Bulletin: SLS2014009

Dear Associates:

Please be aware that if there is an error in the account number on wiring instructions, banks may not be obligated to check further and the money may be deposited to the wrong account. One example is Regulation J (12 CFR 210), controlling payments involving Federal Reserve Banks, or involving Fedwire. Under 12 CFR 210.27 the beneficiary’s bank (the bank receiving the funds) may rely on the account number in the payment order, even if the owner of that account is different than the beneficiary named in the payment order. Further, the regulation states that a Federal Reserve Bank has no duty to detect any such inconsistency. In one recent case, one digit on the account number specified on the payment order was incorrect and the loan proceeds were deposited into the wrong account, even though the payment order clearly identified the correct intended recipient. The bank receiving the funds has relied on Regulation J to deny any responsibility for the error. While including the correct recipient’s name on the payment order is important, we suggest that you make all persons involved in processing wire transfer payment orders aware of the fact that the name on the order may not control where the funds will ultimately be deposited and that if there is any doubt regarding the account number it should be verified before initiating a wire transfer.

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