Suing Vanguard for Cyberhacks

In a “Thestreet.com” article, Karen Brock, Vanguard’s client relationship manager, explains that the brokerage firm has not paid enough attention to the threat of the possibility of cybercriminals hacking into customer’s accounts. The firm has around 20 million customers, many of whom have already experienced glitches in the system, such as the fact that many customers are able to log into their accounts, even when deliberately misspelling answers to security questions. Another security issue has come up with the company’s voice verification system. Brock told thestreet.com that she has tried to address these issues, but that her suggestions have gone ignored and unanswered. Another issue comes with speed and easy access; most Vanguard clients are willing to forgo safety if it means they are able to access their accounts online quicker and more efficiently. Also, accommodation clients and giving them convenience over safety fares well for the firm: the clients who cant access their accounts quickly, end up making more calls to the customer service department, which, in turn, costs Vanguard more money.

Cybercriminals can hack into a computer program, one much like Vanguard’s, and use their own program to randomly guess security answers to questions. If Vanguard allows the security answers to be wrong for clients, it dramatically increases the number of right answers, thereby making it that much easier for a cybercriminal to be able to steal money and identities and data. In 2013, a client persuaded his son to mimic his own voice, in an attempt to reassure himself that his account couldn’t be hacked because of the company’s voice verification system, but the system granted the son full access. Vanguard did see a spike in cybercriminal activity in 2013, and in 2014, Brock blew the whistle on the operation.

In October 2014, Vanguard clients received a detailed educational article about online “phishing” scams that appeared on Vanguard’s site. It warned investors that they should beware of cybercriminals who seduce investors to compromise their online credentials. In one instance, employees were warned after a fraudster stole $80,000 by imitating a 79-year old Vanguard client on the phone and requesting a wire transfer.