Commercially Reasonable Security Procedures for Wire Transfers May Avoid Fraud Risk
Lane Powell Counsel to the Firm Jane Brown authored an article in the Spring 2015 issue of Community Bankers of Washington’s Community Banker magazine titled “Commercially Reasonable Security Procedures for Wire Transfers May Avoid Fraud Risk.” In the article, Brown discussed Article 4A of the Uniform Commercial Code, which attempts to balance the competing interests of banks that provide fund transfer services, and the commercial and financial organizations that use such services. She also addressed how banks may be able to avoid the risk of loss from wire transfers by implementing commercially reasonable security procedures.
In selecting security procedures it offers customers, a bank should consider factors like customers’ anticipated issuance of payment orders, the complexity of the security procedures, and what proven security procedures are used by similarly situated banks and customers. Id. It may not be reasonable for a customer that infrequently submits modest payment orders to have the same security procedures as a customer that transfers millions of dollars daily. Similarly, small banks may find it difficult to conduct manual approval of large volume customers.