Question: Do you agree that if our corporate customer's authorized representative has a check payable to the corporation, and he properly endorses it on behalf of the corporation and then endorses it over to himself personally, he can then in turn cash it?
Answer: I think that's a dangerous practice UNLESS you have a corporate resolution from the corporate customer specifically authorizing that individual to CASH checks made payable to the corporation.
Otherwise, you may be deemed to be on notice that in signing it over to himself, the representative is breaching his fiduciary duty. That would lay the foundation for the corporation to sue you. There is a specific section of the UCC, Section 3-307, that deals with notice of breach of fiduciary duty. You will want to review it.
Imagine if I worked for ABC Corporation and I was an authorized signer on its accounts and had full access to the mail room. When checks came in from ABC's clients to pay for merchandise or services, do you think it would be proper for me to endorse them on the ABC's behalf, then sign them over to myself? ABC might not even know the checks had come in. It would be outright embezzlement and the bank would be aiding it if they allowed me to get away with it.
The original version appeared in the January/February 2002 edition of the Oklahoma Bankers Association Compliance Informer.
BankersOnline is a free service made possible by the generous support of our advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all banking professionals. Support our advertisers and sponsors by clicking through to learn more about their products and services.
Print Friendly!
Email This Article!
Discuss NOW!
