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Endorsement Requirement On Checks Written To 'Cash'
Answer by Ken Golliher, BOL Guru

Question: Is it necessary for all checks written on a personal account for cash or to the bank to be endorsed on the back if the person writing the check is present?

Answer: A check payable to "Cash" is a "bearer" instrument, the law does not require that it be endorsed. However, the preferred banking practice is that the bank require the person negotiating the check to endorse it. Even though the law does not require it, your bank can.

Banks should not cash checks payable to "The Bank." It's a technique commonly used to defraud financial institutions; e.g. the customer claims the check was given as a loan payment and that no cash was received. (The inherent accusation is that the teller took cash out of the drawer and pocketed it. It's the teller's word vs. customer's.)

Along the same lines, banks should not accept checks payable to "The Bank" unless the bank is the true recipient of the funds; e.g. loan payment, fees, etc. The method is also used to defraud the bank's customer; e.g. bookkeeper makes check payable to the bank and uses it to purchase cashiers check payable to third party. Employer reviewing cancelled checks notes check payable to bank and assumes it was applied to line of credit as the bookkeeper was supposed to do. (Court case says bank had duty of inquiry.)

First published on 05/12/03

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