MANAGING THE RISKS OF PAYMENT SYSTEMS CHAPTER 5

5 Wire Transfers: Completing the Transfer and Rules for Errors. A funds transfer is completed at the last link in the fundstransfer chain when the beneficiary’s bank accepts the payment order for the benefit of the beneficiary. | 5 Wire Transfers Completing the Transfer and Rules for Errors A funds transfer is completed at the last link in the fundstransfer chain when the beneficiary s bank accepts the payment order for the benefit of the beneficiary. Completion of the transfer results in the discharge of the underlying debt of the originator to the beneficiary and the obligation of the beneficiary s bank to pay the beneficiary. This chapter discusses these subjects and concludes with the Rules for Errors for all links in the funds-transfer chain. LAST LINK IN THE FUNDS-TRANSFER CHAIN As noted early in Chapter 4 a funds transfer is a series of payment orders each of which can be viewed as a link in the chain that constitutes the transfer. The last but not the least important link in the funds-transfer chain is the payment order to the beneficiary s bank. The order may be sent to the beneficiary s bank by the originator s bank or may be sent by an intermediary bank. 103 Wire Transfers BENEFICIARY AND THE BENEFICIARY S BANK Like any other receiving bank the beneficiary s bank has no obligation to accept a sending bank s payment In other respects however the beneficiary s bank is in a very different position than other banks in the funds-transfer chain. The beneficiary s bank is the last bank in the chain so it cannot execute a payment order by sending its own payment order to another bank. Instead the beneficiary s bank may reject or accept the payment order for credit to the account of the beneficiary. Payment of the Beneficiary and Discharge of the Underlying Obligation between the Originating Company and the Beneficiary Acceptance by the beneficiary s bank is a very important event because it determines when the beneficiary is entitled to payment by the beneficiary s bank and when the originator s debt to the beneficiary is discharged. Acceptance by the Beneficiary s Bank. The acceptance of a payment order by the beneficiary is an interbank event because it is another bank s .