Bank Theft

Technical topics regarding tax preparation.
#1
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Client had bank account hacked and hacker transferred and stole through bogus direct deposit payroll checks across the US $220,000 into multiple accounts. The bank said it is working with FDIC to find out or recover anything. I suggested reporting to FBI cause bank seems more worried about their own liability than client.

Any comments or suggestions - just curious. Thanks
 

#2
ATSMAN  
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I am not an attorney so anytime one of my clients inform me of a "theft" of business assets or money, my standard answer is to file a Police report and talk to their attorney. I can discuss the tax consequences etc. but I am NOT giving any legal advice.
All banks have a deposit/account holder agreement that describes the steps to take if the statement is not accurate or involves misuse/theft of funds. I am assuming the entire $220K was not stolen in one transaction? Was your client checking their bank statements? I get an e-mail/text alert anytime there is a transaction more than $100!
 

#3
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Thanks ATSMAN - A local bank so they were not set up for notifications, other than by phone. The thieves changed the contact phone number, then stole the funds over a two day period (one of the days the bank doors were closed for some sort of maintenance, maybe even computer maintenance). Thieves knew the max transaction amount was $75,000 so stole it in 3 75k payroll, direct deposit transactions, into multiple bank accounts so as not to go over the amount. Very professional job.
 

#4
LW25  
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JonLandon wrote:Client had bank account hacked and hacker transferred and stole through bogus direct deposit payroll checks across the US $220,000 into multiple accounts. The bank said it is working with FDIC to find out or recover anything. I suggested reporting to FBI cause bank seems more worried about their own liability than client.


Unless the real customer somehow contributed (e.g., by some sort of negligence) to the problem, it's probably the bank's problem. It was the bank's funds that were stolen, not the customer's funds.

Just to review: A customer's bank account with a bank is a liability on the books of the bank (call it account A). The bank owes a debt to the customer (let's say $1,000). That's the economic substance of the arrangement; that's the way it's accounted for on the bank's audited financial statements, and that's the legal reality.

A hacker somehow manages to debit account A for $1,000, and credit some other liability account (call it account B) for $1,000, then manages to have the bank transfer $1,000 in funds to the hacker's account or accounts, with a debit of $1,000 to account B and a corresponding credit to (perhaps) some liability account the bank has with a correspondent bank. Soon, $1,000 of the bank's funds end up in the hands of the hacker.

The original entry was not authorized by the customer -- or by the bank. But, the bank is "out" the funds, not the customer. Unless the bank can find a way to hold the customer liable for what the hackers did, the bank still owes the $1,000 liability to the customer -- regardless of what the bank's books show. The bank is going to have to re-credit the customer's account for $1,000 and debit an expense account (theft loss).
 

#5
ATSMAN  
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Thanks ATSMAN - A local bank so they were not set up for notifications, other than by phone.


Taxpayer may want to use a bank that has the capability to send test messages and e-mail for transaction activity even on weekends/holidays and after business hours. I am surprised that in this day and age this back is so far behind??
 


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