Is there a wire expert in the house? My question relates to when our instituion sends out a wrong amount, and the customer returns it, does that kick off various reporting requirements? It is a simple return.

Case in point - last week we sent out a 13 thousand dollar wire, which the wire desk said rejected. In reality, it didn't. We sent out the wire again based on our conversation with the wire desk, and they both confirmed. Monday morning I have to request back the second wire. If the client returns it, we don't usually report the return, as it is a "pullback". What are we required to report?

Judging by the response, I would say not.

who would you be reporting to? There are no requirements to report outgoing or incoming wires to any government or regulatory entity, unless you receive an OFAC violation or you are reporting suspicious activity via a SAR. For standard wire transactions with existing customers, you should not have any issues, even if you sent it out twice in error.

However, be advised that the recipient may not reutn these funds voluntarily, and that your bank may need to take legal action. You may not charge your customer (who ordered the wire sent) for the second wire, as he/she did not order a second wire. Also, the receiving bank is under no obligation to return the funds until after they have received approval from their customer. Doing so is a violation and can subject them to penalties - not that banks don't do this already.

Hope this helps.

Thanks. One more question. If a wire is to a recipient(person named John Smith), it is returned by order of John Smith. What if it is to a company, does it come back returned by a person or the company name? Does this matter? I think it should match exactly as it goes out for recordkeeping purposes.

This is really important for Audit purposes. If anyone could answer it would be appreciated.

A wire to a company should be returned by the company, not an individual. The money should have gone into an account of the company/beneficiary and should be returned from the company/beneficiary. While an individual may APPROVE the wire to be returned, it would be on behalf of the company.

Well, the originator can request to have a wire returned, as can an originating bank. It is incumbent upon the receiving bank to verify with the beneficiary that it is okay to return the wire.

As far as recordkeeping, you should have documentation on your end showing the customer originating the wire, including his/her signature and all pertinent information. If the same customer comes in and asks to have the funds returned, there should also be documentation showing this request, also signed by your customer, and include as much information as possible. All of this information should be kept together.

It sounds like you have an overzealous auditor who does not understand the operational side of the wire room. Or, are they suspecting fraud?

I believe they are overzealous. We wire many funds out, and some can be for rollovers to retirement plans. In that case, the participant would be the person who would return the wire if we sent it out incorrectly, or if they changed their mind and did not want a rollover. However, if we sent it to a company's account incorrectly, I believe we should have the company who was listed as the beneficiary also listed as the source for the return, not an individual at the company.

What difference is it to the auditors who sends money to your bank, even if it is a returned wire? As long as there are no OFAC violations, and no laws are broken (SAR). I don't understand why they are pursuing this.

True.

And even if the wrong person sent the wire, what could you do about it? You have no control over customers of other banks!

How about a scenario where the recipient does indeed return the wire, but will now receive a 1099 for their interest earned during that period? The interest really wasn't theirs to begin with. Case in point is that we RECEIVED a $450,000 wire incorrectly. It took us 45 days to finally get everything sorted out and returned. The interest the person received during that time was not really "Earned", was it?

Did you deposit the interest in this persons account? If so, and they have access to it, then it was earned. If you take the interest back (illegally), then no 1099 should be furnished.

What if the recipient requested it returned?

does not matter, if it was deposited into an interest bearing account, and sat for 1 day or 45 days, interest is owed and payable. If you pay the interest, you must issue the 1099.

One more question...when a recipient is contacted about an inadvertent wire, who contacts? Initiating bank or the recipient's bank?

it could be either. there are no set rules in regards to this. Usually, the sending bank contacts the receiving bank, by either a reversal request (1001 or 1007), service wire (1090), or phone call. The receiving bank usually contacts their customer. However, depending on the size of the wire, the originating bank may contact the end customer, and the originating customer may also become involved.

Is there a time limit on this?

"Depending on the size of the wire" that you mention...would larger wires require correspondence with recipients or smaller wires?

very rarely would the originating bank have the means to contactthe eand customer. A phone number is not required for wire transfers, so how would they arrive at this information. They could ask teh receiving bank to provide it, but that could be a violation of the privacy act. The best method is the originating bank contacts the receiving bank, via a service (1090)or a phone call. SInce many of the larger banks do not act on services until the end of the day, the phone call is the best method. The recieving bank should be the one to contact the final customer, as it is their customer, and receive permission to return the wire. If the customer does not grant permission, then the wire can't be returned.

Thanks.