IBA Compliance Connection

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One of our elderly customers deposited a cashier’s check, which she believes was sent by someone who promised to marry her. We called the issuing bank before making the funds available from the deposit, and they confirmed that the cashier’s check was legitimate. About a month after the deposit, the customer requested a wire to send the funds, which we have not yet executed. We have frozen the customer’s account, which still contains the majority of the funds from the deposited cashier’s check, and reported the potential elder financial exploitation of our customer. Is there any chance that the deposited cashier’s check could be returned?

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First, we do not believe that the issuing bank could return the cashier’s check. The Illinois Supreme Court has held that a cashier’s check is the equivalent of cash. In Illinois, as a general rule, once the cashier’s check enters the stream of commerce, the issuer is liable under the UCC if it refuses to honor the cashier’s check when presented (there are exceptions, one example being when the person presenting the cashier’s check is the same person who fraudulently ordered the issuance of the check).

We should note that this issue is treated differently by some other states around the country.

Also, we believe these facts may have the markers of either first-stage elder financial exploitation or an attempt to enlist your customer in unwittingly participating in a money laundering scheme. While your bank already has reported the potential elder exploitation, we recommend filing a suspicious activity report and reporting this incident to local law enforcement.

For resources related to our guidance, please see below:

  • Illinois Uniform Commercial Code, 810 ILCS 5/4-302 (“If an item is presented to and received by a payor bank, the bank is accountable for the amount of: (1) a demand item, other than a documentary draft, whether properly payable or not, if the bank, . . . retains the item beyond midnight of the banking day of receipt without settling for it . . . .”)
  • Northern Trust Co. v. Chase Manhattan Bank, 748 F.2d 803 (2d. Cir. 1984) (“Northern is here trying to recover back moneys it paid as drawee of a forged check to Chase, the payee of that check. . . . It was not until December 28, 1979 — more than two months later — that Chase was notified by Northern that the check was a forgery. By December 28, 1979, the loss from the forgery had already occurred. The discovery by Northern of the forgery, and its notice to Chase, were too late to prevent loss. . . . There will be judgment in favor of Chase.)
  • Bank One, Merrilville v. Northern Trust Bank/DuPage, 775 F.Supp. 266, 270 (N.D. Ill. 1991) (“Illinois courts view an issued cashier's check as accepted under Code § 4-303 and as the equivalent of cash. . . . As a consequence of the application of Illinois law to the subject of cashier’s checks, Northern, under § 4-303, can raise no excuse ‘whether or not effective under other rules of law’ justifying its refusal to pay.”)
  • FDIC Suspicious Activity Report Rules, 12 CFR 353.3 (“A bank shall file a suspicious activity report with the appropriate federal law enforcement agencies and the Department of the Treasury, in accordance with the form’s instructions, by sending a completed suspicious activity report to FinCEN in the following circumstances . . . .”)