CBT Negotiable Instruments and Check Processing 3

Question 1

What information is required on a check for it to be considered a valid negotiable instrument under the UCC?

Accepted Answer

Unconditional order to pay, specific dollar amount, and maker's signature

Answer

Under UCC Article 3, a valid check must be an unconditional written order to pay a fixed amount of money, signed by the drawer (maker).

Question 2

A 'substitute check' created under Check 21 must contain which statement?

Accepted Answer

'This is a legal copy of your check. You can use it the same way you would use the original check.'

Answer

Check 21 requires that substitute checks bear the specific legal equivalency statement confirming they are legally the same as the original paper check.

Question 3

When a customer presents a third-party check (made out to someone else and signed over), what should a teller do first?

Accepted Answer

Verify the endorsement and follow bank policy for third-party checks

Answer

Third-party checks carry higher fraud risk, so tellers must verify the endorsement is complete and follow their bank's specific policies, which may include additional ID verification.

Question 4

What is 'check kiting'?

Accepted Answer

Exploiting the float between two accounts to fraudulently inflate balances

Answer

Check kiting is a form of fraud where a person exploits processing float by writing checks between accounts with insufficient funds to artificially inflate balances.

Question 5

Which endorsement allows a payee to sign a check over to a third party?

Accepted Answer

Special (full) endorsement

Answer

A special or full endorsement names a specific new payee ('Pay to the order of [Name]'), transferring the check to a third party.

CBT - Certified Bank Teller Practice Test

CBT - Certified Bank Teller Practice Test

CBT Negotiable Instruments and Check Processing 3