When things go wrong: How DBS did all the right things.

How SMRT (and the other agencies involved in managing public transport) bungled in the recent train crisis and how DBS Bank acted swiftly on all fronts -- especially in keeping customers in the loop -- when it encoutered serious incidents of unauthorised cash withdrawals from ATMs in Malaysia, should be a classic management case study.

DBS' CEO apologised unreservedly today (11 Dec) and sketched out further steps to enhance the security of its ordinary banking services. All in, about 400 customers were affected by the largest ATM fraud in Singapore's history and about S$500,000 was stolen from the accounts over two days on 4 and 5 January.

ChannelNews Asia's story is here:

http://news.xin.msn.com/en/singapore/article.aspx?cp-documentid=5750039

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Going further on the issue, I found a law professor's take on what legally happens to your money after it has been deposited in a bank, rather interesting.

Associate Professor Kelvin Low from the Singapore Management University wrote a letter, headlined "Understand the legal nature of bank deposits" (ST, 9 Jan, page A23). Here are extracts:

When someone deposits money with a bank, he is in effect lending the money to it. Property rights to the money pass to the bank. In return, the bank owes its customer a debt. At that point, any money stolen or pilfered from the bank is its money, not its customer's (emphasis mine).

The bank continues to owe its customer the same debt unless there are special contractual stipulations allowing it to transfer the loss to its customer. This usually takes the form of a contractual stipulation that customers are required to check their monthly bank statements and object to any unauthorised transaction within a stipulated time.

It is only at this point that the loss is "transferred" to bank's customers.

If the news reports are accurate, it is not likely that sufficient time has passed for this point to have been reached, unless DBS' terms are particularly harsh. It is therefore also not technically accurate to speak of the bank "reimbursing" its customers. All it has done is correct its accounts to accurately reflect the state of its indebtedness to its customers.

There should be cause for concern only if the fraud is so significant that DBS' solvency is in question, as customers are unsecured creditors...

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Moral of the above? Go live on an uninhabited island paradise (ok, maybe with a dog as a companion) where food and water are aplenty!