I don't want to be ignorant here but I am not getting the risk of this scenerio. Our tellers are being told not to accept a check payable to our bank to deposit to our customer's account. Example: Our customer has an account at ABC Bank. Want's to draw a check from ABC Bank and deposit to their account here at OUR Bank and the check is payable to "OUR Bank" as opposed to being payable to their name individually or to Cash.
I hope I haven't confused this issue. I have polled the tellers for the reasoning of this to no avail. They have asked me to research. Thank you.

I won't interfere with your research assignment, but will give you a couple of anecdotes. The first was from a flyer that a bonding company sent to all of its insureds a few years ago:

Bookkeeper (for a CPA firm no less) is instructed to issue checks payable to a bank to make principal payments on the firm's line of credit. When the bookkeeper presents the checks to the bank she says they are to purchase cashiers checks which the bank dutifully issues to entities and individuals which the bookkeeper controls. The bookkeeper enters the checks on the firm's books as loan payments and no one reconciles the payments to the loan balance. Amount lost is about $75,000 and the bonding company refuses to pay, citing simple negligence on the part of the bank.

Second example from personal experience:

Company is transferring funds from Bank A to Bank B to simply build a deposit relationship there. Bookkeeper issues checks payable to Bank B, but deposits them to her checking account at Bank B. Amount lost is about $100,000. Company gears up to sue Bank B citing simple negligence, but bookkeeper makes restitution before suit is filed.

If the bank is not getting the money it should not accept checks made payable to it. If I want to move money between banks I should make the check payable to myself and then endorse and deposit it at the second financial institution.

This is so very helpful. Thanks so much.

Ken,

Per the first anecdote, it would seem that checks for the purchase of cashier's checks need to be made payable to "cash" or to an individual. But I just don't understand how the bank can be negligent for accepting a check payable to the bank for the purchase of a cashier's check?

The insuror (and the court decision that followed it) said that since the proceeds of the check were not applied to a debt owed by the drawer that the drawer's intentions were ambiguous and the bank should have verified their intent. I was shocked when I first read the decision, but have come to accept it.

Anecdote 3: CPA issues and signs checks on bank customer's payroll account, ostensibly for deposit of estimated and withheld payroll taxes, which would be credited as TT&L payments. Checks are payable to the bank. Instead of TT&L coupons, the CPA uses deposit tickets to his personal account, and absconds with the funds. CPA has also arranged for all IRS written communications to come to his office.

Customer doesn't find out what's going on until he finds an IRS lien on his real estate and a notice from the bank that funds have been levied by the IRS.

Admittedly, the customer was naive. The CPA had too much control and was not supervised. But the bank and customer had a wonderful time sorting out who was paying whom and how much.