District court rules that beneficiary bank without actual knowledge of misdescription of wire transfer is not liable under Louisiana law

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On September 22, the U.S. District Court for the Intermediate District of Louisiana granted summary judgment to a defendant beneficiary bank in an action concerning a fraudulent wire transfer that was allegedly sent to a hacker instead of the intended recipient. According to the notice, the originating bank executed a wire transfer on behalf of the trade applicant to a vendor. However, a hacker had inserted false account information into the provider’s email to the complainant, causing the complainant to instruct the originating bank to point the wrong account to the beneficiary bank. As a result, the funds were deposited by the beneficiary bank into an account whose account number did not match its account name. A large sum of the plaintiff’s money was then withdrawn by a hacker from the account in which the funds had been deposited. The plaintiff filed a lawsuit asserting multiple claims, including negligence and gross negligence, violations of EFTA and the Louisiana Uniform Commercial Code (UCC), and aiding in fraud. After all of the claims except the UCC claim were dismissed, the defendant sought summary judgment on the grounds that he had not violated the UCC “because he did not actually know that the wire transfer at issue had misrepresented the payee prior to payment of the wire transfer as contemplated by that statute.

The court ruled that based on the evidence, no reasonable juror could conclude that the defendant had actual knowledge of the misdescription at the time he made the transfer, explaining that the defendant had no actual knowledge that a hacker computer had accessed the applicant’s electronic transfer order. , provided false instructions and replaced the target account number with his own. The court said that under Louisiana law, a bank’s liability for making a wire transfer that misidentifies a payee or account number depends on whether it has “actual knowledge prior to payment that there was an erroneous description of a beneficiary” – implied knowledge is not actionable, the court said. Defendant also had no actual knowledge of the misdescription prior to payment, but instead gained actual knowledge of the misdescription approximately two weeks later when the originating bank alerted the defendant to the alleged fraud. The court further held that under Louisiana law, a beneficiary bank that uses a fully automated payment system for wire transfers is permitted “to act on the basis of number regardless of name if the bank does not know that the name and number refer to different people.

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