Opinion in Fraudulent Wire Transfer Case Applies Uniform Commercial Code Article 4A

On September 10, 2024, Judge Nora Barry Fischer of the United States District Court for the Western District of Pennsylvania issued a lengthy opinion applying Article 4A of the Uniform Commercial Code in a case involving claims for fraudulently induced wire transfers. Elkin Valley Baptist Church v. PNC Bank, N.A., et al., No. 23-1798, 2024 U.S. Dist. LEXIS 162888, at *32 (W.D. Pa. Sept. 10, 2024).  The opinion addresses a number of issues that arise in fraudulent wire transfer cases in connection with the UCC’s allocation of liability among the originator of the wire transfer, the “recipient bank” and the “beneficiary bank.”  Significantly, Judge Fischer explained that under UCC § 4A-207(c), “the originator’s bank bears the loss where the beneficiary’s bank did not know of the misidentification (i.e., a discrepancy or “mismatch” as between the account owner and the account number), its acceptance was thus valid, it paid the wire by account number to a non-entitled payee, and the originator’s bank had not notified the originator that the beneficiary’s bank might so proceed.”  The last clause of that quotation refers to disclosures that may be provided by an originating bank under UCC § 4A-207(c) in order to avoid liability when the beneficiary bank did not know of the misidentification, and Judge Fischer ruled that in the Elkin Valley case, the disclosures provided by the originating bank, First National Bank of Pennsylvania, were not sufficient.  Because of Judge Fischer’s detailed analysis of numerous issues under Article 4A, the Elkins Valley case is now one of the most important decisions addressing the allocation of losses in fraudulent wire transfer cases.