Account Takeover and Commercially Reasonable Security Procedures


Presented by:
Paul Carrubba and Dan Fisher

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    Financial Institutions need to take a second look at their efforts to comply with the FFIEC Guidance on Internet Banking and Authentication.

Compliance is not optional! Clearly, the burden on financial institutions and their role has been increased and FIs can't wait on their vendors for an adequate solution.

Recent holdings in several cases have made a determination as to whether unauthorized transfers were enforceable against the customer and the results have not been pretty for banks.

Article 4A of the Uniform Commercial Code provides that an unauthorized payment order (funds transfer) is enforceable against the bank's customer if the payment order was initiated in accordance with a security procedure agreed to by the customer and the bank, the security procedure was a commercially reasonable security procedure, and the bank proves that it accepted the payment order in good faith.

The most recent ruling from the United States Court of Appeals for the First District reinforces the importance of the FFIEC guidance on internet banking, efforts of financial institutions regarding compliance and, perhaps most significantly, an institution's security procedures to prevent unauthorized transactions.

This Webinar, conducted by industry experts Paul Carrubba and Dan Fisher, takes a look at the PATCO case that was reversed by the United States Court of Appeals and other cases dealing with the issue of commercially reasonable security procedures and whether a bank accepted a payment order in good faith.

The session will analyze the courts' rulings in these cases, UCC 4A, authentication procedures and technology and provide financial institutions with suggestions and ideas on technology and security procedures that may be used that should be considered commercially reasonable.

The session will also provide some recommendations on key provisions that should be included in customer agreements.

This session will include discussions on:
  • UCC Article 4A
    • Applicability of 4A
    • Liability of bank/customer for unauthorized transfers
    • Enforceability of an unauthorized transfer
  • Security Procedures
    • Questions of Law not Fact
    • Factors Considered by the Court
    • Customer's Selection of the Security Procedure
  • FFIEC 2005 Guidance on Authentication and the 2011 Supplemental Guidance
  • Authentication Technology
  • Importance of Customer Agreements and Sample Provisions
About the Speakers: Paul Carrubba is an attorney with the law firm of Adams and Reese LLP. His primary focus is on Banking Law and legal issues dealing with payment system fraud. He is a member of the faculty of the Alabama School of Banking and the BAI's Graduate School of Bank Operations and Technology. Mr. Carrubba is the author of five books including: Revised UCC Article 3 and 4, A Banker's Guide to Checks and Principles of Banking.

Dan Fisher is President and CEO of The Copper River Group offers consulting and research services to the financial industry with an emphasis on payments systems, information and technology strategies for independent community banking organizations.

Dan has been in technology and banking for over 30 years. He has been a director of the Federal Reserve Bank of Minneapolis, Chairman of the ABA Payments Committee, a member of the ICBA Payments Committee and participated in the industry effort with the Federal Reserve that ultimately succeeded in the passage and implementation of the Check-21 legislation.

He has authored or co-authored six books and has written numerous articles and white papers on technology, operations and the payments system. His most recent book titled, Capturing Your Customer, focused solely on Remote Deposit Capture.

You have the right under this license agreement for this CD-ROM to use this presentation on a single-workstation. Use on a network is in violation of the copyright agreements. CD may be used by multiple users at a given institution but may not be placed on a network or in any other multi-user environment.

This program was recorded in its entirety on August 2012. The CD-ROM includes program slides, materials (if available) and follow-up Q & A document.

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  • Model: cd_patco0812
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This product was added to our catalog on Tuesday 10 July, 2012.

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