Should Banks Check Both Beneficiary Name and Account Number in Incoming Transfers?

 In cross-border payments, one recurring issue is whether receiving banks should credit funds solely based on the account number in the payment order, or whether they must also verify that the beneficiary name matches the account holder. Practices differ across countries, and the consequences are serious — especially in fraud cases.

QUESTION

Dear Mr. Old Man,

In Korea, before remittances over USD 20,000 are automatically credited to account numbers in payment orders, the beneficiary is notified of the incoming remittance and asked to bring documentary evidence for the remittance according to foreign exchange transaction regulations.

When the beneficiary comes to the bank and presents the evidence, it is found that the beneficiary name in the payment order is different from the name of the accountholder.

The remittance is sent back to the sender bank.

What do you think?

Thomas

________

ANSWER

Dear Thomas,

The issue you raise is an important one. In many fraud cases, hackers intercept remitters’ emails and alter the account number to divert funds to their own accounts. In some jurisdictions, such as the United States, banks typically credit funds solely to the account number in the payment order. Courts there have often ruled that banks are not obliged to check whether the beneficiary name matches the account number, and thus the funds are credited automatically.

My own banking experience was different. Before my retirement, our practice was that whenever an MT 103 showed a mismatch between the beneficiary name and the account number, we would not credit the funds. Instead, we contacted the remitting bank for confirmation and further instructions. If the difference was only a minor spelling variation, we often contacted the beneficiary directly (particularly established corporate customers) to confirm and obtained their written undertaking to refund if any claim later arose.

In my view, the safer and more responsible approach is the traditional one: banks should verify both the beneficiary name and the account number, whether manually or electronically. If there is a mismatch, the funds should not be credited automatically. This practice helps prevent fraud, reduces disputes, and protects both the remitter and the receiving bank.

Best regards,

Mr. Old Man