Matthew Kane Publishes Article in Mass Lawyers Weekly on Wire Fraud Loss Allocation

Matthew A. Kane authored an article titled “Wire fraud litigation: understanding the loss allocation rules for Article 4A”  for Massachusetts Lawyers Weekly. In the article Matt examines the loss allocation rules governing wire transfer fraud under Article 4A of the Uniform Commercial Code. Drawing on his experience representing banks, Matt explains how losses from wire transfer fraud are allocated under the statutory framework and why the results often surprise the victims.

Matt shares that most wire transfer fraud does not involve sophisticated hacking. Instead, fraudsters rely on social engineering, impersonation, and forged documents to trick businesses into authorizing transfers to accounts the fraudster controls. When a business later discovers the fraud and turns to its bank for reimbursement, Article 4A determines who bears the loss, not common law concepts like negligence or causation. Under Article 4A, if the customer authorized the payment order (even if the customer was deceived into doing so), the bank generally has no obligation to refund the loss. The statutory framework was designed not to assess which party was more careful, but to establish in advance who would bear the risk.

Matt’s article also addresses the role of “commercially reasonable” security procedures, the ability of banks and customers to modify loss allocation rules by agreement, and the high burden a customer faces when attempting to shift liability back to a bank. He notes that Article 4A intentionally displaces competing legal theories when the alleged loss arises from the execution of a wire transfer.

For commercial litigators, Matt emphasizes that claims arising from induced wire transfer fraud require more than showing that the fraud was foreseeable or that the bank might have acted differently. Successful claims typically turn on whether the bank deviated from agreed security procedures or relied on procedures that were not commercially reasonable.

The full article is available to subscribers at Massachusetts Lawyers Weekly.