![]() Under the framework of Article 4A, a “receiving bank” (the bank that receives wire instructions from a sender) ordinarily bears the risk of loss of any unauthorized transfer. The rules described under Article 4A are “intended to be the exclusive means of determining the rights, duties, and liabilities of the affected parties.” Id. The Official Comments to Article 4A reflect that the rules governing wire transfers were written on a “clean slate” using “precise and detailed rules” in order to balance the “competing interests of the banks that provide funds transfer services and the commercial and financial organizations that use the services.” Cal. Article 4A (also known as Division 11) of the Uniform Commercial Code (“UCC”) sets forth a carefully chosen set of rules that allocate the risk of loss among the participants in “funds transfers” involving “payment orders” (e.g. The Legal Framework: Uniform Commercial Code Article 4A. ![]() Further, this article will examine some of the tools financial institutions have made available to combat cyber-initiated wire fraud and how those tools fit within the legal framework. The focus of this article is on providing an overview of the legal framework applicable to claims brought against financial institutions by customers relating to unauthorized wire transfers. With the dramatic rise in cyber-initiated wire fraud, financial institutions will inevitably be confronted with pre-litigation demands and lawsuits from customers relating to authorized and unauthorized transfers. Transfers resulting from the second will be referred to as “authorized”. For the purposes of this article, wire transfers resulting from the first category of fraud will be referred to as “unauthorized”. ![]() ![]() The second type of fraud involves the use of email, sent to the victim by the fraudster from a spoofed or hacked account, containing wire instructions with erroneous account information. One type of fraud involves the use of phishing, social engineering, malware and/or hacking to gain access to the victim’s online bank account in order to directly initiate an unauthorized wire transfer with the victim’s financial institution. Suffice it to say, cyber-initiate wire fraud is a real and immediate threat to financial institutions and their customers.Īlthough the perpetrators of cyber-initiated wire fraud employ an arsenal of tools that are constantly evolving, the schemes generally fall into one of two categories. IC3 data includes fraud that is occurring in all 50 states and 131 countries. Victims of this type of fraud include individuals and businesses of all sizes and across all industries. Between October 2013 and December 2016 there were 22,292 reported cases of fraud by domestic victims. ![]() Data collected by the Internet Crime Complaint Center (“IC3”) reflects a 2,370% increase in reported fraud losses between January 2015 and December 2016. According to a May 2017 Public Service Announcement by the Federal Bureau of Investigation (“FBI”), cyber-initiated wire fraud is not just on the rise-it is exploding. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |