- within Insolvency/Bankruptcy/Re-Structuring topic(s)
If wire transfer instructions designate a valid account number, but an incorrect beneficiary, may the bank that accepts the incoming wire rely upon the account number?
Answer: Yes, assuming the bank did not have actual knowledge of that inconsistency. So said the court of appeal in Los Angeles in TME Enterprises, Inc. v. Norwest Corporation, 04 C.D.O.S. 10834 (December 9, 2004).
In this case, the plaintiffs were victims of a fraudulent investment scheme and sent funds by wire transfer to an account at the defendant bank. The wire transfer instructions included a valid account number but incorrectly designated the account name (as a trust account). The bank processed the wire transfer manually but had no actual knowledge of the inconsistency.
Under these circumstances, the court of appeal held that the bank did not violate Regulation J or the California Commercial Code, which allow a bank to rely upon the account number specified in a wire transfer order as the proper identification for the beneficiary.
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