Safekeeping Cheques

Posted Monday December 12, 2011

Category: Cheques

A small business owner, Mr. D, kept his business chequebook in a locked cabinet behind a counter at his office. He was the only person who had access to the cabinet.

One day, Mr. D's bank phoned to ask for instructions in cashing a $90,000 cheque, as doing so would generate an overdraft in the account. Confused, Mr. D explained to the bank that he never wrote such a cheque. Mr. D then looked in his cabinet and realized that some cheques were missing. Suspecting a fraud, he contacted his bank as well as the police, who later arrested an employee of Mr. D's.

It was after the employee was arrested that Mr. D discovered another earlier cheque for $21,500 had been fraudulently written, and in that instance the bank had cashed the cheque. Mr. D requested the bank compensate him for the full amount but was turned down. The bank was of the opinion that Mr. D had inadequately protected his cheques and was therefore liable for his employee's fraudulent activity. Unhappy with the bank's response, Mr. D complained to OBSI.

Complaint upheld

From the outset, there was no dispute as to whether a fraud was committed or not. However, the bank believed that Mr. D failed in his obligations to take reasonable measures to prevent cheques from misuse, as specified in his account agreement.

We interviewed Mr. D as well as a number of representatives from the bank. We concluded the client did take reasonable measures to safeguard his cheques. They were kept in a discrete locked cabinet and there were no prior indications the cabinet had been compromised.

Mr. D had immediately informed the bank of the suspicious transactions when he became aware of them, as he was required to do. In addition, the account agreement did not contain provisions preventing compensation in the event an employee was involved in the fraudulent activity that caused a loss. In this instance, we felt that Mr. D could not be held responsible for the fraudulent cheque. The bank agreed to compensate Mr. D the full $21,500.

(2011)

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