An elderly customer purchased a $9,000 cashier’s check. She came in the next day to request a stop payment, as she now believes that she was defrauded — she had received a telephone call from someone claiming to be with Publisher’s Clearinghouse, who told her that she had won and needed to send in a $9,000 cashier’s check to withdraw her winnings. Can we stop payment?

No, we do not believe that you should stop payment on the cashier’s check. The Illinois Supreme Court has held that a cashier’s check is the equivalent of cash. As a general rule, once a cashier’s check enters the stream of commerce, the issuer (your bank) is liable under the Uniform Commercial Code (UCC) if it refuses to honor the cashier’s check when presented. We are not aware of any Illinois court cases that permit an exception to this general rule where a third party fraudulently induced a bank’s customer to purchase a cashier’s check.

If your bank suspects the financial exploitation of an elderly customer, state law encourages you to report the activity to the Illinois Department of Aging, and federal law likely requires you to file a suspicious activity report (SAR). The Financial Crimes Enforcement Network (FinCEN) requires banks to file a SAR for suspected elder financial exploitation when a transaction aggregates at least $5,000 and the bank knows, suspects or has reason to suspect the transaction involved criminal activity.

We also note that both state and federal privacy laws provide safe harbors for banks when reporting suspected elder financial exploitation.

For resources related to our guidance, please see:

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.”)

Midamerica Bank, FSB. v. Charter One Bank, FSB, 905 N.E.2d 839, 844 (2009) (“Reading the plain language of sections 4-403 and 3-411 together leads us to one unmistakable conclusion: a bank’s refusal to pay a cashier’s check based on its customer’s request to stop payment is ‘wrongful’ under section 3-411 because a customer has no right to stop payment on a cashier’s check under section 4-403.”)

Adult Protective Services Act, 320 ILCS 20/4(a) (“Any person who suspects the abuse, neglect, financial exploitation, or self-neglect of an eligible adult may report this suspicion to an agency designated to receive such reports under this Act or to the Department.”)

FinCEN Rules, 31 CFR 1020.320(a)(2) (Requires banks to file SARs when a transaction involves or aggregates at least $5,000 in funds or other assets, and the bank knows, suspects, or has reason to suspect that “(i) The transaction involves funds derived from illegal activities…(ii) The transaction is designed to evade any requirements of this chapter or of any other regulations promulgated under the Bank Secrecy Act; or (iii) The transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.”)

Regulation P, 12 CFR 1016.15 (Lists exceptions to opt-out requirements, including “[t]o comply with Federal, state, or local laws, rules and other applicable legal requirements”)

FRB Suspicious Activity Reports Rules, 12 CFR 208.62(k) (Creates a safe harbor from liability for the disclosure of “reports of suspected or known criminal violations and suspicious activities to law enforcement and financial institution supervisory authorities, including supporting documentation, regardless of whether such reports are filed pursuant to this section or are filed on a voluntary basis.”)

Illinois Banking Act, 205 ILCS 5/48.1(b)(16) (Creates exemption from privacy requirements for furnishing information to law enforcement authorities, the Illinois Department on Aging and its regional administrative and provider agencies, the Department of Human Services Office of Inspector General, or public guardians “if there is suspicion by the bank that a customer who is an elderly or disabled person has been or may become the victim of financial exploitation.”)