Stop Payment on Cashiers Check (potential fraud)

Our customer purchased a cashiers check from our bank and mailed it to a fraudulent business (i.e. our customer is being scammed). Can we place a stop payment on this cashiers check?

Payment cannot legally be stopped on a cashier's check. The issuing bank is obliged to pay it if presented by a person entitled to enforce it. Any holder in due course would be so entitled. See UCC §§ 3-411 and 3-412.

Refusal of payment of a Cashier's Check can only be done in the instance of it being lost, stolen, or destroyed. Refer to UCC § 3-312: http://www.law.cornell.edu/ucc/3/3-312.html

You cannot place a stop payment on a cashier's check and refusing to pay a cashier's check under any other circumstance than outlined above leaves you open to a financial liability.

Could we attempt to return the cashier's check "Refer to Maker" and hopefully the depository bank would possibly realize their customer is a fraudster?

You could attempt that piece of subterfuge, but at the end of the day the depositary bank, as holder in due course, will come to you with the expectation of receiving payment not only for the check but also any costs it incurred as the result of your refusal to pay.

The moral of this story: It was your customer who was duped and your customer who is out the money. Don't make your customer's gullibility your problem.

Your bank is the maker.

Perhaps the reference was to The Maker.

Back in my teller days I had a number of customers deposit a check and state that they're going to home and pray that it doesn't bounce.

This is now a civil matter between your client and the person that they paid with the cashier's check. You don't have a dog in this fight, no matter how much the client may try to make it seem as if it's your problem to fix.

Logic above aside, if the other bank paid out the funds, "the depository bank would possibly realize their customer is a fraudster" is only going to ensure they want the money from your bank sooner rather than later.

I will say that once upon a time, in a bank far far away, a cashier's check was issued that should not have been. A gal at our bank with a strong personality called the bank we knew was getting the check. The customer drove straight over. Our gal told that bank's cashier (who she knew) that we would not honor the check.

It was a bluff, it wasn't legal, but the customer came back to our bank to discuss the matter. (FWIW I was but a peon in the bank at the time, an observer.) That, and the (stupid) loan that funded that check were both taken care of. We were lucky in more ways than one and the new lender did not last long at our bank.

I give you that story not because it worked, but because losses could have been greater had the customer gone to a savvy attorney and not back to our bank.