"Burning Chrome" meets "Burning Platinum"? In this case, even a 60-day actual settlement time on a stated three- day NACHA transaction couldn't help this gentleman. As irrevocable transaction settlement time trends to instantaneity, the more dangerous book-entry settlement becomes. The *least* an instantaneous book-entry transaction risks is the value of the account performing the transaction. The *most* it risks is all the assets of the identity controlling that account. An instantaneous digital bearer transaction would risk, at most, the value of transaction alone. Cheers, RAH -------- <http://www.nytimes.com/2008/08/30/business/yourmoney/30theft.html?pagewanted =print

New York Times August 30, 2008 The Bank Account That Sprang a Leak By DIANA B. HENRIQUES They are a staple of consumer-complaint hotlines and Web sites: anguished tales about money stolen electronically from bank accounts, about unhelpful bank tellers and, finally, about unreimbursed losses. But surely customers of the elite private banking operation at JPMorgan Chase, serving only the banks wealthiest clients, are safe from such problems, right? Wrong, says Guy Wyser-Pratte, an activist investor on Wall Street for more than 40 years who uses his hedge funds war chest of roughly $500 million to wage takeover fights and proxy battles in the United States and Europe. In May, Mr. Wyser-Pratte learned that someone had siphoned nearly $300,000 from his personal account at the private bank through many small electronic transfers over a 15-month period. Then he was told by the bank that he could stop the theft only by closing his account and opening a new one  an enormous hassle, he said. And finally, JPMorgan Chase told him that the bank would cover only $50,000 of his losses. While this is an unfortunate situation, we believe our response has been entirely appropriate, said Mary Sedarat, a spokeswoman for the private banking service at JPMorgan Chase. Mr. Wyser-Pratte emphatically disagrees. They never should have approved that first transfer, he said. The wealthy financier is getting a taste of what the rest of us have to deal with all the time, said Gail Hillebrand, the senior staff lawyer for Consumers Union in San Francisco. That sour taste is called automated clearing house fraud, theft involving unauthorized electronic transfers through the automated networks of the circulatory systems that connect the worlds bank accounts. When a consumer writes a check, the merchant that accepts it is entitled to have the specified amount taken from the customers bank account and sent electronically to the merchants account. But once someone has certain routing numbers for a customers account, fraudulent transfers become possible unless the customer carefully scrutinizes all of the transactions on the monthly account statement. If the consumer reports a clearly unauthorized transaction within 60 days, federal banking rules require the bank to cover the loss, Ms. Hillebrand said. If not, and if the bank informed the customer in advance about the 60-day deadline, the bank has no liability. Consumer advocates agree that online purchases and automatic bill- paying arrangements have greatly complicated the task of catching fraudulent transfers  particularly small ones  from busy accounts. And Mr. Wyser-Prattes personal account was as busy as his life. Louis Morin Jr., his chief operating officer, said his boss splits his time between Paris and New York and travels almost constantly. He is not someone who writes 30 checks a month  more like thousands a month, Mr. Morin said. And a retail bank statement is kindergarten arithmetic compared with the monthly statement for a private banking client. Indeed, Mr. Wyser- Pratte said that the statements have become so complicated not even a Wall Street veteran like himself could detect the continuing theft. I kept complaining that the banks records showed I was overdrawn when I shouldnt be, he said. Each time, he was assured that the statement was accurate, even if he could not decipher it. As for the 60-day deadline for reporting a theft, I never knew about it, he said. I opened that account eons ago, it must be 20 or 25 years now. I dont think I ever signed anything agreeing to that policy. It all sounds sadly familiar to Ms. Hillebrand, who said all bank customers  even wealthy private banking customers  must know their rights and watch their monthly statements. It is easier than ever for people to steal money from your account, she said. Mr. Wyser-Pratte has filed a complaint with the New York City Police Department. A detective working on the case confirmed that an investigation is under way. According to Mr. Morin, the money was sucked out of Mr. Wyser-Prattes personal account through dozens of unauthorized purchases of computer equipment from Dell. But so far, police investigators have been able to trace only a single $1,600 shipment of equipment, delivered to a nonexistent business in Brooklyn. Mr. Wyser-Pratte, understandably eager to solve the mystery, complained that neither Dell nor his bankers were giving the police enough help. Dell is cooperating fully with the police, said Jess Blackburn, a company spokesman. We have been very responsive to all requests for information. JPMorgan Chase is also cooperating fully, said Ms. Sedarat, the bank spokeswoman. This is an important reminder that clients are responsible for monitoring activity in their accounts. The banks private banking clients probably did not need another reminder so soon. On July 29, federal authorities in Manhattan announced the indictment and arrest of Hernan E. Arbizu, who was a vice president in the private banks Latin American unit and who is accused of embezzling more than $5 million from his private banking clients. Ms. Sedarat said that case was completely unrelated to Mr. Wyser- Prattes loss.