That's a fascinating post, especially the comment from Don Geddis:

> ...I eventually reached the conclusion that "check clearing" doesn't mean anything at all. What there really is, is a web of trust among large financial institutions. They take actions which work 99% of the time, and then they have correction procedures for the 1% that fail...

> ...their primary concern is that I'm not a con man who is going to take money out of the system. As long as the cash is EITHER at their bank, OR at the original bank, they can afford to not be completely sure just where it is, and to work that accounting out over time.

> This system is totally unlike how computer scientists would design it. They would want guarantees that the money really was only in one place, and there would be a thing which is a "transaction", where the money reliably went from one place to another. A wire transfer is something like that, but it's really bootstrapped on old-time banking, which is a trust relationship with repair procedures, not a guarantee of freedom from error.

Maybe. Here's a slightly different perspective. First take the case of ftp'ing/sftp'ing files to a bank.

There are multiple layers of security in sftp - not just the username and password. Source IP is checkec in a stateful way so spoofing is hard even if one somehow manages to get the credentials. Furthermore the files will not be processed unless there is an out-of-band message (typically an email, could be a phone call too ) with certain info also required in very specific format which must match the contents of the file. So there you go. 3 layers of security with one layer being completely out-of-band with the other two is reasonable enough for the risk involved. (There are other measures hard coded e.g. a dollar limit which basically "cap" any fraud but I won't go into those)

Now for the missing (or atleast MIA) transaction you allude to on your blog: Just because you were not told how the money ended up where it did doesn't mean people didn't know. Bankers are steeped in "social engineering" and trained from day one to only give out information required by law and really nothing else. Whether you use Fedwire or Swift (or really any other RTGS = real-time gross settlement network ) there is always a trail. Always. In your case it was probably Fedwire - and the bank I'm guessing was BofA or maybe Chase. Regardless if the sender's account is an individual account (not business) they are still protected by Reg E (as well as FDIC insurance). Reg E as you may know basically puts the onus of returning the funds to the sender's account on the bank. The problem is the timelines or the lack of it. Since banks are generally allowed upto 30 days (I don't know if 30 days is hardcoded ) in law they take their sweet time in tracing. And when they find out - they almost always do - they deliberately will not share details with you to protect themselves from liability.

The bottom line is ACH/FedWire moves trillions of dollars - hundreds of billions a day - and barring a very small percentage they all work.

> Just because you were not told how the money ended up where it did doesn't mean people didn't know.

That's true, but there was a lot of additional evidence that they really didn't know:

1. They said they didn't know.

2. Two weeks passed during which they could not find the money.

3. The money was only found after the person in whose account it ended up contact me (not the bank!)

And, BTW, I actually found out later how the mistake had been made: the original wire form had been filled out wrong. It was supposed to be a for-benefit-of wire, but the form was filled out as if for an intermediate-institution wire. And the bank employee who entered the data was apparently completely clueless because they entered an account number as an ABA number (or maybe it was the other way around, it was a long time ago). But it was without a doubt a total clusterfuck from beginning to end.

> barring a very small percentage they all work

Yes. As I said, this never ceases to amaze me.

It works primarily not because of technology but because of inter company agreements, contracts and regulations.