IBA Compliance Connection

Your go to source for compliance!

Are we required to accept a power of attorney (POA) that lists someone as an agent who we believe is dishonest? We are concerned that accepting the POA will open us up to liability, as this individual has attempted to pass fraudulent checks and has been involved in numerous scams in the past.

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In our view, the risk of refusing to accept a POA generally is higher than the risk of accepting a POA that turns out to be invalid, unless you have reasonable cause to refuse to comply with the agent’s direction or have actual knowledge that the agency is invalid.

The Illinois Power of Attorney Act requires your bank to comply with an agent’s directions that are in accordance with a document “purporting to establish an agency,” and “any person who fails to comply arbitrarily or without reasonable cause shall be subject to civil liability for any damages resulting from noncompliance.” An Illinois court has confirmed that the reference to a document “purporting to establish an agency” means that banks may rely on a POA document in good faith, even if the POA is later shown to be forged. The Act also provides a safe harbor from liability for any person who acts in good faith reliance on a POA and allows such persons to “presume, in the absence of actual knowledge to the contrary, that the document purporting to establish the agency was validly executed, that the agency was validly established, [and] that the named principal was competent at the time of execution.”

As an added layer of protection for your bank, you can demand that the agent fill out and sign a “Certification and Acceptance of Authority,” using a form provided in the Illinois Power of Attorney Act. By signing this document, the agent swears under penalty of perjury that: (1) the principal had the capacity to execute the POA, (2) the principal is alive, (3) the POA has not been revoked, (4) the agent’s powers have not been altered or terminated, and (5) the POA remains in full force and effect.

Consequently, we believe that your bank may be risking more liability by refusing to accept the POA — which risks civil liability for damages resulting from your noncompliance with the POA — unless you have reasonable cause to refuse to comply with the agent’s direction or have actual knowledge that the agency is invalid.

For resources related to our guidance, please see:

  • Illinois Power of Attorney Act, 755 ILCS 45/2-8(d) (“Each person to whom a direction by the named agent in accordance with the terms of the copy of the document purporting to establish an agency is communicated shall comply with that direction, and any person who fails to comply arbitrarily or without reasonable cause shall be subject to civil liability for any damages resulting from noncompliance.”)
  • Amcore Bank, N.A. v. Hahnaman-Albrecht, Inc., 326 Ill.App.3d 126, 139 (“The legislature subsequently amended the opening clause of section 2-8, which now reads, ‘Any person who acts in good faith reliance on a copy of a document purporting to establish an agency will be fully protected.’ (Emphasis added.) 755 ILCS 45/2-8 (West 2000). This change was part of Public Act 90-21, which took effect on June 20, 1997. When the bill was read in the Senate, Senator Dillard stated: ‘This bill . . . is in response to a 1st District Appellate Court Case which held that a bank relying on a forged power of attorney document was not protected by the Power of Attorney Act. . . this protects persons who are acting in good faith but are being fraudulently presented with invalid power of attorney documents.’”)
  • Illinois Power of Attorney Act, 755 ILCS 45/2-8(a) (“Any person who acts in good faith reliance on a copy of a document purporting to establish an agency will be fully protected and released to the same extent as though the reliant had dealt directly with the named principal as a fully-competent person. The named agent shall furnish an affidavit or Agent’s Certification and Acceptance of Authority to the reliant on demand stating that the instrument relied on is a true copy of the agency and that, to the best of the named agent’s knowledge, the named principal is alive and the relevant powers of the named agent have not been altered or terminated; but good faith reliance on a document purporting to establish an agency will protect the reliant without the affidavit or Agent’s Certification and Acceptance of Authority.”)
  • Illinois Power of Attorney Act, 755 ILCS 45/2-8(c) (“Any person dealing with an agent named in a copy of a document purporting to establish an agency may presume, in the absence of actual knowledge to the contrary, that the document purporting to establish the agency was validly executed, that the agency was validly established, that the named principal was competent at the time of execution, and that, at the time of reliance, the named principal is alive, the agency was validly established and has not terminated or been amended, the relevant powers of the named agent were properly and validly granted and have not terminated or been amended, and the acts of the named agent conform to the standards of this Act. No person relying on a copy of a document purporting to establish an agency shall be required to see to the application of any property delivered to or controlled by the named agent or to question the authority of the named agent.”)
  • Illinois Power of Attorney Act, 755 ILCS 45/2-8(b) (“Upon request, the named agent in a power of attorney shall furnish an Agent’s Certification and Acceptance of Authority to the reliant in substantially the following form: . . .”)