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Managing. The risk of Payment System - Turner P.

Turner P. Managing. The risk of Payment System - John Wiley & Sons, 2003. - 253 p.
ISBN 0-471-32848-0
Download (direct link): managingtherisksofpayment2003.pdf
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If the senderís instructions state that the transfer is to be carried out telephonically, by wire transfer, or otherwise by the most expeditious means, the bank must transmit its payment order by the most expeditious means available and instruct any intermediary bank accordingly.29
The Official Comments explain the rules requiring the receiving bank to comply with the senderís instructions:
Section 4A-302 states the manner in which the receiving bank may execute the senderís order if execution occurs. Subsection (1) states the residual rule. The payment order issued by the receiving bank must comply with the senderís order and, unless some other rule is stated in the section, the receiving bank is obliged to follow any instruction of the sender concerning which funds transfer system is to be used, which intermediary banks are to be used, and what means of transmission is to be used. The instruction of the sender may be incorporated in the payment order itself or may be given separately. For example, there may be a master agreement between the sender and receiving bank containing instructions governing payment orders to be issued from time to time by the sender
Wire Transfers
to the receiving bank. In most funds transfers, speed is a paramount consideration. A sender that wants assurance that the funds transfer will be expeditiously completed can specify the means to be used. The receiving bank can follow the instructions literally or it can use an equivalent means. For example, if the sender instructs the receiving bank to transmit by telex, the receiving bank could use telephone instead. [ß 4A-302(c).] In most cases the sender will not specify a particular means but will use a general term such as ďby wireĒ or ďwire transferĒ or ďas soon as possible.Ē These words signify that the sender wants a same-day transfer. In these cases the receiving bank is required to use a telephonic or electronic communication to transmit its order and is also required to instruct any intermediary bank to which it issues its order to transmit by similar means. [ß 4A-302(a)(2).] In other cases, such as an automated clearing house transfer, a same-day transfer is not contemplated. Normally, the senderís instruction or the context in which the payment order is received makes clear the type of funds transfer that is appropriate. If the sender states a payment date with respect to the payment order, the receiving bank is obliged to execute the order at a time and in a manner to meet the payment date if that is feasible.30
Unless instructed to the contrary, the originatorís bank may use any funds-transfer system, if the use of the system is reasonable, and may issue its payment order either directly to the beneficiaryís bank or to an intermediary bank if the originatorís order can be expeditiously carried out through the intermediary bank and the originatorís bank exercises ordinary care in the selection of the intermediary bank.31 The receiving bank is not required to follow the senderís instructions regarding a funds-transfer system if the bank determines in good faith that it is not feasible to follow the instructions or that doing so would unduly delay the completion of the transfer. The Official Comments
Originator and Its Bank
explain the rules governing the selection of a funds-transfer system or intermediary bank:
[Section 4A-302(b)] concerns the choice of intermediary banks to be used in completing the funds transfer, and the funds transfer system to be used. If the receiving bank is not instructed about the matter, it can issue an order directly to the beneficiaryís bank or can issue an order to an intermediary bank. The receiving bank also has discretion concerning use of a funds transfer system. In some cases it is reasonable to use either an automated clearing house system or a wire transfer system such as Fedwire or CHIPS. Normally, the receiving bank will follow the instruction of the sender in these matters, but in some cases it may be prudent for the bank not to follow instructions. The sender may have designated a funds transfer system to be used in carrying out the funds transfer, but it may not be feasible to use the designated system because of some impediment such as a computer breakdown which prevents prompt execution of the order. The receiving bank is permitted to use an alternative means of transmittal in a good faith effort to execute the order expeditiously. The same leeway is not given to the receiving bank if the sender designates an intermediary bank through which the funds transfer is to be routed. The senderís designation of that intermediary bank may mean that the beneficiaryís bank is expecting to obtain a credit from the intermediary bank and may have relied on that anticipated credit. If the receiving bank uses another intermediary bank the expectations of the beneficiaryís bank may not be realized. The receiving bank could choose to route the transfer to another intermediary bank and then to the designated intermediary bank if there were some reason such as a lack of a correspondent-bank relationship or a bilateral credit limitation, but the designated intermediary bank cannot be circumvented. To do so violates the senderís instruction.32
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