Topic: Cashier’s Checks
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We learned that a customer fraudulently obtained an economic injury disaster grant from the SBA, despite not owning a business. The customer used the funds to purchase a cashier’s check that was mailed to a recipient who cashed it at an out-of-state bank. We learned of the fraud approximately one week after issuing the cashier’s check and put a stop payment on it. When the check came into our bank, we returned it due to the stop payment. However, the depository bank claims that it called our bank to verify the authenticity of the cashier’s check and was advised that it is valid. Are we liable for the cashier’s check?
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Yes, we believe your bank is liable for 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…
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We have a business customer that deposited a fraudulent $100K cashier’s check at our bank. The customer waited two days for the funds to become available, then wired out $70K. After sending the wire, we received the $100K check as a chargeback with the notation that the check was an “altered fictitious check,” but we rejected the return as late (past the midnight deadline). Our customer later notified us that the $100K check they deposited appeared to involve a fraud scheme. We placed a hold on the remaining $30K in our customer’s account. After waiting thirty days, we have not heard from the paying bank, which apparently has a $100K loss. Is our customer entitled to keep the $30K from the fraud, or does the paying bank have a right to claim the remaining funds?
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Whether the paying bank has a right to claim the remaining funds from your customer depends on the facts and circumstances of the fraud. If your customer was an innocent victim of the fraud and took the cashier’s check in good faith as payment for goods or services (or took certain actions in reliance on…
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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?
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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…
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Can we limit the amount of cash we will provide to a non-customer when they present an on-us check in person? We would pay the remainder with a cashier’s check. Our deposit account terms describe the check cashing fees and identification requirements for non-customers, but they do not indicate that we may refuse to cash a customer’s check for a non-customer.
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We recommend consulting with your bank counsel to amend your account agreements before setting a limit on cashing checks for noncustomers. By setting a limit on cashing checks, your bank would be refusing to cash (or fully cash) some checks issued by your customers to noncustomers. While it is unlikely that a noncustomer would have…
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Can we establish a limit over which we will not cash checks for non-customers? Also, can we refuse to cash our bank’s certified checks, cashier’s checks and money orders for non-customers?
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Checks Drawn on Your Customer’s Account Yes, we believe you may set a limit over which your bank will not cash checks for noncustomers. However, we recommend reviewing your account agreements to assess the possibility of liability under the Uniform Commercial Code (UCC) when refusing to honor your customer’s checks. Your bank’s refusal to cash…
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Are we authorized to put a stop payment on a cashier’s check payable by our bank that has not yet been submitted for payment? We discovered that one of our customers had purchased the cashier’s check as the result of a scam.
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No, we do not believe that your bank may stop payment on the cashier’s check without risking liability for the 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…
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If a customer loses a cashier’s check or it is lost in the mail, how long does a customer have to wait to request a refund or reissue?
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A customer may assert a claim for a lost cashier’s check by signing a “declaration of loss” that meets the Uniform Commercial Code’s (UCC) requirements. The customer may sign the declaration of loss as soon as they become aware of the loss, but the claim will not be enforceable until ninety days after the date…
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We have a customer who closed her account and requested that a cashier’s check with the remaining funds be mailed to her. The customer has not received the check and believes it was lost in the mail. She has signed an indemnity agreement and would like a new cashier’s check to be issued. Do we have to wait ninety days to reissue the cashier’s check if we have a signed indemnity agreement? Can we put a stop payment on the lost cashier’s check?
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Whether to issue a replacement cashier’s check prior to the ninety-day waiting period is a business decision for your bank. As both the remitter and payee of the cashier’s check, the customer may assert a claim for the lost check by signing a “declaration of loss” that meets the Uniform Commercial Code’s (UCC) requirements. However,…
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What are the consequences for our bank if one of our employees signs a cashier’s check for an amount higher than they are authorized to sign (for example, where an employee has authority to sign up to $10,000 but signs a cashier’s check for $50,000)? What if the employee steals and writes a cashier’s check? In either of these cases, can the check be returned? We tell our customers that they must wait ninety days and sign an affidavit of loss before we can put a stop payment on a cashier’s check.
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We do not believe your bank would be able to return or stop payment on an unauthorized cashier’s check if presented by a holder in due course, unless it sent notice of dishonor before your midnight deadline, on the next banking day after the check was received. As a general rule, a bank may not…
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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…