Computer Fraud & Funds Transfer Fraud: Are You Adequately Protected?

Almost every business today relies on computers to manage their banking and financial activities.  While this has made transacting business more convenient, it has also created new risks.  A hacker with the right knowledge and equipment can access an organization’s bank account and steal significant sums of money.  A company may also be exposed to theft by a third party coming onto their premises, gaining access to a computer and using that computer to fraudulently transfer money or other property.

Computer Fraud coverage is available to cover direct loss of money, securities and other property resulting directly from the use of any computer to fraudulently transfer insured property from inside the insured premises or bank premises to a person or place outside of the insured’s premises or bank’s premises.  Below are two claim examples:

  •  An employee of a vendor fraudulently gained access to the insured’s computer system and changed the bank routing number from the vendor to the employee’s bank routing number, causing a large sum of money to be transferred directly to the employee instead of the vendor
  • A former employee used his supervisor’s password to enter the insured’s building and gain access to the supervisor’s computer.  Using his bank routing number, he activated transactions to receive fake reimbursements allegedly made to the company’s customers

A similar coverage known as Funds Transfer Fraud can be purchased to cover direct loss of money and securities in the insured’s transfer account on deposit at a financial institution committed by a third party and directly caused by:

  •  Electronic, telephone or fax instruction which purports to have been transmitted by the insured but which was fraudulently transmitted by someone else without the insured’s knowledge or consent
  •  Written instruction issued by the insured which is then forged or altered by someone else without the insured’s knowledge or consent, or which purports to have been issued by the insured but was fraudulently issued without the insured’s knowledge or consent
  • Electronic, telephone or fax instruction received by the insured which purports to have been transmitted by an employee but was fraudulently transmitted by someone else without the insured’s or employee’s consent

Both coverages are available under a standard Crime Policy.  Some insurance carriers offer as a combined coverage, while others write as two distinctly separate coverages.  Generally the cost is quite reasonable for the valuable protection provided.  We have clients who’ve experienced claims in these areas, and we strongly recommend that both coverages be included in a company’s insurance portfolio.

Please refer to the policy terms and conditions as coverages may vary by insurance carrier.

For More Information, Reference www.travelers.com

Authors: Karen Gibbons, CIC & Susan Gormley, CIC

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