1. The paying banker
A paying bank/banker also known as the drawee bank is the bank on whom a cheque is drawn. That is, the paying bank/banker is the bank who pays the value of the cheque.
The paying bank/banker is the bank whose name is printed on a given cheque.
Duties of a paying bank
The paying bank has the duty to ensure the following;
1.To check the front of the cheque to ensure that;

2. the signature of the drawer is genuine
the cheque is dated and not stale or post dated.
there is a payee
amount in words and in figures tally
No material alteration is made ie. no erasure, cancellation etc.
The cheque is in good form. Ie. No mutilation
2. To check the back of the cheque to ensure that the cheque is endorsed

3. Other duties include;
Check the account of the drawer to find out whether or not there is sufficient funds
Check whether or not the cheque has been stopped
To check for any legal bar. Eg. Death of customer, mental incapacitation of customer, garnishee order etc.

4. Precautions in the payment of cheques
These are some few precautions to be taken by the paying bank;
Payment must be made in accordance with the customer mandate. That is, the cheque must be paid in conformity with the customer’s signing instructions. Eg. Sole signatory, either to sign, both to sign etc.
The paying banker should also note whether the cheque is presented during the banking hours and on a business day.
The paying banker should ensure that the cheque is drawn on the branch where the account is kept.

5. Risk facing the paying banker
Wrongful payment
The paying bank may not be paying in accordance with the customer’s instructions as per the mandate between the customer and the bank. This may take the form of ;
An unthorized /forged signature
For joint accounts where both members have to
sign and only one person signs.
Payment of countermanded cheques.

6. 2. Wrongful dishonour
This is when a bank refuses to pay without any tangible reason. When a bank wrongfully dishonours a cheque, it is guilty of breach of contract and can be sued for damages, for defamation or libel.
Egs.
(a)When the bank fails to realize that the drawer has notified the bank to cancel any stop notice.
(b) Wrong assumption that there is insufficient funds in the account of the drawer.

7. As a result when a bank/banker wrongfully dishonours a cheque, the bank should;
Apologise to the customer
Refund charges (if any)
Contact both the customer and the collecting bank and explain it was their fault. This is done usually on the phone and in writing.

8. Protection for the paying banker
Under section 79 of the bill of exchange Act, 1961, there is protection given to the paying bank in relation to the payment of open and crossed cheques.
Where the banker pays a cheque whether open or crossed in good faith and without negligence is not liable to the true owner of the cheque.
Hence when faced with a claim of conversion the paying banker is protected when he/she acts in good faith and without negligence.

9. Estoppel
In short estoppel means “prevented from denying”. That is, estoppel is a legal principle that prevents someone from denying the truth of a statement he/she has made or has been established.
This principle is used to prevent the customer or banker from denying the truth of some act or the validity of a transaction.

10. Eg1. In Brown v Westminster Bank Ltd(1964), an old lady’s signature had been forged on over 300 cheques, and the bank had questioned her on several occasions. The bank was informed the signatures were either her own or had been authorized by her. Later when her son became aware of the forgeries He sued the bank. The court held in favour of the bank that the customer was estopped from denying that the signatures were genuine.

11. In Greenwood vs Martins Bank(1921), a husband was aware that his wife was forging his signature but was persuaded not to inform the bank. When the wife died and the husband claimed against the bank, He was estopped from denying the genuiness of the cheque.

12. It therefore follows that, a bank can rely on the doctrine of estoppel ;
Where contributory negligence can be attributed to the customer.
Where the customer has given contradictory statements regarding the authenticity of his signature.

13. Subrogation
Subrogation means stepping into the shoes of another person. A bank has a right of subrogation where it has paid a cheque in breach of mandate. Subrogation enables the bank to claim back from the payee the goods purchased by the proceeds of a wrongfully paid cheque in order to prevent unjust enrichment of the payee.

14. Payment under mistake
A paying bank may use this defense to reclaim money paid in breach of mandate where ;
The payment was made as a result of a forged signature, stopped cheque or the payment was made as a result of any other mistake. That is, the bank can claim that whatever payment that was made was a mistake and can therefore recover the amount that was wrongfully paid.

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16. Cheque handling and fraud
A fraud is a criminal offence of intentionally executing or attempting to execute a plan to obtain money or any other thing.
 Fraud could also be defined as deliberate deception to secure unfair or unlawful gain.
In banking, cheques can easily be used to commit fraud.

17. How is fraud committed using cheques?
1. Through stealing of cheques- employees, friends, family members etc can steal leaflets from cheque books, forge the customer’s signature and present to the bank for payment.
2. Counterfeit cheques – Counterfeit cheques are fake cheques produced in the likeness of the original. These cheques are very difficult to distinguish from the original without using appropriate technology. Counterfeit cheques can be used to draw cash if bankers are not vigilant.

18. Criminals, customers, existing and ex-employees of printing firms, bank staff amongst others are key people who can facilitate the production of counterfeit/fake cheques.
3. Forged cheque – This is a cheque where the signature has been mimicked. The signature is not signed by the original owner but by someone else. These are called forged signatures are usually similar to that of the owner of the cheque. If the banker is not careful such a cheque can be honoured.

19. Altered cheque – an altered cheque is a cheque which has been properly issued but another person obtains it makes changes to the original information on the cheque.
Cheque book of closed accounts- any time an account is closed, it is advisable for the bank to take back any cheque books in the possession of the customer. Otherwise it can be used to facilitate fraudulent activities.

20. Measures to reduce fraud by cheques
Customers should keep cheque books in safe places
Customers can ask their banks/bankers to seek confirmation on amounts beyond a certain limit
When a cheque book is stolen, the customer should quickly notify the bank.
No spaces should be left between words and figures

21. Customers must be mindful not to issue blank cheques.
Signs of bad cheques
Missing cheque numbers or repeated cheque numbers
Name of bank and logo missing
Colour of the cheque not in uniformity with the colours of the bank cheque book
Mismatch between the MICR code, the bank sorting code and cheque number.

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