The article discusses a recent ruling by the US Court of Appeals for the Fourth Circuit regarding financial institution liability for fraudulent scams involving ACH and electronic fund transfers. The court decided that financial institutions must have "actual knowledge" of a mismatch between the name and account number to be held liable under the Uniform Commercial Code Section 4A-207. The case in question, Studco Building Systems US LLC v. 1st Advantage Federal Credit Union, involved a phishing scam where Studco was deceived into sending payments to a fraudulent account. The Fourth Circuit reversed a lower court's decision that found 1st Advantage liable, emphasizing that banks and credit unions are not required to investigate name and account number mismatches and, absent an investigation of a specific mismatch, financial institutions lack "actual knowledge" to be held liable.
"Breaking Down 4th Circ. 'Actual Knowledge' Ruling For Banks," Law360, May 13, 2025
Dallas
