Okla. Stat. tit. 12A § 4A-207

Current through Laws 2024, c. 453.

Section 4A-207 - [Effective 11/1/2024] Misdescription of beneficiary

(a) Subject to subsection (b) of this section, if, in a payment order received by the beneficiary's bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.

(b) If a payment order received by the beneficiary's bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:

(1) Except as otherwise provided in subsection (c) of this section, if the beneficiary's bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary's bank need not determine whether the name and number refer to the same person.

(2) If the beneficiary's bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary's bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur.

(c) If (i) a payment order described in subsection (b) of this section is accepted, (ii) the originator's payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary's bank pays the person identified by number as permitted by paragraph (1) of subsection (b) of this section, the following rules apply:

(1) If the originator is a bank, the originator is obliged to pay its order.

(2) If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator's bank proves that the originator, before acceptance of the originator's order, had notice that payment of a payment order issued by the originator might be made by the beneficiary's bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary. Proof of notice may be made by any admissible evidence. The originator's bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a record stating the information to which the notice relates.

(d) In a case governed by paragraph (1) of subsection (b) of this section, if the beneficiary's bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:

(1) If the originator is obliged to pay its payment order as stated in subsection (c) of this section, the originator has the right to recover.

(2) If the originator is not a bank and is not obliged to pay its payment order, the originator's bank has the right to recover.

Okla. Stat. tit. 12A, § 4A-207

Amended by Laws 2024, c. 13,s. 28, eff. 11/1/2024.

Added by Laws 1990, SB 641, c. 110, § 15, eff. 7/1/1991.

Oklahoma Code Comment

Under Section 4A-207(b)(1), the beneficiary's bank is relieved from liability for paying funds to the wrong account if it relies on the account number provided to it, unless it has "knowledge" that the named beneficiary and the account number identify two different parties. This is intended to protect the efficiency of wire transactions by permitting the bank to use automated processes which promote the speed of the transaction. A large percentage of these transactions are performed by automated machinery which "reads" the information provided on a standard format. The standardized formats frequently key on account numbers. This automation is an essential element of the speed and economy associated with payment orders. Even if the beneficiary's name was included in the standardized format, requiring the bank to correlate the two would slow the process, and remove the benefits of automation.

Under 12A O.S. § 1-201(25), "knowledge" is generally defined to mean "actual knowledge." However, this definition is modified, in the case of organizations, by 12A O.S. § 1-201(27) which provides that actual knowledge may be imputed throughout an organization if, through the exercise of due diligence, the information would have been disseminated to the appropriate persons within the organization. Section 4A-207 narrows and limits this otherwise broad definition of organizational knowledge, by expressly providing that the bank has no duty to determine whether the name and number identifying the beneficiary's account refer to the same person. Even though information concerning the disparity might be available m records otherwise available to the bank, the bank has no duty to inspect those records. It may rely on the number it receives without checking the accompanying name at all.

This does not mean that the originator is always without a remedy. Originators who are not banks may mover from the originating bank unless they have received a written statement or have been otherwise informed that the beneficiary's bank will rely exclusively on the provided account number. Thus if a non-bank originator issues a payment order containing both the beneficiary's name and an identifying or account number, the originator's bank should require the originator to sign a writing stating that a payment order containing an identifying or account number may be paid on that basis before accepting the order or should price the service in recognition of its liability. If the originator is not warned, and provides an incorrect account number, the originating bank will have to refund any payment made on the basis of an incorrect account number provided by the originator. The originating bank will then be subrogated to the originator's claim against the beneficiary and recovery will be governed by the law of mistake and restitution. On the other hand, originators who are banks are assumed to realize the importance of assuring the accuracy of the account number transmitted, and will bear the loss for transmitting an improper account number.

With respect to Official Comment 1, under Oklahoma law each sender m the funds transfer that has paid its payment order should be entitled to get its money back.

In the example given in Official Comment 2, under Oklahoma law the mutual fund should be able to recover from Roe. See Associates Discount Corporation v. Cements, 321 P.2d 673 (Okla.1958). But if Roe received the payment for the gems in good faith and for value, Roe should be entitled to retain the payment. See Knapp v. First Nat. Bank & Trust Co. of Oklahoma City, 154 F.2d 395 (1Oth Cir.1946). Likewise, under Oklahoma law, the beneficiary bank that has paid the holder of Account # 12346 by mistake has a right to recover the payment if the payment was withdrawn. If beneficiary's bank knew about the conflict between the name and number and nevertheless paid Roe, beneficiary bank should bear the loss. See Bartlett v. Liberty Glass Co., 253 P.2d 997 (Okla.1953).

With respect to Official Comment 3, under Oklahoma law mutual fund should bear the loss since it is the person who dealt with the imposter and supplied the wrong account number. See Bartlett v. Liberty Glass Co., 253 P.2d 997 (Okla.1953). Under subsection (b)(1) mutual fund has an action against Roe, but if Roe took the money in good faith and for value as payment for the gems, Roe should be entitled to keep the money. See Knapp v. First Nat Bank & Trust Co. of Oklahoma City, 154 F.2d 395 (1Oth Cir.1946).

This section resolves the issue litigated m the Bradford and Securities Funds Services cases discussed in the introductory comment.

This section is set out more than once due to postponed, multiple, or conflicting amendments.