Topic: Authorized Signers
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Can a minor be added to a business checking account as an authorized signer? Is any additional documentation required?
Yes, we believe that a federally chartered savings bank may add a minor as an authorized signer to a business checking account when presented with the appropriate corporate documents providing such authorization. The Illinois Savings Bank Act states that any individual may hold a deposit account at a savings bank regardless of age. Similarly, the…
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Which documents should our bank require when a customer opens a corporate account?
The Customer Identification Program (CIP) regulations provide specific guidance regarding documentation for new corporate accounts. CIP regulations require you to collect an Employer Identification Number (EIN) from every business customer, as well as its name and address (a principal place of business, local office or other physical location). You also must verify the existence of…
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A married couple added a secretary from their business as an authorized signer on a CD. The CD has matured, and the couple would like the authorized signer to renew the CD, since they are out of town. Can an authorized signer renew the CD or otherwise change its terms?
Yes, we believe the authorized signer should be able to renew the CD or agree to new account terms, provided that this would not be inconsistent with the terms of your account agreement and any collateral agreement you may have defining the scope of the authorized signer’s authority.
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An LLC would like to open a deposit account. The LLC is owned and managed by a trust, but the trustee does not want to serve as an authorized signer for the account. Can the trustee open the account with two non-trustees as authorized signers?
We recommend suggesting that the trustee open the account, naming the LLC as the account owner, and having both the trustee and the two individuals be authorized signers. The Illinois Trusts and Trustees Act limits the types of powers that a trustee may delegate to non-trustees. It prohibits trustees from delegating powers that involve “judgment…
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Is there a law that requires us to have all of the members of a member-managed LLC as signatories for the LLC’s deposit account? For example, one LLC customer wants only two of its four members to have signing authority.
No. We are not aware of any law that would require you to include all of the members of a member-managed LLC on the LLC’s signature card. The Illinois Limited Liability Company Act provides that every member of an LLC has authority to act on behalf of the LLC, “including the signing of an instrument…
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Can the authorized signer on a consumer deposit account close the account?
The Uniform Commercial Code (UCC) provides that any authorized signer may close an account. However, the UCC also permits an institution to change this rule in its account agreement to prohibit an authorized signer from closing the account. For resources related to our guidance, please see: UCC, 810 ILCS 5/4-403(a) (“ . . . If…
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Should we accept a check for deposit in a business account if the check was made out to an employee of the business, who then endorsed the check to the business? (One of our customers issues paychecks to its employees, has the employees endorse the checks, and then cashes the checks for the employees.) Can a check deposited in a business account be endorsed over to the business or does the check deposited in a business account have to be made out to the business itself and not endorsed over to the business?
There are some risks in accepting checks that were endorsed to your customer by the payee of the check. Whether a check is made out to an individual or to a business entity, the bank may be risking liability to the payee of the check when allowing a customer to deposit such checks, as discussed…
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Do we need to obtain social security numbers from the authorized signers for our business customers? Is it permissible to ask them for social security numbers?
We do not believe that the Customer Identification Program (CIP) rules require your organization to collect social security numbers for every individual who is an authorized signer on a business account. The CIP rules require, at a minimum, that you collect a taxpayer identification number from every customer, including business customers. 31 CFR 1020.220(a)(2)(i). The…
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We have a trust account here, and the trustee has asked to add an authorized signer to the trust. Is that allowed?
We do not recommend allowing an authorized signer on the trust unless the trust agreement specifically authorizes the individual to hold that power. If a trustee has signing power, the trustee cannot delegate that power to another individual; the Trusts and Trustees Act prohibits trustees from delegating to others “the performance of any acts involving…
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We have a representative payee account. The beneficiary of the account came into a branch and, without permission from the representative payee, withdrew money from the account in cash. Will the bank be held liable to anyone for this, and what steps should we take?
We believe that the withdrawal would be considered unauthorized and that the bank could be liable for the unauthorized withdrawal, if no defenses under the Uniform Commercial Code apply. Under the Social Security Administration (SSA) regulations, a representative payee is selected is selected after determining that the beneficiary of the payments is unable to manage…