Legal Seminar, Denver, CO

071018 Discussion Draft

d. Speed is an issue. Earlier versions used to require up to two days for clearing. Speedier clearing has been a priority. See https://www.nacha.org/rules/same- day-ach-moving-payments-faster (visited June 19, 2018). 2. Wire Transfers. Wire transfers occur over two networks in the U.S. – Fedwire, which is run by the Federal Reserve and accessible to institutions with accounts, and Clearing House Payment System (CHIPS), which is run by a consortium of the thirty largest financial institutions, who are also their primary users. See generally Wegner, et. al , supra , at 17-19. a. Fedwire has large transaction values, but comparatively fewer transactions than the ACH system. o Fedwire involved transferred nearly $740 trillion during 2017, for an average of $4.85 million/transaction and 608K transactions per day. https://www.federalreserve.gov/paymentsystems/fedfunds_ann.htm (visted June 19, 2018). o ACH recorded 21.4 billion transactions totaling $46.8 trillion during 2017. https://www.nacha.org/resources/ach-network-volume-and- value-2017 This works out to an average transaction value of $2,176. b. Wire transfers are higher in aggregate cost, but the rules are skewed in favor of the financial institutions due to the risk. See UCC Article 4A (discussed in Wegner, supra). c. SWIFT (Society for Worldwide Interbank Financial Telecommunication) is an international wire transfer network. https://www.swift.com/ A large security breach within the SWIFT network, which allowed $81 million to be siphoned away from a Bangladesh bank, has brought significant attention to cybersecurity issues. https://www.reuters.com/article/us-cyber-heist-swift- idUSKCN11600C d. Note that when international transfers are involved, the international sanctions 3. Payment Cards. Contracts for members imposed by card associations provide a significant framework for these payment networks. Those contract terms are supplemented by various federal and state laws that provide additional constraints and protections on consumers. While card associations have developed their own networks, they also rely on the bank systems, including Fedwire and ACH, for settlement of payments among issuing and acquiring banks and for delivering payments to merchants. See generally Dabertin & Dubow, Charging Ahead – from Innovation to Industry 21-45, in E LECTRONIC P AYMENT S YSTEMS (2018). a. Payment card networks are subject to consumer protection statutes at the state level. On the federal level, Dodd-Frank added new prohibitions against “unfair, deceptive, or abusive acts or practices” (UDAAP). lists at the Treasury department must be consulted. See https://www.treasury.gov/resource-center/sanctions/SDN- List/Pages/fuzzy_logic.aspx

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