud, but rather your own mistake.

Identity Spoofing: Identity Spoofing is when someone tricks you into getting your password, ATM information, or even spending 10 minutes tricking you over the phone (which gives them full access to your account). In the case of identity spoofing, financial institutions have a pretty strict policy and will not reimburse your losses. They claim that if you transferred money yourself or "authorized" a transaction to buy or transfer money, it's your responsibility. For example, if you thought you were texting your friend and he asks you to send him money, and you do, then you knowingly committed an act and you have a responsibility to make sure you send money to a trusted person you actually know about.

Consumer Financial Protection Bureau ("CFPB")

The Consumer Financial Protection Bureau's ("CFPB") ruling makes clear its views on the Electronic Fund Transfer Act, known as Regulation E ("Reg E"). Under this law, if a third party manipulates a consumer into providing account access information fraudulently, the consumer should be protected just as if his or her money had been stolen from a stolen debit card or other banking device.

Although the use of Reg E was common a couple of years ago and consumers successfully recovered their funds, Reg E itself did not have the status of a law or mandatory banking requirement. It was merely a CFPB "opinion" that banks responded to a few years ago by returning consumers their funds. Last year, however, banks strongly opposed the practice.

If you are facing a similar situation, you should try filing a Reg E complaint with your bank. The process usually involves filing a Reg E complaint with the bank within two days of the fraud or as soon as you become aware of the problem, and then waiting for the bank to conduct an "investigation" to determine a refund. If the bank refuses to refund your lost funds, you can file a complaint with the CFPB.

However, it's worth noting that losses from such manipulations are now estimated in the billions of dollars, and banks are actively warning their customers of the potential risks. They are posting warnings on their websites, apps, and sending letters insisting that customers be careful. So if you've been tricked into losing your funds, it could be your own problem, not the bank's.

Let's look into this fascinating episode that has been going on for quite some time, but still surprises MANY people. It has become a real target for the elderly, for college applicants entering college, for those who are somewhat naive about the dastardly villains. Scammers are perfecting their CallerID and email spoofing skills in an effort to deceive the trust of young people and the elderly. Be wary when it comes to your finances, maintain a high degree of suspicion!