With the rapid increase in electronic banking and commercial transactions, banks and other financial institutions like brokerage firms are finding themselves left behind when it comes to preventing liability for potential unauthorized wire transfer claims.
Imagine a scenario where a bank customer makes five wire transfers. For each transfer, the customer sends a signed letter of authorization (LOA). After receiving each LOA, a bank representative calls the client’s telephone number and confirms the LOA. Management also calls the client and confirms the LOA as well as answers to personal questions (such as the client’s address, date of birth and email address)to verify the client’s identity.
Finally, management compares the signatures on the LOAs against the signatures on file. All of the signatures match and all of the personal questions are answered correctly. Nevertheless, after the transfers, the client claims that they were unauthorized and files a lawsuit. Will the customer prevail? Shockingly, the answer is presumptively yes.
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