Financial Institution Law Blog

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?

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.

For additional information on this topic or other areas of law affecting financial institutions, please contact one of the following attorneys:

Robert J. Stumpf, Jr., San Francisco 415.774.3288 rstumpf@sheppardmullin.com
Edward D. Vogel, San Diego 619.338.6529 evogel@sheppardmullin.com
John R. Pennington, Los Angeles 213.620.1780 jpennington@sheppardmullin.com
Andrew J. Guilford, Orange County 714.513.5100 aguilford@sheppardmullin.com