David Kronemyer

The Internal Controls Defense

March 14th, 2008 by David Kronemyer · No Comments

DAVID KRONEMYER: Here is another paper I wrote about bank law issues arising under Article 3 and Article 4 of the Uniform Commercial Code (“UCC”). You can download it as a .pdf.  

The Internal Controls Defense

Abstract: Banks are often defendants in litigation involving an employee of one of the bank’s depositors who has altered his employer’s check and received payment from the bank. The employer sues the bank for wrongful payment to a thief.  This article describes an affirmative defense that is available to the bank: the internal controls defense.  The defense makes the reasonableness of the plaintiff’s business practices the central issue in the case instead of what the bank did or did not do. The author tells banks how to successfully deploy this defense with reference to relevant case law, sections of the Uniform Commercial Code, and accounting standards.