## Facts

- Sabena SA performed aircraft maintenance services for Sudan Airways Ltd.
- On November 4, 1997, Sudan Airways initiated an electronic funds transfer (EFT) of $360,000 to pay Sabena through a multi-bank transfer chain.
- The originator’s bank was National Bank of Abu Dhabi (NBAD); the beneficiary’s bank was Generale Bank in Belgium.
- A New York bank (then Bankers Trust, later Deutsche Bank Trust Company Americas) acted as the intermediary bank for the transfer.
- On November 3, 1997, a U.S. executive order blocked property and interests in property of the Government of Sudan within U.S. jurisdiction or control of U.S. persons.
- When the intermediary bank received the payment order, it debited NBAD’s account but did not issue a payment order to the beneficiary’s bank; it segregated the funds as blocked assets.
- In 2012, the U.S. Office of Foreign Assets Control (OFAC) issued a specific license authorizing release of the blocked funds; the license permitted, but did not require, completion of the EFT.
- After Sabena sought release, Deutsche Bank returned the funds to NBAD rather than completing payment to Sabena’s bank.
- Sabena’s receivers sued Deutsche Bank entities alleging UCC Article 4-A violations, violation of the OFAC license, and conversion; the trial court denied a motion to dismiss, and the intermediary bank appealed.

## Issues

1. Whether UCC Article 4-A imposes a duty on an intermediary bank, enforceable by the beneficiary, to complete an incomplete EFT after an OFAC license authorizes release of previously blocked funds.
2. Whether an OFAC license authorizing release of blocked funds creates a legal obligation, enforceable by the beneficiary, requiring the intermediary bank to complete the transfer.
3. Whether the beneficiary has a property interest in blocked funds held at an intermediary bank sufficient to support a conversion claim.

## Decision

- The Appellate Division, First Department reversed the trial court and granted the motion to dismiss the complaint in its entirety.
- The court held that Article 4-A imposed no duty on the intermediary bank to complete the funds transfer in favor of the beneficiary absent an express agreement.
- The court held that the OFAC license authorized release but did not require completion of the EFT and did not create a private, beneficiary-enforceable right.
- The court dismissed the conversion claim because the beneficiary lacked a property interest in the funds at the intermediary-bank stage.

## Legal Principles

- UCC Article 4-A provides the exclusive framework for determining rights, duties, and liabilities in situations it covers, displacing inconsistent common-law theories.
- Under UCC 4-A-212, a bank owes no duty to any party to a funds transfer except as provided in Article 4-A or by express agreement.
- In a segmented Article 4-A funds transfer, an intermediary bank’s obligations run to the sender of its payment order, not to the ultimate beneficiary; the beneficiary has no right to payment from the intermediary bank.
- An OFAC license that permits a transaction removes a legal prohibition but does not, without more, impose a private-law duty to perform or create a private cause of action.
- A beneficiary’s property interest in transfer funds does not vest at an intermediary bank merely because funds are segregated there; absent acceptance by the beneficiary’s bank, conversion does not lie.

## Conclusion

The court dismissed the beneficiary’s claims because UCC Article 4-A did not impose an intermediary-bank duty to complete a halted transfer, the OFAC license was permissive rather than mandatory and created no privately enforceable right, and the beneficiary had no property interest in the funds while they remained at the intermediary stage.


Receivers of Sabena SA v. Deutsche Bank A.G., 142 A.D.3d 242 (N.Y. App. Div. 1st Dep’t 2016)