Savings bank

Newtown Savings Bank fraudulently wired $67,000, judge finds

NEWTOWN — A state judge has ruled against Newtown Savings Bank in a lawsuit accusing the bank of authorizing the fraudulent wire transfer of more than $67,000.

Shelton-based Precision Computer Services alleged in a 2018 lawsuit that the bank refused to reimburse the company for lost funds.

In a judgment filed in the Judicial District Court of Milford, Judge W. Glen Pierson wrote that the bank “failed to accept and execute the payment order in a manner consistent with the plaintiff’s reasonable expectations, such than established by reasonable commercial standards of fair dealing”.

Newtown Savings Bank declined to comment on the judgment.

“For nearly five years, management at Newtown Savings Bank has not reimbursed our company for the fraudulent wire transfer that they failed to authenticate,” PCS owner Michael FitzSimons with his wife said on Tuesday. , in a press release. “I am deeply saddened to have trusted the management of my hometown bank who ultimately failed to protect one of their long-time clients.”

The issue stems from a scam that changed a letter in FitzSimons’ email address, according to the judgment. The bank believed it had received authorization for the wire transfer from FitzSimons, but did not properly authenticate that he sent the email, the judgment said.

However, the judgment indicates that a person who is an employee of PCS confirmed the wire transfer.

On June 14, 2017, bank officials received an email that appeared to be from FitzSimons, according to court documents. The email asked the bank to process a wire transfer of $67,560 to an entity in Hungary for “legal services, assistance and strategic advice,” the documents say.

Bank officials responded that they would need permission from the person who allegedly sent an email claiming to be FitzSimons, who wrote in another email: ‘Please process the attached wire transfer’ , indicates the judgment.

However, the emails purporting to be from FitzSimons were sent from an address that had swapped the letter “g” for a “q”, according to the ruling. The letters “closely resemble each other in the typeface used for email communication,” the court filing said.

In response to the complaint, the bank’s lawyer argued that the payment order was authorized because it had been received “from a party authorized by the plaintiff and therefore constituted an authorized transfer” under the law of the ‘State.

But Pierson ruled that even though an “authorized person” at PCS confirmed the wire transfer, it violated the security procedure agreed to by the two parties because it “came from an impostor claiming to be Michael FitzSimons”.

“This violates the clear terms of the security procedure established by the agreement and is not an ‘authorized order’…from a person identified as the sender, as Michael FitzSimons did not authorize the order” , Pierson wrote.

An expert witness for the company wrote in an affidavit that the impostor “used character substitution fraud to ‘spoof’ Michael FitzSimons’ email address, resulting in the plaintiff’s funds being transferred to Hungary”, indicates judgment.

“As of June 2017, the existence of this type of fraud was well known in the banking sector,” the judgment states.

The expert also noted that such schemes are one of the “easiest types of fraud to detect for someone with minimal training” because they only require the recipient to read the email address of the recipient. sender. The bank should have been even more careful, notes the judgment, citing the expert witness, because Hungary “is a known destination for fraudulent transfers”.

Pierson wrote in his judgment that “for most commercial banking customers, contemporary reasonable commercial standards of fair dealing require multi-factor authentication.

“The proceeding that the defendant asks the court to sanction is, in essence, a single-factor proceeding that would transfer responsibility for the fraud to the defendant’s client,” the judge wrote. “Multi-factor authentication is the common thread in the reasonableness of wire transfer transactions.”

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