KRS 355.4A-405: Payment by beneficiary's bank to beneficiary.

(1) If the beneficiary's bank credits an account of the beneficiary of a payment order,

payment of the bank's obligation under KRS 355.4A -404(1) occurs when and to the

extent:

(a) The beneficiary is notified of the right to withdraw the credit;

(b) The bank lawfully applies the credit to a debt of the beneficiary; or

(c) Funds with respect to the order are otherwise made available to the beneficiary

by the bank.

(2) If the beneficiary's bank does not credit an account of the beneficiary of a payment

order, the time when payment of the bank's obligation under KRS 355.4A -404(1)

occurs is governed by principles of law that determine when an obligation is

satisfied.

(3) Except as stated in subsections (4) and (5), if the beneficiary's bank pays the

beneficiary of a payment order under a condition to payment or agreement of the

beneficiary giving the bank the right to recover payment from the beneficiary if the

bank does not receive payment of the order, the condition to payment or agreement

is not enforceable.

(4) A funds-transfer system rule may provide that payments made to beneficiaries of

funds transfers made through the system are provisional until receipt of payment by

the beneficiary's bank of the payment order it accepted. A beneficiary's bank that

makes a pay ment that is provisional under the rule is entitled to refund from the

beneficiary if:

(a) The rule requires that both the beneficiary and the originator be given notice

of the provisional nature of the payment before the funds transfer is initiated;

(b) The beneficiary, the beneficiary's bank, and the originator's bank agreed to be

bound by the rule; and

(c) The beneficiary's bank did not receive payment of the payment order that it

accepted. If the beneficiary is obliged to refund payment to the beneficia ry's

bank, acceptance of the payment order by the beneficiary's bank is nullified

and no payment by the originator of the funds transfer to the beneficiary

occurs under KRS 355.4A-406.

(5) This subsection applies to a funds transfer that includes a payment order transmitted

over a funds-transfer system that:

(a) Nets obligations multilaterally among participants; and

(b) Has in effect a loss -sharing agreement among participants for the purpose of

providing funds necessary to complete settlement of the oblig ations of one (1)

or more participants that do not meet their settlement obligations. If the

beneficiary's bank in the funds transfer accepts a payment order and the

system fails to complete settlement pursuant to its rules with respect to any

payment order in the funds transfer,

1. The acceptance by the beneficiary's bank is nullified and no person has

any right or obligation based on the acceptance;

2. The beneficiary's bank is entitled to recover payment from the

beneficiary;

3. No payment by the originator to the beneficiary occurs under KRS

355.4A-406; and

4. Subject to KRS 355.4A -402(5), each sender in the funds transfer is

excused from its obligation to pay its payment order under KRS 355.4A-

402(3) because the funds transfer has not been completed.