N.Y. Uniform Commercial Code Law § 4-a-202: Authorized and Verified Payment Orders

Section 4-A-202. Authorized and Verified Payment Orders.

(1) A payment order received by the receiving bank is the authorized

order of the person identified as sender if that person authorized the

order or is otherwise bound by it under the law of agency.

(2) If a bank and its customer have agreed that the authenticity of

payment orders issued to the bank in the name of the customer as sender

will be verified pursuant to a security procedure, a payment order

received by the receiving bank is effective as the order of the

customer, whether or not authorized, if (a) the security procedure is a

commercially reasonable method of providing security against

unauthorized payment orders, and (b) the bank proves that it accepted

the payment order in good faith and in compliance with the bank's

obligations under the security procedure and any agreement or

instruction of the customer, evidenced by a record, restricting

acceptance of payment orders issued in the name of the customer. The

bank is not required to follow an instruction that violates an agreement

with the customer, evidenced by a record, or notice of which is not

received at a time and in a manner affording the bank a reasonable

opportunity to act on it before the payment order is accepted.

(3) Commercial reasonableness of a security procedure is a question of

law to be determined by considering the wishes of the customer expressed

to the bank, the circumstances of the customer known to the bank,

including the size, type, and frequency of payment orders normally

issued by the customer to the bank, alternative security procedures

offered to the customer, and security procedures in general use by

customers and receiving banks similarly situated. A security procedure

is deemed to be commercially reasonable if (a) the security procedure

was chosen by the customer after the bank offered, and the customer

refused, a security procedure that was commercially reasonable for that

customer, and (b) the customer expressly agreed in a record to be bound

by any payment order, whether or not authorized, issued in its name and

accepted by the bank in compliance with the bank's obligations under the

security procedure chosen by the customer.

(4) The term "sender" in this Article includes the customer in whose

name a payment order is issued if the order is the authorized order of

the customer under subsection (1), or it is effective as the order of

the customer under subsection (2).

(5) This section applies to amendments and cancellations of payment

orders to the same extent it applies to payment orders.

(6) Except as provided in this section and in paragraph (a) of

subsection (l) of Section 4-A-203, rights and obligations arising under

this section or Section 4-A-203 may not be varied by agreement.