Although we cannot provide legal advice, we believe that the providing cash back to these individuals could be viewed as permitting unauthorized withdrawals for which your bank would be liable.

Under the Uniform Commercial Code (UCC), a bank is liable for unauthorized withdrawals from a customer’s account. A withdrawal is considered unauthorized if it violates the terms of the account agreement. Therefore, unless the account agreements grant these individuals the right to access the account funds — which is unlikely because they are not authorized signers — their requests for cash back could be considered unauthorized withdrawals.

We note that under the Fiduciary Obligations Act, a depository bank that deals with a known fiduciary (which may include a customer’s accountant or bookkeeper) generally is not liable for the fiduciary's misconduct unless the bank had actual knowledge that the conduct amounts to a breach of fiduciary duties. However, the Seventh Circuit has held that when a fiduciary is not an authorized signer on a particular account, the individual is not a fiduciary with respect to that account.

In this case, the individuals are not authorized signers on the accounts. Consequently, they have no fiduciary authority with respect to withdrawals from those accounts, including cash back on deposits.

For resources related to our guidance, please see:

• 810 ILCS 5/4-401 (“A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.”)

• Fiduciary Obligations Act, 760 ILCS 65/2 (“A person who in good faith pays or transfers to a fiduciary any money or other property which the fiduciary as such is authorized to receive, is not responsible for the proper application thereof by the fiduciary…”)

• Mikrut v. First Bank of Oak Park, 359 Ill.App.3d 37, 49 (1st Dist. 2005) (“The Fiduciary Obligations Act also relieves the bank of liability to the principal unless the bank has actual knowledge that the fiduciary is committing a breach of his obligation or the bank has knowledge of facts that its action in paying the check amounts to bad faith.”)

• Mutual Service Cas. Ins. v. Elizabeth State Bank, 265 F. 3d 601, 625 (7th Cir. 2001) (“The simple fact is that [the individual] was never an authorized signer on the operating account. That he had signature authority on [his employer’s] payroll account may have rendered him a fiduciary as to that account, but no other.”)