Cross-Border Electronic Funds Transfers through Large Value Transfer Systems, and the Persistence of Risk
Journal of Business Law, pp. 584-602, November 2003
15 Pages Posted: 16 Sep 2010
Date Written: September 15, 2010
Abstract
Cross border electronic funds transfers through large value transfer systems facilitate the movement of trillions of dollars across the major financial centers of the world. This ability to move large amounts of funds, and to move it rapidly, has contributed in no significant measure to the globalisation of financial services and the world economy generally. However, participants in large value funds transfers and transfer systems continue to be exposed to liquidity and credit risk, and payment and settlement risk of the other participants amongst other risks. These risks when they come to pass, impact not only on the immediate party to the transaction, but may also impact on the many other financial institutions linked to the transaction and possibly on a nation's financial system as a whole. As funds transfer systems form the backbone of the financial system of advanced economies, their health and efficiency has, not surprisingly, become of key concern to both government and industry participants in these countries.
Regulatory aims (both government and industry sponsored), in this connection have been first, to identify the causes of failure and to try and limit, if not prevent, the impact of such failure, and secondly to identify the party or parties who should bear the loss in these circumstances. But as legal systems and national jurisdictions differ in the underlying premises and approaches in the handling of these issues, inconsistent outcomes have resulted with respect to international funds transfers and transfer systems. More recently, there have been industry-sponsored initiatives toward harmonising these differing approaches. This paper examines the progress that has been made in this direction, difficulties that continue to persist, and future directions on the subject. It reviews the nature of cross-border funds transfers, the rights and obligations of the parties to a funds transfer as defined by their relationship to one another, the problems created by the interaction of different domestic laws governing funds transfers, and the progress made internationally in establishing a generally acceptable body of law on this very important and complex issue.
Keywords: Bankers duties, Clearing systems, Conflict of laws, EC law, Electronic funds transfer, Harmonisation
JEL Classification: G00, K33
Suggested Citation: Suggested Citation