Responding to the financial abuse of older people - Loddon ...

It is a common aphorism that banks have a duty to know or check a customer’s
signature but the principle is only that a bank must have a mandate to debit a
customer’s account and bears the risk of having to reverse a debit it makes without
such a mandate. 97 The bank would not have a mandate where a cheque was forged, for
example, or a person purported to sign an instrument on behalf of the customer but
had no actual authority. Thus it is not a question of whether the bank owes any duty
to a customer to verify the signature of a representative or the validity of that status.
It is rather a question of whether a bank is prepared to take the risk of being unable
to debit the customer’s account for amounts that have been paid by it on cheques
honoured.
It is therefore in the interest of the banks to ensure that any person signing a cheque
as a representative of the customer has actual authority to do so.
(b) Accounts
Anti-money laundering law requires that the identity of any additional signatories
to an account must also be verified. 98 Most banks have standard forms (additional
signatory application forms) for the addition of a signatory to an account which
requires both the signature of the accountholder (customer) and the new signatory
(representative). 99 Such a form acts as a mandate authorising the additional signatory
to access the account. A bank’s requirement for a formal process of adding a signatory
to an account serves not only to protect the customer but also to protect itself from
claims that the signatory did not have the authority of the customer. How a bank
operates an account with an additional signatory will therefore usually depend on
the terms and conditions as set out in the additional signatory application form.
Where the representative is authorised under a power of attorney, the powers of the
attorney would be set out in the power of attorney. The bank is nonetheless required to
verify the identity of the attorney before accepting the attorney’s authority to operate
the account. The bank may also have terms and conditions which require any additional
account signatory to complete an additional signatory application form.
8.8 Can a bank mitigate these risks
As discussed earlier, the banker-customer relationship is essentially a contractual
relationship. In the absence of an express contract (written or otherwise), the contractual
obligations of both parties are governed by the implied terms of the contract. These
implied terms may be varied or removed by the parties agreeing to any express terms
which are inconsistent with those implied terms. The issue of elder abuse may therefore
be assisted by including express contractual terms to promote the detection and/or
prevention of abuse. There are also other ways a bank may reduce its exposure to legal
liability when dealing with suspected abuse. Some options to promote the detection and
prevention of abuse are listed below.
(a) A bank may incorporate a term which allows the bank to delay the execution of any
apparently valid mandate of the customer. This gives the bank time to investigate any
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