Article 4A, a proposed amendment to the Uniform Commercial Code, has been issued to govern the problems of fraud and errors in electronic transfers of funds. Article 4A has been adopted or is in the process of being adopted by 14 states, including New York, Illinois, and California. In the case of a fraudulent or unauthorized payment order, Article 4A seeks to implement security procedures for improving verification. Banks are liable for the amount of the transfer, plus interest, for cases in which the customer proves the bank did not comply with security procedures and the customer did not cause the security breach. In the area of errors in transfers, Article 4A holds that where customers and their banks have agreed on security measures to detect erroneous transfers and that customers can prove that the bank failed to comply with the security measures, the bank is liable for the transfer.
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