A small glassware importer is suing Bank of America for processing a fraudulent $50,000 wire transfer to Croatia and then refusing to refund the money to the company’s account.
Bank of America spokeswoman Shirley Norton denies any wrong doing by the bank.
Fan Bao and his wife Cathy Huang own Zico USA Inc. in the City of Industry, which imports colored glassware from China and Hong Kong.
The company has been a Bank of America customer since 2003 and frequently went into a bank branch to send wire transfers, according to a lawsuit filed Feb. 4 in Los Angeles Superior Court.
Norton said the lawsuit has not been served on Bank of America. But attorney Nada Alnajafi with the Orange County office of One LLP, which represents Zico, said it was served on Feb. 12.
The lawsuit alleges that a BofA official told Zico that it must open an online account, which the company did in 2007. The bank described to Zico its online banking as “one of the most comprehensive and secure commercial banking transaction and information channels ever developed.”
On June 22, 2009, BofA processed two fraudulent wire transfer requests — for $50,000 and $99,100 — against Zico’s online account to two banks in Croatia, the lawsuit says. At 10 a.m., a BofA employee called Bao and reported irregular activity on the account but gave him no other details because Huang was listed as the only person to authorize wire transfers for Zico’s online account.
Huang was in Australia on a business trip, the lawsuit says, and by the time she reached BofA at 4 p.m. to say the wire transfers were not authorized, the $50,000 request had been executed and the money withdrawn from the Croatian bank, according to the lawsuit.
BofA charged Zico a $30 processing fee to return the $99,100. The bank refuses to refund the $50,000.
“Safeguarding client information is one of our top priorities,” BofA spokeswoman Norton said in a written statement. “Our security procedure is consistent with those used by other major banks to authenticate wire transfers.”
She said an internal investigation determined that the bank’s security system was not breached and suggested the problem occurred in Zico’s computer.
Adding to Zico’s claim, in May, a month before the fraudulent transfers, BofA offered the company a new security procedure for online banking including wire transfers, the lawsuit says. The company signed up immediately but BofA did not apply the new protections until July 13, after the fraud.
“Online banking is very fragile,” said banking expert Thomas Timmons, of Timmons Co. in Rancho Santa Margarita, who is not involved with either side of this dispute. “The agreement between the bank and customer must be clear about wire transfers and how they are authorized.”
The court will probably look at that agreement to determine whether BofA is legally responsible, he said.
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