Also known as: funds transfers · fund transfer · fund transfers · wire transfer · electronic funds transfer
Written by attorneys — see sources below.
A series of transactions beginning with an originator's payment order and made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary.
Felix Franco receives a foreclosure notice on his home after missing several mortgage payments. Two days before the scheduled sale, he directs his bank to send the full cure amount via electronic funds transfer to the lender's account. The lender accepts the payment order, satisfying the monetary default and halting the foreclosure proceedings.
Franklin Foundry owes a supplier for equipment and instructs its bank to issue a payment order transferring the invoice amount to the supplier's account at a different bank. The originator's bank sends the order through an intermediary to the beneficiary's bank, which accepts the order and credits the supplier's account, completing the funds transfer and discharging the debt.
Eric Eisenberg was the victim of a fraudulent investment scheme perpetrated by Douglas Walter Reid. Reid falsely represented to Eisenberg that he was a senior vice president of Bear Stearns Companies and convinced Eisenberg to make a putative investment. At Reid’s direction, Eisenberg transferred $1,000,000 via electronic wire to a Wachovia branch bank in North Carolina for deposit in an account bearing the name “Douglas Walter Reid dba Bear Stearns,” “For Further Credit to BEAR STEARNS.” The electronic transfer was made through the Fedwire wire service operated by the Federal Reserve Bank. Wachovia accepted the transfer and deposited the funds to the credit of the specified account, which had been opened by and was under the control of Reid. Reid withdrew almost all of Eisenberg’s funds and converted them to his own use. Wachovia’s customer agreements do not restrict the name under which a new customer may open a bank account. The Wachovia employee who opened Reid’s account did not verify that Reid was authorized to operate under the name Bear Stearns. Reid possessed no such authority and was not in any way affiliated with Bear Stearns. Eisenberg filed a complaint against Wachovia in federal court on the basis of diversity jurisdiction, asserting two claims of negligence. The first claim alleged that Wachovia negligently allowed Reid to establish and operate a fraudulent bank account and negligently failed to train its employees to detect fraud. The second claim alleged that Wachovia was vicariously liable for its employee’s negligence in allowing Reid to open the bank account without proper verification. Wachovia moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion and dismissed the complaint with prejudice. Eisenberg appealed to the Fourth Circuit.
View caseA funds transfer begins with the originator's payment order and ends when the beneficiary's bank accepts a payment order for the beneficiary's benefit.
Supporting sources
Article 4A generally does not apply to funds transfers governed by the Electronic Fund Transfer Act, though it covers remittance transfers unless they qualify as electronic fund transfers under that federal statute.
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If the beneficiary's bank does not know the name and number refer to different persons, it may rely on the number as proper identification and pay accordingly, with the originator remaining obligated unless specific conditions are met.
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A receiving bank has no duty to accept a payment order absent an express agreement, and liability for breach of such an agreement is limited to the terms of the agreement or Article 4A.
Supporting sources
…at 189. In a thorough and well reasoned opinion, the New York Court of Appeals canvassed the emerging law governing electronic fund transfers and concluded that “the ‘discharge for value’ rule as set forth at Section 14 of the Restatement of Restitution , should be applied in the circumstances in this case.” Id. at 376, 568…