LECTURE 4

TYPES OF ACCOUNT
HOLDERS (1)
 Individua
l
Executor/
administrator
joint

TYPES
OF ACC
HOLDER Sole-
agent S proprietor
ship

compan
y
partners
 INDIVIDUAL ACC
1) PRIOR To Opening An Acc…
Bank must ensure:
ensure -

Customer’s
identity is
ascertained, ie Has LEGAL Has an
proper person to CAPACITY AUTHORITY
conduct the acc
IF bank – not taking proper steps & not making
preliminary inquiries
to check the identity &integrity of customers
– Bank will be LIABLE
 LADBROKE & CO V TODD (1914) 111 LT 43

1) Opened an acc with a STOLEN CHEQUE,

pretending to be a payee
THIEF No introducer, no references BANK

2) Cleared the cheque

3) Drew the proceeds the next day
at thief’s request

PLAINTIFF – actual owner of cheque, discovered fraud,

sued bank
Bank’s failure to obtain a satisfactory
introduction/reference constituted a
breach of duty to true owner of the
cheque. Bank was LIABLE.
 WHAT BANK MUST DO TO CHECK
CUSTOMER’S IDENTITY?
INDIVIDUAL:
Checking the
National
Registration Nowadays: fast
Identity advancement in
card/passport IT – can use
BIOMETRIC
means

BUSINESS/CO:
Checking Business/Co
registration record –
can check with CCM
 P W / G P 1: o n
U g in s ti t u ti
yr e p o r tin
. 1 . 1 : E v e r r D U E
Para 5 c u s to m e
c o n d u c t c t o r y
m u s t in sati sf a
E & o b ta n i t s
G E N C l is h i
DILLI ro p e r l y e s tab
c e
c e & p al e x is te n
eviden d e n tit y & le g
e s s
t h e i b u s in
records, n a p ply in g t o d o
e
y p e r s o m u s t b
of an u c h e v i d e n c e
n d e nt
with it . S & i n d ep e
y re l iab le
n ti ate d b t s.
su bst a c u m e n
source do
 2) OPENING AN ACC

1)
Apply to open an acc
CUSTOMER 2) BANKER

Take a mandate
SAMPLE OF MANDATE

- Usually in form of:

Customer’s specimen
signature, address &
occupation
 NATURAL PERSON (INDIVIDUAL)

Provide
Not specimen of Provide details
disqualified signature ie address, tel
by any law no, occupation,
from employer’s
name & add
contracting
Current acc
– must
Sound introduced
mind by existing
customer

18 Years
(current acc) NORMAL Not to hv issued
cheque -
Saving acc –
12 above REQUIREMENT dishonoured
within IC
 Permanent &
mailing add
NRIC/passport
no
Date of birth
(original &
copy)

PARA 5.1 Standard

Guidelines on
Money Laundering
Full name & Combating the
Financing of
Nationality
Terrorism
UPW/GPI
 UPW/GP1, PARA 5.2.3 – in any doubt, bank
should request customer to produce other
supporting identification documents –
preferably, photo of customer, issued by official
authority to enable customer’s identity to be
ascertained.
 If individuals are
“Foreign Politically
Exposed
Persons” (PEPs)*:
Para 5.9 UPW/GP1
- Requires bank to
*PEPs – foreign individuals
conduct
entrusted with prominent enhanced customer due
public function, eg: head of
state diligence
Or government, senior
politicians
Senior government officials,
Judiciary or military officials
Senior executives of public
organization 13
 3) STOPPING AN ACC
Banker must stop an acc as soon
as his mandate is revoked,
expressly or impliedly
Means: Banker does not permit
money to be paid into or out of an
acc.
 JOINT ACCOUNT (JA)

Sometimes, an acc may be opened by more

than one person
JA – an acc which is conducted by 2 or more
persons
 Fill in an Can do this in the
application form bank or building
society

 OPENING OF JA

Online Over the

phone.

No limit on how many joint

account holders there can be.
 MANDATE FOR JA

Bank should obtain

written mandate
signed by all parties

JACKSON V WHITE & MIDLAND BANK LTD [1967] Lloyd’s Rep 68

Mandate to negotiate the cheque

needed the signature of BOTH joint acc-
holders
 FORM OF MANDATE FOR JA

Must be: IN WRITING

Mandate shd specify WHICH
& HOW many of parties hv
authority to sign cheque &
carry out any transactions
connected with the acc
(usually in bank’s
standardized format),
signed by all parties
contain instructions
regarding mode of
operation of acc

18
 Without the mandate – Bank CANNOT
pay a cheque safely unless the cheque has
been signed by all parties

Where banker hold any valuables or

securities on behalf of the joint-holders, he
should only release them (or their sale-
proceeds) to all acc holders together unless
the mandate specifies otherwise.
 REVOCATION OF MANDATE

