Printable Format84-4a-201. Security procedure. "Security procedure" means a procedure established by agreement of a customer and a receiving bank for the purpose of: (i) Verifying that a payment order or communication amending or canceling a payment order is that of the customer; or (ii) detecting error in the transmission or the content of the payment order or communication. A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, callback procedures or similar security devices. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.
History: L. 1990, ch. 367, ยง 9; January 1, 1991.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official Text.
84-4a-201, 84-4a-202 and 84-4a-203 are important provisions allocating duties and the risks of fraud. There is a strong impetus for a bank to enter into a security procedure agreement with its senders because, if a bank has followed the security procedure set up between the sender and the bank, the risk of fraud is generally going to be on the sender. See Official Comment 1 to 84-4a-204.