Two huge reasons why crime insurance is needed
Travelers Insurance put out an excellent bulletin that describes the financial threats posed by funds transfer fraud and computer fraud, and the need for specialized Crime Insurance Coverage. The Travelers coverage version, wrap +, includes coverage for both electronic funds transfer and computer fraud.
- According to a survey by Computer Security Institute, the average financial loss due to computer fraud was $289,000. The average loss due to funds transfer fraud was $500,000.
- Pfishing scams, Trojans, key loggers and other techniques allow hackers to gain control of online banking transactions and to circumvent normal online authentication controls.
- Internal controls such as antivirus software, firewalls, and employee training are critical, but not enough for 100 percent protection.
- Specialized Financial Insurance coverages should be purchased to protect against this risk.
Examples of Electronic Funds Transfer Fraud Claims
- The bank of a victim company allegedly sent a letter explaining a new security program. A company received an email that appeared to be from the bank explaining a new security program. An employee opened the email, allowing a Trojan virus access and read keystrokes from the company’s computer. The perpetrator then obtained banking and password information. A fraudulent electronic wire transfer was initiated and the company lost $683,000.
- The finance director of a company opened an attached zip file in an email that contained a virus. The user ID and password to the company’s bank account was obtained through code inserted by the virus. A fraudulent electronic wire transfer totaling $147,000 was initiated by criminals from the company’s bank account to an unknown bank account in Arizona. The immediate withdrawal was unrecoverable.
- A payroll supervisor logged on to the payroll account for the company and noted that three payments totaling $704,632 had been wired from the account. The transactions were reported to the bank as unauthorized and the account was shut down. Unfortunately, $238,781 of the loss was not recovered.
Examples of Computer Fraud Claims
- An employee of a customer hacked into a company’s website and changed the bank routing and account numbers to her own. When the company paid her employer for services rendered, she fraudulently received the funds in her account.
- A former employee used his supervisor’s password to enter the insured’s unlocked building and gained access to use the supervisor’s computer. Using the bank routing number, he activated transactions to receive fake reimbursements allegedly made to the company’s customers.
Source: Travelers Bond & Financial Products, Bulletin, 11-09