How secure is cheque system?

Recently, my father issued a crossed cheque to my mother and submitted it to the bank in order to open a fixed deposit account in her name.

The next day, we found that the funds were withdrawn but had not been deposited into the new fixed deposit account.

After a couple of days, my elderly father went to the bank to inquire about the missing funds, which amounted to a few hundred thousand dollars and represented his life savings.

We were later told that the funds had been deposited into the bank's "suspense" account for a few days now.

Can a bank divert funds of a crossed cheque into its own account?

For cheques given to a bank for the opening of a fixed deposit account, does the bank have the discretion to do other things with the funds without instruction or informing the issuer?

We wrote to the Monetary Authority of Singapore (MAS), hoping some kind of rectification could be institutionalised so that others would not suffer the same fate.

The MAS forwarded our feedback to the bank, which replied that it was within its procedure and right to have held the funds.

I had always thought a crossed cheque was safe and could be deposited only into the account of the payee.

It seems that I have been wrong.

Richard GohTiong Hwee

A version of this article appeared in the print edition of The Straits Times on September 01, 2015, with the headline 'How secure is cheque system?'. Print Edition | Subscribe