Article

Breach of Contract; Negligence; Prime Bank Instrument Scams; Conditional S.W.I.F.T. MT-100 Screen 72.

Type of Lawsuit:

Motion for summary judgement by defendant (First National Bank of Maryland (FNB)).

Parties:

Plaintiff- Piedmont Resolution

Defendant/Alleged Scamster- Johnston, Rivlin& Foley

Defendant/Third Party Bank- First National Bank of Maryland

False Instruments:

Prime Bank Guarantees, conditional S.W.I.F.T.

Activities:

1) On 13 December 1995, the alleged victim entered into an escrow agreement for the purchase of US$ 3,000,000 of non-existent bank guarantees which promised returns of over 108% pa.

2) On 15 December 1995, the victim, at the behest of the alleged scamster, opened an escrow account with the defendant third party bank.

3) On 19 December 1995, the victim authorized the third party bank to effect a wire transfer based on a "conditional S.W.I.F.T. MT-100 Screen 72". The defendant bank agreed.

4) Later that month, US$ 1,500,000 was wired from the escrow account without the authorization of the alleged victim or the purchase of any bank guarantees.

Decision:

The U.S. District Court for the District of Columbia, Attridge, J., found against the defendant, indicating that FNB was not entitled to summary judgement when all of the facts of the case were viewed "in a light most favorable to [the victim], the non-moving party."

Notes:

The defendant bank's expert noted that "virtually all funds transfers are unconditional ... because of the added cost, difficulty, and unknown liability attendant". Another expert of the bank stated that "there is no such thing as a 'conditional' S.W.I.F.T." and "the reference to MT-100 Field 72" does not "in any way connote a conditional transfer." The plaintiff's expert agreed that the S.W.I.F.T. mechanism was not best suited to the transaction contemplated but claimed that it was not a conditional wire transfer but rather a procedure to enable funds to be wired conditionally. The court does not attempt to clarify what meant by this statement, but did state that it regarded "S.W.I.F.T. [as] a means of completing a conditional funds transfer." It is regrettable that the court, in its opinion, gave credence to the notion of a "conditional S.W.I.F.T."-a concept which appears frequently in Prime Bank Scams but is unheard of elsewhere.

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.