This week, JP Morgan Chase revealed that hackers invaded its customer records. On the heels of that announcement, many banks assured customers that ‘security is important to us’. No doubt. The problem is that the evolution of hackers is just a fast as, if not faster than the evolution of defenses. Someday, hackers may not simply steal your social security number or account records. They will steal your money too, right out of your bank account.
You’re thinking that your deposits are insured, right? Aha, that is true, but only in the event of bank failure. Theft is not covered by FDIC insurance. Certain types of terrorism insurance exist, but exactly what they cover is somewhat open to interpretation. There’s no question that if a large bank were swept clean of deposits, its insurer would claim that the event fell outside the coverage in the insurance contract. In the meantime, there you are, with no funds.
The best defense is a good offense. It might be time to ask your bank exactly what happens in the event of a security breach that brings your deposit balances to zero. We don’t advocate any bank over any other, but put yourself in the hacker’s shoes: if you were reaching for the brass ring, wouldn’t you go where the money is – ie, the biggest bank you could reasonably hack? You probably would not bother with a small community bank. On the other hand, does your community bank have the resources to stand up to cyber crime?
We have the uneasy feeling that the various hacks, identity thefts, data breaches, and so forth over the past several years are practice. Eventually someone somewhere is going to figure out how to make a massive funds transfer from a very large bank. Better hope it’s not yours.