A wire transfer is an EFT. Any transfer of funds initiated by phone, online, or in person for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit an account is an EFT. Credit unions primarily transfer member funds.
Credit unions may also use wire transfers to transfer their own funds from one institution to another; these wire transfers include the purchase of investments, mortgage funding, bank-to-bank transfers, and indirect dealer funding.
A credit union may wire funds directly through the Federal Reserve Bank or through a corporate credit union, correspondent financial institution, or a third-party servicer, which then forwards the funds through the Federal Reserve Bank on a credit union’s behalf.
When wiring funds, a credit union will instruct an intermediary institution to:
- Access the credit union’s settlement account at the intermediary institution to fund a wire transfer.
- Forward the funds and the wire instructions to the Federal Reserve.
- Post the transaction to the recipient’s account.
Credit unions that offer wire transfers must abide by written security policies and procedures that consistently promote safe and accurate transactions. They can limit their liability and risk of loss by using recommended security procedures, referred to as “commercially reasonable security procedures” (such as recorded telephone lines, codes, passwords, PINs, encryption, etc.) in UCC Article 4A.
To mitigate the risk that wire transactions may be vulnerable to error or fraud, credit unions should also apply a variety of internal controls.
Review procedures for this EPS are described in the Review Procedures section of this Examiner’s Guide chapter.
Last updated September 25, 2017
