We have an attorney customer who issues checks to his clients drawn on his client trust account. When the clients (who are not customers) come to our bank to cash the checks, we have been issuing them personal money orders signed by a bank employee with the bank listed as the remitter. We do not want to list the clients as the remitter since our BSA policy prevents us from selling monetary instruments to noncustomers. We also do not want to issue cashier’s checks to the clients because we would like to be able to put a stop payment on an item if it is lost. Will this work, or will signing the money orders cause them to function like cashier’s checks?

We believe that having your bank representative sign the customer’s personal money orders would cause them to be treated like cashier’s checks, in which case you would not be able to place a stop payment order on these items.

A cashier’s check is defined in the Uniform Commercial Code (UCC) as “a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.” Illinois courts have held that a cashier’s check is “considered accepted for payment by its issuance [and] is not subject to countermand through a stop order.”

By contrast, while the UCC does not define a personal “money order,” Illinois courts have interpreted this term to apply to checks that are not signed by an authorized representative of the issuing bank and are not obligations of the issuing bank — since a person is not liable on an instrument unless they have signed the instrument. A personal money order “functions as a personal check” subject to a stop-payment order and “does not become the obligation of a bank unless or until it is signed by a bank official or it is accepted by a bank from a named payee.”

In our view, when your bank representative signs the personal money orders, they become obligations of your bank, and similar to cashier’s checks, they are not subject to stop-payment orders. If one of your customer’s clients presents a money order signed by your bank for payment, you would be obligated to honor it or be subject to the client’s claim for wrongful dishonor.

For resources related to our guidance, please see:

Illinois UCC, 810 ILCS 5/3-104(f) (“‘Check’ means (i) a draft, other than a documentary draft, payable on demand and drawn on a bank or (ii) a cashier's check or teller's check. An instrument may be a check even though it is described on its face by another term, such as ‘money order’.”)

Illinois UCC, 810 ILCS 5/3-104(g) (“‘Cashier’s check’ means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.”)

Illinois UCC, 810 ILCS 5/3-401(a) (“A person is not liable on an instrument unless (i) the person signed the instrument . . .”)

Uniform Commercial Code, 810 ILCS 5/4-403(a) (“A customer or any person authorized to draw on the account if there is more than one person may stop payment of any item drawn on the customer’s account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in Section 4-303.”)

Uniform Commercial Code, 810 ILCS 5/3-411(b) (“If the obligated bank wrongfully (i) refuses to pay a cashier’s check or certified check . . . the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular circumstances giving rise to the damages.”)

Chicago Cicero Currency Exchange, Inc. v. Continental Illinois National Bank & Trust Co., 545 N.E.2d 250, 251 (1st Dist. 1989) A cashier’s check is a bill of exchange or draft which is drawn by a bank upon itself. A cashier’s check, considered accepted for payment by its issuance, is not subject to countermand through a stop order. . . . Since a personal money order is not signed by an authorized representative of the issuing bank, it is more in the nature of an ordinary check than a bank obligation, and, thus, subject to stop-payment orders.”)

Duggan v. State Bank of Antioch, 540 N.E.2d 1111, 1113 (2nd Dist. 1989) (“Ordinarily, when an individual purchases a money order, the bank fills in only the amount of the purchase. . . . In contrast, when a bank issues a cashier’s check, the bank fills in the date, the name of the payee, and the amount of the check. Additionally, an authorized signer of the bank signs as drawer of the check. By its act of issuance, a bank accepts a cashier’s check in advance, and any subsequent stop-payment order is ineffective. In the case of a money order, we agree with the trial court . . . that a personal money order functions as a personal check and not as a banker’s or cashier’s or traveler’s check. Since the only signature on a personal money order is that of the purchaser, since the instrument takes the form of an order to pay, and since it is drawn on a bank and payable on demand, it is within the classification of a check. As such, a money order does not become the obligation of a bank unless or until it is signed by a bank official or it is accepted by a bank from a named payee.”)