Thursday, November 30, 2023

Bank Draft’s Future in Today’s Technological World of Banking


Gone are the days in Ghana when students and/ or parents will have to queue for hours, if not the whole day, just to get banker’s draft (Payment Order) from a particular bank to pay for school fees and/ or other related charges/ fees. But now that we find ourselves in this technological and digital world of banking, the question is, “Is Banker’s Draft still relevant?” With the surge in organized crime and the vulnerabilities in the issuance of banker’s draft to money laundering, many are wondering why we still rely on banker’s draft to make payments?


A banker’s draft is a payment instrument issued by a bank to guarantee payment on behalf of a payer. Typically, a bank will review the bank draft requester’s account to see if sufficient funds are available for the draft to clear. Once it has been confirmed that sufficient funds are available, the bank effectively sets aside the funds from the customer’s account to be given out when the banker’s draft is used or comes through the clearing system. In Ghana, one does not need a bank account before banker’s draft is issue out. All, the person needs to do, is to present the cash to the bank for the draft to be issue (a very big money laundering red flag or vulnerability).


Obtaining a banker’s draft requires that the customer has already deposited funds equal to the draft amount and applicable fees with the issuing bank. The bank creates a draft to the payee (beneficiary of the funds) drawn on the bank’s own account. The name of the customer (also known as the remitter) is noted on the draft, but the bank is the entity making the payment. A bank official signs the draft. The banker’s draft guarantees the availability of the underlying funds for the payee. It is important to note that once a banker’s draft is arranged, it is usually not possible to cancel or stop payment on it since it, in effect, represents a transaction that has already occurred. However, if the draft has been lost, stolen or destroyed, it can usually be canceled or replaced as long as the requester (customer) has the required documentation.


Why will a customer walk to the bank and request for a bank draft for the payments of goods and/ or services, when he or she can just sit in the comfort of his home or office and make the payments for the goods supplied and/ or services rendered at the click of a bottom?


It is the practice in Ghana not to issue a bank draft above the threshold limit of GH¢30,000. That is to say, if a customer want a bank draft for GH¢50,000, the bank will issue the draft as GH¢30,000 and GH¢20,000 (yet to get the supporting guideline or regulation for this practice), when the customer can just send this fund using the Automated Clearing House (ACH) transfer to the suppliers’ bank account directly within hours if not minutes.


Criminals all over the world have been using the banker’s draft to wash their dirty money by employing so many ways. One way to laundering ill gotten funds is when the criminal walks into the bank with the dirty money to request for a banker’s draft. In Ghana you don’t need to be a customer of a bank for a banker’s draft to be issue to you. The criminal will do this on a large scale when he or she uses his or her associates to request for the bank instrument. Most often the payee is an associate person(s) and/ or company(ies) who deposit these drafts in their bank account for it to clear to obtain clean cash.


Another way of laundering money using banker’s draft is the smuggling of a particular currency such as the US dollar to a foreign financial institution for the purchase of draft denominated in that currency, US dollars. The foreign financial institution accepts the currency (US dollars) and issues the draft denominated in that currency, drawn against its correspondent bank account. Once the currency is in banker’s draft form, the money launderer can more easily conceal the source of funds. The ability to convert illicit proceeds to a banker’s draft at a foreign financial institution makes it easier for criminals to transport the instrument back into the country and/ or to endorse it to a third party in a jurisdiction where money laundering laws or compliance are lax.


In order to fight criminals using banker’s draft to wash their ill-gotten fund, organizations (both financial and non financial) should train their employees on how monies are or can be laundered. The main stream media and social media should create the awareness and educate the general public to be on the alert when dealing with people and report any suspicious activity to the Financial Intelligence Centre (FIC) and/ or the nearest police station.


Introducing new regulations and/ or guidelines on the issuance of banker’s draft (that is if we are still going to use it) will also go a long way in the fight against money laundering and terrorist financing. The guidelines or regulations should try and address the following issues:

  • Threshold limit to issue a banker’s draft to a non customer (someone without a bank account) if it is to be allowed.
  • Knowledge and evidence of the source of funds of the non-customer.
  • Criteria for opening a banker’s draft relationship with a foreign financial institution.
  • Acceptable and unacceptable transactions (e.g., structuring transactions or the purchase of multiple sequentially numbered drafts for the same payee).
  • Monitoring and reporting suspicious activities associated with banker’s draft.


Customers of Financial Institutions and the general public as a whole should be encouraged to use the electronic payment system or point of sale systems for the payment of good and services. The use of ACH transfers (either through internet banking, mobile banking or USSD) and issuance of cheques will help overcome the money laundering issues associated with banker’s draft. This will even save the customer the time and risk of carrying huge sums of money.


Bank draft might still be relevant in today’s banking environment but Banks should make a cautious effort to educate their customers and the general public as a whole on the use of alternative methods of making payment, if we are to fight this menace of money laundering and terrorist financing.


Would you mind doing me a favor? Share this article with someone so that the awareness of money laundering and terrorist financing could be spread to avoid being use as a conduit by criminals.


If you require further information on this article, please contact Richieson



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