What happens if your bank account is hacked? Are you liable or is your bank? We have the answer, along with some tips how to keep your money safe online.
As society’s reliance on technology grows, especially for things like banking, we will continue to see more and more issues with account hacking. Whether on a large scale – such as the recent $10M theft from banks in the U.S. and Russia – or small, data breaches are becoming increasingly prevalent. So, what happens if your bank account is hacked?
How Big is the Problem?
According to the Identity Theft Resource Center, hacking was responsible for a whopping 59.3% percent of the total data breaches in 2017. This number has grown significantly each year (up from 14% in 2007 and 27% in 2012, for instance). It shows no signs of slowing.
It’s concerning enough to think about our email accounts being breached or our personal data being compromised through physical theft of personal documents. However, when we consider the impact of our checking or savings accounts being hacked – and even emptied – the fear increases exponentially.
This may even lead some to think about pulling their money out of financial institutions, opting instead a more personal, less-likely-to-be-targeted solution. However, that might not be the best option.
While there are many reasons to reconsider doing business with large financial institutions, the threat of a cyber attack shouldn’t be one. Those who see the potential for this kind of data breach as a reason for not doing their financial business over the internet are over-reacting. Of course, that’s little comfort in the face of fear.
Let’s take a look at exactly what happens after your bank account is hacked, and why you shouldn’t be scared to bank with an online institution.
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You Probably Won’t Lose Your Money
You may not know this, but the banks are actually liable for any stolen funds as a result of cyber crime. Non-business Customers should not lose money, as long as they notify their banking institution of the fraudulent transaction(s) within a reasonable period of time and took steps to safeguard their account information.
This is all thanks to Regulation E, a guideline established by the Federal Reserve to protect electronic funds transfers (ETFs). According to Reg E, banking customers are only liable for up to $50 in losses if they notify their bank right away (typically, within 2 days of receiving the statement with the fraudulent charge). If they wait up to 60 days, their lost funds are still limited – losses are capped at $500 – and the bank carries most of the liability.
However, if customers wait beyond 60 days to notify their bank of any fraudulent charges, they may be liable for the full amount stolen.
The takeaway here? You’re still protected as a personal banking customer, even against cyber threats, as long as you stay on top of your account activity. Of course, you should be doing this anyway, but thanks to the Federal Reserve, your losses are largely capped even if you’re the unfortunate victim of bank account hacking.
Banks Are More Prepared than Ever
Banks are hit by cyber attacks every single day. As a result, they are becoming more adept at preventing breaches of security, and are implementing cutting-edge protocols and software to prevent such attacks from being successful.
It’s important to remember that only the big attacks hit the news. Banks are bombarded by security threats all day every day, and their systems are improving exponentially for detecting and dealing with these problems.
You Can Help Protect Yourself
While some breaches happen on a much larger scale, many of them originate by an individual having his or her personal data compromised. In today’s world of WiFi hotspots and coffee shop internet, it’s even easier for hackers to gain access to our accounts.
Luckily, it’s fairly simple to ensure your account is not vulnerable to this particular attack. When using a public internet connection – whether at the airport, in a coffee shop, or even at your kids’ after school gymnastics practice – avoid logging in to important personal accounts. Browsing the web is fine, but don’t enter personal information like your bank account login or even email password while on a publicly-accessed connection.
Also, when logging into your bank account online, most banks allow you to “remember your computer.” This allows you to bypass a few added security questions the next time you log in, but makes it easier for cyber threats. Hackers can spoof your IPv4 address or even use malware to hijack your computer, so you don’t even know it’s accessing your bank account.
It’s a good idea to always disable the “remember your computer” feature. While it makes logging in a bit more of a pain, it’s much more secure in the end.
Keep an Eye Out for Spoofs
Even the most technology-savvy folks can be fooled by today’s advanced social engineering. Keep a close eye on everything you open and click on, to ensure that you’re not their next victim.
Email programs have become very adept at filtering out spam most of the time. However, they’re not foolproof. You may still see emails that look very much like they are official, coming from your bank or even Paypal, asking you to visit the website and confirm some piece of financial information.
In reality, the “bank’s website” is actually a hacker’s website, designed to look identical to the official site. Never enter your password or any other identifying information on a website that you’re accessing over an insecure connection.
Internet browsers now even identify the security certificate. So when you’re visiting a secure website that’s supposed to be operated by Chase, you can verify you’re safe. Click the security icon in your browser’s address bar for more information. Here is a screenshot of what that looks like with Chrome.
When dealing with suspicious emails, you can even nip spoofs in the bud. Simply click on the sender’s email address if you receive a message requesting information, to see if it truly came from your financial institution. If you have any doubts, forward the message directly to your bank’s customer service department and get their confirmation.
You can make your passwords as long and as random as you like, but the complexity of a password is irrelevant if you hand it to a criminal willfully.
Safer Alternatives Don’t Exist
I’m sorry to break the news to your sweet grandma, but stashing money under your mattress is much less safe than giving it to the bank.
When you don’t like dealing with banks because you already believe that these corporations are evil, fear-inducing stories about recent hacks or cyber theft prevalence are particularly resonant. News of major security threats seem to confirm the skeptic’s opinion that money is only safe when it’s cold, hard cash… not bits in a bank’s computer.
However, the threat of your money being physically stolen is much more serious than it being digitally stolen. Your house being robbed and criminals being able to find your hidden bills or walk away with your safe is much more likely than losing money due to cyber crime.
Plus, as we mentioned before, you have methods of recourse if your bank account is compromised. Thanks to Regulation E, your stolen personal funds are protected by-and-large, as long as you notice the theft and alert your bank in a timely fashion. If someone walks out of your house with a coffee can full of bills, you’re simply out of luck.
Should You Worry?
While news of past attacks and the threat of future ones is scary, the truth is that the banks will know before you do. Often times, these institutions (and their advanced cyber security teams) solve the problem before the media even mentions the threat.
Federal law requires that banks are liable in the event of a security breach. There is no bank that wants to be liable for a potentially large amount, so the companies have a very strong incentive to be very proactive and protect their customers.
Banks are easy to criticize, for a number of other reasons. However, security is one area where the needs of the customers, shareholders, employees, and executives are completely aligned.
Does news of cyber attacks change the way you feel about banking online?
Updated February 23, 2018 and originally published December 13, 2012.