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A customer asked to deposit a check for over $1000 drawn on a credit union account in Italy. The check has been marked “non-transferable” and has been indorsed in blank by the payee. However, our customer is not the payee. Can we deposit the check into our customer’s account? – IBA Compliance Connection

IBA Compliance Connection

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A customer asked to deposit a check for over $1000 drawn on a credit union account in Italy. The check has been marked “non-transferable” and has been indorsed in blank by the payee. However, our customer is not the payee. Can we deposit the check into our customer’s account?

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Whether you wish to deposit the check into your customer’s account is a business decision for your bank to make.

According to the U.S. Treasury, a check drawn on an Italian bank in an amount greater than $1000.00 must be marked as “non-transferable.” However, under the Illinois Uniform Commercial Code, when a check is endorsed in blank — that is, without special instructions — it becomes payable to the bearer. In this case, the payee endorsed in blank. Consequently, we believe your bank is permitted to deposit the check into your customer’s account.

However, we note that by depositing the check and sending it for collection, your institution is warranting to the payor bank that your customer was entitled to enforce the item. If it turns out that your customer forged the payee’s signature, your bank could be liable to the paying bank for breaching this warranty. Therefore, whether you wish to accept the risk of liability is a business decision for your bank.

For resources related to our guidance, please see:

  • Create a Deposit for a Foreign Check Item (“For a check drawn on an Italian bank that is greater than $1,000.00, ensure the face of the check bears the wording ‘Non Transferable’ and that it has been endorsed by the payee.”)

  • Uniform Commercial Code,810 ILCS 5/3-205(b) (“If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a ‘blank indorsement’. When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.”)

  • Uniform Commercial Code, 810 ILCS 5/3-417(a)(1) and 810 ILCS 5/4-208(a)(1) (“If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that: (1) the warrantor is or was, at the time the warrantor transferred the item, a person entitled to enforce the item . . .”)