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Check Payable to Financial Institution Risks

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Are there any risks for a financial institution if we accept a check from a client for deposit to their savings account and the check is payable to our financial institution, instead of making it payable to the account holder?

If the check in question was issued by your depositor, I don't think there's added risk. But if the check issuer is not your depositor, it's possible the issuer intended for the check to be used for another purpose, such as a payment on the check issuer's loan at your bank, or to purchase a cashier's check.

As a general rule, a bank should not accept a check payable to the bank itself for any other purpose than to pay an obligation owed to the bank.

First published on 01/12/2020

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