## Facts

- Grain Traders initiated a $310,000 international electronic funds transfer to pay a beneficiary in Uruguay.
- Grain Traders instructed its bank, Banco de Credito Nacional (BCN), to route the transfer through Banque du Crédit et Investissement Ltd. (BCIL) using Citibank in New York as an intermediary.
- BCN sent Citibank a payment order directing Citibank to debit BCN’s Citibank account and credit BCIL’s Citibank account for $310,000.
- Citibank executed BCN’s payment order by debiting BCN’s account, crediting BCIL’s account, and transmitting instructions to BCIL to complete the onward transfer.
- After the credit to BCIL’s Citibank account, BCIL and a downstream bank in the chain suffered financial failure, and the funds did not reach the beneficiary.
- Grain Traders sued Citibank seeking to recover the $310,000, alleging Citibank wrongfully froze BCIL’s account and/or used the funds as a setoff, and that Citibank should have rejected the payment order due to BCIL’s alleged financial instability.
- Citibank moved for summary judgment.

## Issues

1. Whether Citibank, as an intermediary bank, incurred liability under New York UCC Article 4-A for the failed transfer despite executing BCN’s payment order as instructed.
2. Whether Article 4-A imposed a duty on Citibank to reject or refuse the payment order based on alleged knowledge of downstream bank financial distress.
3. Whether Grain Traders could recover under common law theories (e.g., negligence, conversion, breach of contract) based on Citibank’s role in the transfer.

## Decision

- The court granted summary judgment to Citibank and dismissed the complaint.
- Citibank satisfied its Article 4-A obligations by debiting BCN’s account, crediting BCIL’s account, and forwarding conforming instructions to BCIL.
- Article 4-A did not require Citibank to monitor, investigate, or act on the perceived creditworthiness of downstream banks selected in the payment route.
- The record did not support a finding that Citibank misapplied the funds or engaged in conduct supporting liability under the UCC or common law.

## Legal Principles

- Under UCC Article 4-A, an intermediary bank’s core duty in executing a payment order is to make the directed debit and credit entries and transmit a conforming payment order to the next bank.
- Article 4-A allocates risk in funds transfers to preserve speed, certainty, and low cost; courts should not impose extra-statutory duties that alter that allocation.
- An intermediary bank has no Article 4-A duty to protect the originator from credit risk arising from insolvency or failure of downstream banks in the chosen transfer chain.
- Common law claims cannot be used to impose obligations inconsistent with Article 4-A’s allocation of rights, duties, and remedies; in any event, liability requires wrongful conduct beyond a loss caused by downstream bank failure.

## Conclusion

Because Citibank executed the payment order as required by Article 4-A and had no statutory duty to refuse the transfer based on downstream bank financial condition, Grain Traders could not shift the loss from downstream bank failure to Citibank under either Article 4-A or common law theories.


Grain Traders, Inc. v. Citibank, N.A., 960 F. Supp. 784 (S.D.N.Y. 1997)