In State Bank v. BancInsure, Inc., 2016 U.S. App. LEXIS 9235 (8th Cir. May 20, 2016), the United States Court of Appeals for the Eighth Circuit held that a $485,000 fraudulent wire transfer perpetrated through the use of malware residing on a bank employee’s computer was covered under the bank’s financial institution bond. The facts are straightforward.
The insured used the Federal Reserve’s FedLine Advantage Plus system to perform wire transfers. The transfers were made through a desktop computer connected to a Virtual Private Network device provided by the Federal Reserve. In order to complete a transfer, two bank employees had to enter their individual user names, and each had to insert individual physical tokens into the computer, and provide individual passwords and passphrases.