Courts Address the Level of Security Banks Must Provide to Business Accounts
Angel Diaz writes:
Big or small, all bank accounts are susceptible to hijacking and fraudulent wire transfers. Banks ordinarily bear the risk of loss for unauthorized wire transfers. Two independent frameworks exist to govern these transfers: the Electronic Fund Transfer Act (“EFTA”) for consumer accounts, and Article 4A of the Uniform Commercial Code (“UCC”) for business accounts.
While the EFTA will ordinarily shield consumers from having to pay for most unauthorized charges as long as they provide notice to their bank, UCC §4A-202 shifts the risk of loss to the customer if the bank can show that (1) a commercially reasonable security procedure was in place and (2) the bank accepted the payment order in good faith and in compliance with the security procedure and any other written agreement or customer instruction.
Read more about the courts’ interpretations of these laws on Proskauer Privacy Law Blog.