In what is being termed as “one of the biggest blunders in banking history”, the Banking giant Citibank accidentally transferred USD 900 million (about Rs 6,554 crore) to cosmetic company Revlon's lenders instead of creditors. Citibank committed the mistake while serving as the administrative agent between the company and its creditors. It paid the lenders by mistake, much more than it intended to as only USD 8 million was the correct amount.
Citibank moved the court demanding a full refund after only a few lenders returned the money. It still had to recover USD 500 million from the accidental transfer. A New York Court of Appeals ruled that Citi can’t recover that amount. It said, "it is one of the biggest blunders in banking history."
The court explained: "When a beneficiary receives money to which it is entitled and has no knowledge that the money was erroneously wired, the beneficiary should not have to wonder whether it may retain the funds; rather, such a beneficiary should be able to consider the transfer of funds as a final and complete transaction, not subject to revocation."
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Such a huge amount of money reaching the wrong beneficiary does not happen in normal scenarios as banks have adequate procedures, including the account numbers and IFSC codes, in place to ensure a fund transfer is approved by the sender and the recipient details are submitted promptly.
In case the bank makes the wrong transfer, it notifies the wrong recipient about the accidental transfer and requests the transaction to be reversed without any delay. Moreover, the bank can seek legal opinion besides filing a plea with the police in case the recipient refuses to do so.
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However, in cases where the customer enters the beneficiary’s wrong account details then the onus is completely on him as the bank has followed the account holder’s instructions.