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Bank Draft Vs Certified Cheques


A bank draft is an order to pay a sum of money on demand. It is addressed by a banker either to itself or to another banker and drawn on its head office or at a branch. It is issued and signed by two authorized signing officers of the bank; one being a “counter signature”. Once “signed”, bank drafts become a statutory obligation of the signing bank and are irrevocable.

Particulars Required for a bank draft are: The date, amount payable, and payee’s name must be typed on the draft prior to its delivery. It can be payable to a customer or creditor. On purchasing, the amount paid is placed in a special reserve account. When presented for payment, funds are withdrawn or collected from that account. The item is then collected through the ACSS. Not a Guarantee of Payment, although bank drafts are substitutes for cash, they cannot always be converted to cash immediately on deposit to a holder’s bank and are not a guarantee of payment. A collecting bank must be certain that the signatures are genuine and authorized. Funds are not realized until actual collection. The amount of the draft or the geographical distance between the place of issue and deposit, are factors that can increase/decrease the time of collection. Many devices exist for discovering counterfeit banknotes; however no corresponding devices exist for the discovery of forged or unauthorized signatures on a bank draft or certified cheque.


“Certification” is the name given to the marking of a cheque by a bank to show that its customer has an existing account with sufficient funds to meet the drawn amount. Certification is demonstrated by a mark on the cheque, typically a stamp marked “certified”. It must be signed by a bank or other financial institution. Certified cheques are not a guarantee of payment; items bearing forged endorsements can be returned for up to six years.

Particulars of Payment Certified cheques are typically drawn by a bank’s regular customer and payable to a creditor or an endorsee. They are payable on demand and collected through the ACSS. The customer’s account is then debited and the amount set aside into a special suspense account. When presented for payment through the ACSS, the amount is charged to that account.

A bank may be able to refuse payment on a certified cheque, if it can be demonstrated that a payee would be unjustly enriched by payment. Certification therefore is a direct promise of a bank to pay, independent of a customer’s obligation to pay, even where a bank has mistakenly certified a cheque.

Verification is required whether funds are direct deposited by bank draft or certified cheque, there is no appreciable difference in risk in comparison to closings in the past. Remember however that financial institutions may not post funds to a trust account until the next business day and sometimes later if the other lawyer’s financial institution is not one of the major institutions, or, if a cheque is drawn on an account in another region of the country. Verification of both items is necessary as the ACSS does not guarantee payment by bank draft or certified cheque.

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