Skip to content

Question & Answer

Question: A check was deposited with our institution, payable to a corporation, split into two corporate accounts. Both of these accounts belong to the same person, who owns both corporations. We have now received a letter from the drawee bank on the check, asking us to tell them exactly into what account the check was credited. How much can we reveal about the transaction to this bank?

Answer: In a case like this where neither financial institution is out any money, and the inquiry is on the behalf of the depositor of one of the institutions, the danger is overstepping the rules of implied confidentiality. Financial institutions have, traditionally, exchanged information when requested. Unfortunately, the price we are paying for inter-institution cooperation is an increase of lawsuits.

The drawee bank has the right under Uniform Commercial Code to ask for a guarantee of endorsement. If the check is payable to one corporation and has been split, you will not be able to put a guarantee stamp on the check.

All of this could have been avoided at the teller's window. A check payable to a corporation should go only into that corporation's account. Your depositor could then have drawn a check from that account payable to the second corporation to disperse the funds into two accounts.

Both attorneys we spoke to about this case suggested that you refer all inquiries to the payee on the check, and not respond to the bank. Of course, if you are subpoenaed, you will have to produce the records.

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 2, 3/91

First published on 03/01/1991

Filed under: 
Filed under operations as: 
Filed under security as: 

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Topics