A Missouri escrow firm lost $440,000 in 2010 when someone—no one knows who—stole the username and password from the escrow firm and transferred the money from the bank to an account in Cyprus. Attorney Stanley Orszula comments on the appellate decision in favor of the bank.
The Eighth Circuit Court of Appeals upheld the ruling of a district court, including that the Choice Escrow and Land Title LLC could be required to pay the attorney fees for BankCorp South Inc. Orszula notes that there are different rules for how a bank treats a person who has an account and how the bank treats a company that is a bank customer. Businesses are assumed to be more sophisticated when it comes to safeguarding their money.
In this case, Orszula points out, the escrow company opted to go for a more simplified security procedure than they should have. The bank in this case had suggested more rigorous security procedures than the escrow company used. The case should be a wake-up call for businesses—and for everyone—in being careful about security measures in the cyber world.
Stanley F. Orszula is a member of the Corporate Services Practice Group of Quarles & Brady LLP, Chicago. He focuses his practice on financial institutions and banking with an emphasis on failed bank receiverships, regulatory issues, secured lending, loan workouts and the acquisition and disposition of loans and other assets. The Legal Broadcast Network is a featured network of the Sequence Media Group.