Possible Red Flag on New Account Opening
by John Burnett, BOL Guru BIO AND CONTACT INFO
Question: A corporation has two relatively inactive business accounts at the same bank. The president of the corporation goes into a separate branch of the bank and opens a third account. He signs the bank's form resolution and the signature card. The two old accounts, however, have three persons on the signature card. Money from one old account is then transferred into the new account and a large corporate check is deposited into the new account. Then, one of the signers on the old account (who is an equal shareholder in the corporation and co-president) complains that the bank made a mistake by permitting the other "co-president" to open the new account, because he is excluded from access to the funds. He said there was never a shareholder's meeting and the new resolution was never passed by the corporation. To what extent can the bank rely on the resolution submitted? Did the bank have to notify the other co-signers of the new account, or investigate the validity of the resolution? Should a red-flag been raised by the existence of the other two accounts and the fact that they had three signers? Once notified, what should the bank do?
Answer: The bank, in spite of its multiple locations, should be presumed to have a single information database, if you will. I believe the bank should be held to the knowledge of the pre-existing accounts.
The fact that the "resolution" was apparently not signed by the corporate clerk or secretary is another red flag. Accounts should not be opened based on the "say so" of a single officer.
Once the bank had the knowledge that something was amiss, it should have frozen the account in question, and contacted its attorney ASAP.
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