Email Fraud Ruling Against a CU Could Create Troubling Precedent

Credit/Adobe Stock

A business email compromise case involving a Virginia credit union that is before the Fourth Circuit Court of Appeals in Richmond may create a concerning precedent for financial institutions victimized by fraudulent misdirected payments that costs billions of dollars in losses.

The $950 million 1st Advantage Federal Credit Union filed its appeal earlier this year to reverse a judgement by U.S. District Court Judge Raymond A. Jackson in Norfolk, which found the Yorktown-based financial cooperative liable for fraudulent fund transfers when it failed to act on anti-money laundering alerts and suspicious activity from a member’s account and payments made to that account from Studco Building Systems. The judge ordered the credit union to pay Studco Building Systems (SBS) compensatory damages of $558,868, plus $591,568 in attorney fees and $56,168 in expenses stemming from a business email compromise (BEC) lawsuit. Based in Webster, N.Y., SBS manufactures steel framing systems.