New York v. Citibank

The Complaint by the New York Attorney General (“NYAG”) posits an interpretation of the law governing wire-transfer payments that contradicts the text, Congressional intent, regulatory interpretation, and settled understanding of the relevant statutes and that would upend decades of legal precedent and industry practice. According to the NYAG, Citibank, N.A. (“Citibank”) violated EFTA by failing to follow the statute’s requirements when customers fell victim to wire fraud schemes. But the NYAG omits a critical point: The wire transfers targeted by the Complaint are categorically exempt from EFTA’s coverage. 15 U.S.C. § 1693a(7)(B); 12 C.F.R. § 1005.3(c)(3). Instead, as the Second Circuit has recognized, it is Article 4A of the UCC that provides the “comprehensive body of law that defines the rights and obligations that arise from wire transfers.” Export-Import Bank of U.S. v. Asia Pulp & Paper Co., 609 F.3d 111, 118 (2d Cir. 2010); Bodley v. Clark, 2012 WL 3042175, at *4 (S.D.N.Y. July 23, 2012) (Forrest, J.) (applying Article 4A to unauthorized consumer funds transfer). This Court should reject the NYAG’s attempt to deviate from established law and practice and to impose—through litigation— the NYAG’s own policy choices as to how the risk of loss surrounding an electronic transfer of funds should be allocated.

First, the NYAG badly misreads EFTA. The statute on its face excludes wire transfers from its scope. Congress has repeatedly declined to amend EFTA to bring all wire transfers within its coverage despite numerous suggestions and opportunities to do so. Indeed, when Congress amended EFTA in 2010, it subjected only a subset of wire transfers (remittance transfers) to part of EFTA’s regime—a subset and part not mentioned or relied upon by the NYAG in this case. Congress chose not to apply EFTA to consumer wire transfers in general, as the NYAG would do here. See 76 Fed. Reg. 29902, 29908 (May 23, 2011).

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