Healthcare vs. Banking: It Could Get Messy

It’s hard to think of two industries more regulated than healthcare and banking. Launching a business in either arena means ploughing through a plethora of compliance mandates, all designed specifically to protect the customers of each. That’s of course appropriate, but there are odd disconnects at the core of it all.

In both industries, and in most others, technologies are developed, adopted and discarded at lightning speed, and each has a serious impact on routine operations. Regulations, meanwhile, can take years to legislate and implement. That makes for some serious confusion about what’s in compliance, and what’s not. And, the rules are very different for consumers than they are for businesses.

Some of these issues might play out in a low-profile lawsuit before the courts right now. Chelan County Hospital No. 1, part of the Cascade Medical Center in Leavenworth, Wash., is officially suing Bank of America for a cybercrime committed almost two years ago. The case, which was filed last fall, hasn’t received much attention, perhaps because the numbers aren’t particularly big. The scam amounted to ‘unauthorized transfers,’ the lawsuit refers to only three and they amounted just over $1 million. And BofA—which recorded net income of $4.8 billion on revenue of $85.1 billion for 2014—did indeed get back some $400,000 of the money that was stolen.

Krebs on Security, the invaluable blog that is often ahead of the pack on cybercrime, has been on this case since it occurred, and explores the broader ramifications.

Here’s the gist: In April 2013, cybercriminal operatives broke into the accounts of the hospital in question and added nearly 100 ‘money mules’ (individuals recruited to steal and launder stolen cash, even if they sometimes don’t know it) to the payroll. They then initiated those unauthorized transfers. The official complaint states that the county treasurer’s staff spotted the suspicious activity and promptly alerted the bank. A bank representative then reached out to the county’s treasurer’s office to ask if the pending transfer requests were indeed authorized, and was immediately told it wasn’t. However, the bank processed the transfers anyway.

Again, the numbers are, by industry standards, tiny and the entire affair might yet be chalked up to human error or even a bureaucratic stumble. But there are larger issues at play.

First, as the lawsuit makes clear, BofA provided Chelan County and the Taxing Districts with Bank of America software for use in all such processes. It’s not an issue here, but in similar cases this could become relevant with regard to liability.

And also, as mentioned earlier, businesses don’t have the same safety blanket as consumers. For the latter there’s Regulation E, which fundamentally limits potential losses from unauthorized transfers like these. For businesses, meanwhile, going to court is often the only option.

It’s entirely possible that this particular suit will be settled one way or another—with these numbers, legal fees alone could be higher. But it would be wise to consider the larger picture.

It’s not as if large-scale cybercrimes are new—there’s been a slew of them in just the past year, with brands that are household names being victimized (along with their customers). Many of these companies have sustained massive damage to the overall brand, not to mention the bottom line. Some are still digging their way out of the rubble.

That’s messy enough. But when cybercrime causes healthcare and banking to be pitted against other in a courtroom setting, all against the backdrop of extensive regulations governing each industry, the potential for toxicity is even higher.

Written by Jack Dougal