Pub. 5 2010-2011 Issue 4

www.nebankers.org 10 Extraordinary Service for Extraordinary Members. SECURITY OFFICER’S BY-WORD O NE WAY TO ELIMINATE A LEGAL liability is for the bank to use personal money orders rather than bank money or- ders. Although the bank needs to have the ability to issue cashier’s checks, a bank should never issue bank money orders or cashier’s checks when it could issue personal money orders. bankmoney order on behalf of the bank can issue them in such numbers and amounts that all of the bank’s capital and the entire personal wealth of all the directors must be paid to honor the cashier’s checks or bankmoney orders. Personal money orders are entirely different legal instruments. A personal money order is not signed by or on be- half of the bank. It is similar to an ordi- nary check in that the personal money order is issued with unfilled blanks for the name of the payee, the date, and the signature of the purchaser. Only the amount is filled out at the time of issue and that is usually done by a check- writer impression. A personal money order is a one-time, one-check checking account. A customermay stop payment on a personal money order. It is a safe and convenient means of remitting funds by a person who does not have a checking account. The real advantage to the bank is that a personal money order is not an obligation of the bank. The bank may refuse payment for the proper reasons. The bank’s only obligation is to pay the personal money order if payment has not been stopped and if it was purchased with honest and valid funds. We recommend that banks use personal money orders in all cases in which a cashier’s check is not required to fulfill the customer’s needs. All tell- ers can issue personal money orders. All cashier’s checks should require two authorized signatures, and the number of bank officers and employees who are authorized to sign cashier’s checks should be strictly limited. NOTE: The Uniform Commercial Code has been changed so that pay- ment now can be refused on a cashier’s check, but only after 90 days and in compliance with UCC 3-312. Z Watch Your Liability Donald M. Towle , President, Kansas Bankers Surety Co. A bank money order is legally the same as a cashier’s check. That is, it is a bill of exchange or draft drawn by the bank on the bank and is le- gally accepted by the act of issuance. A bank may not stop payment on its cashier’s checks or bankmoney orders. A dishonest officer or employee who is authorized to sign a cashier’s check or It is always important for the bank to limit its legal liability whenever possible. There is no reason for any bank to obligate itself for anything which can and should be avoided. For more information, please contact Kansas Bankers Surety Co. at (785) 228-0000.