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#1625041 - 11/07/11 04:03 PM Depositing checks payable to a business
Help!!! Offline
Member
Joined: Aug 2011
Posts: 51
Arkansas
We have a business account that has another business operating inside. The account only has the one business name on it. Some of the checks that are being deposited are made out to the other business that is not listed anywhere on the account. I am new to the deposit side of compliance but I would think we should NOT allow checks to be deposited that are not payable to the name on the account. Where can I read information on such?

Any comments are apreciated.

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Deposits and Payments
#1625427 - 11/08/11 12:29 AM Re: Depositing checks payable to a business Help!!!
Deputy Dawn Offline
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Deputy Dawn
Joined: Feb 2007
Posts: 485
Pennsylvania
1. Your customer is XYZ Corp - you have identified XYZ Corp through your CIP process.
2. ABC Corp is not your customer - you have not identified ABC Corp through your CIP process.
3. Your contract is with XYZ Corp - not ABC Corp
4. If ABC Corp files for any of the checks that have been deposited to XYZ Corp's account, those funds will be returned to ABC Corp which could result in a loss to your bank.


If you substitute people instead of businesses, would you allow checks payable to Jane Doe to be deposited into Mary Smith's account? No

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#1625524 - 11/08/11 02:31 PM Re: Depositing checks payable to a business Deputy Dawn
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Consider the possibility that the "business operating inside the other business" is actually a division of the business for which the bank has the account. For example, "Easy Irrigation Systems, a division of Easy Landscape Services, Inc." Assuming that the bank has worked with the depositor to assure itself of that structure of the businesses, the bank could accept a check payable to "Easy Irrigation Systems" for deposit to the "Easy Landscape Services, Inc." account. It could be facilitated by an endorsement reading something like "Deposit only to account of Easy Landscape Services, Inc., Easy Irrigation Systems, a division of Easy Landscape Services, Inc."

A similar result could be arrived at if Easy Landscape Services, Inc. operated a separate business, Easy Irrigation Systems, under a fictitious name (DBA).
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#1625533 - 11/08/11 02:40 PM Re: Depositing checks payable to a business Help!!!
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Similar thread. I would have more interest in putting a stop to it than I would in seeking an explanation for it.

You guarantee the endorsement of every check going through the account. You have no CIP information and the second customer. etc. etc.
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#1625561 - 11/08/11 02:59 PM Re: Depositing checks payable to a business Elwood P. Dowd
Help!!! Offline
Member
Joined: Aug 2011
Posts: 51
Arkansas
Thanks for all the comments. Very helpful

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