Mandate given by JA cc holders can be

revoked at ANY TIME by any of the parties to
the acc
eg: Anyone of joint acc holders can stop a
cheque drawn by another party even though
the cheque was drawn in accordance to the
mandate.
When this happens, bank should inform the
other party or any of the parties ASAP
Mandate is revoked automatically by:

Death

Bankruptcy

Mental capacity
of any parties
 BANKRUPTCY
As soon as banker learns of
bankruptcy petition vs any of join
acc-holder – he cannot allow any
further drawing from the acc
If cheque drawn by the bankrupt
joint acc-holder – banker should
return with reason “refer to
drawer.”

If cheque drawn by solvent joint

acc-holder – banker should return
with reason “joint acc-customer X
involved in bankruptcy
proceedings.”
 MENTAL INCAPACITY/DISORDER

If one of joint acc-holder became

mentally disordered –banker must not
allow withdrawal

Withdrawal can only be permitted on –

joint instructions of remaining joint acc-
holders and guardian ad litem (guardian
for under-age-children cases, to
represent the interests of the minor
children
 Where a dying man still maintained
his mental capacity, the transfer of
money made is VALID, whether or not
he has mental capacity at the material
time is a question of fact
 CHOW YEE WAH & ANOR V CHOO AH PAT
(1978) 2 MLJ 41
1) Signed cheque prior to his death –
RM60384.80 & paid into JA,
under his name & first def for the benefit of his
Loke Yaik Hoe
wife
deceased

2) ISSUE: whether the deceased was in full mental capacity when

his thumbprints were affixed to the said cheque & documents

3) Claimed to recover the money

Deceased mother
 Facts showed that the deceased
was not mentally capable when
thumbprints were
Affixed. (high ct)
Clear intention to transfer the
money for the benefit of his wife.
Mother cannot claim.

COURT
DEATH If one of joint acc-holders died – banker
normally freezes the acc

BECAUSE – if there is survivorship

clause in the mandate – it does not
necessarily mean the fund in the acc
belongs to survivor beneficially, as
there may be claims made by estate of
deceased joint acc-holder

If the amount is nominal – banker may

use discretion as authorized by bank
management to pay the same to
survivor/survivors
 DEVAYNES V NOBLE (1816)
(CLAYTON’S CASE)
…new debt on the acc were
not responsibility of dead
partner, being incurred after he
ceased to be a partner

28
 SOLE
PROPRIETORSHIP

Solely liable for all

debts & liabilities of In banking practice, bankers
the firm allow ‘account payee’ cheques
payable to sole proprietor’s
name to be banked in into
firm’s acc
  Precaution – sole proprietor
must endorse at the back of the
cheque signifying his instruction
to credit the same into his firm’s
acc.
 OPENING SOLE-PROPRIETORSHIP ACC
When opening the acc, bank should:

conduct a search at CCM – to confirm

existence of the firm, identify of SP &
other particular of firms

Obtain specimen of firm’s rubber stamp

&acc mandate containing acc operation
details, signed by SP

 conduct customer due diligence

 Authorisation for
any person to
represent
business Identification doc of
authourised person to
Identification represent business dealing
with bank
document of SP UPW/GP1 para 5.3.1

Certificate of Copy Verify the

authenticity of info

of
registration provided by the
business with CCM
 In doubt case – bank should
conduct basic search/enquiry on
business b/ground to make sure it
has not been dissolved or in the
process of dissolution
 PARTNERSHIP
Opening partnership acc… In opening acc for p/ship, bank must:

• CCM
• To confirm existence
Conduct
search of firm, identity of
partners, other
particulars

Rubber • Specimen of firm

stamp rubber stamp

• Acs mandate,
Containing acc
mandate
operation details
• Signed by all parties

Customer’s
due
dilligence
 Authorisation
for any person Identification doc
to represent of authourised
business person to
represent business
Identification dealing with bank
document of UPW/GP1 para
partners 5.3.1

Certificate of Copy Verify the

authenticity of info

of
PS provided by the
business with CCM
 In doubt case – bank should
conduct basic search/enquiry
on business b/ground to
make sure it has not been
dissolved or in the process of
dissolution
Bank cannot honour the cheque WITHOUT all partners acc-holders’
signature
TWIBELL V LONDON SUBURBAN BANK [1869]

During opening their acc, stipulated:

Ptf & partner “No cheque drawn in the name of the firm
by one of the partners should be honoured Bank
by the bank unless it bores signature of other
partners

Honoured a cheque
Ptf was entitled to sue for BOC drawn on the firm’s
acc by one partner
without others’ initial