An account mandate is a document that sets out:
- who owns an account (often called the account holder or account owner)
- who can use the account (and how it can be used)
- who can access information about the account.
A mandate is very straightforward if you are the only one operating an account. But you need to take care if there are two or more account holders, or if you let someone else operate the account.
Account holders can let someone else operate the account. These people are often called authorised signatories. Most banks require account holders to also be authorised signatories. Banks often require organisations such as companies, trusts and partnerships to have a certain number of directors, trustees, partners or officers who are authorised signatories. They also require rules about how such people access accounts.
Individual authorised signatories can use an account separately if the mandate says “several”, “any” or “either” authorised signatory can sign (that is, operate the account).
A mandate that requires “joint”, “both” or “all” (or in some cases “any two”) authorised signatories to sign or access the account together means one authorised signatory alone cannot use the account. Other authorised signatories must also authorise the transactions. A bank cannot allow transactions or other activity without the consent of the other holders.
Types of access
Be clear about what type of access you want authorised signatories to have. Do you want them to be able to access the account alone, or do you want them to act together? Consider this carefully before you set up an account – and before you sign the mandate check it carefully to ensure it accurately records how you want the account to be operated.
If you change your mind later on, and want to switch from one type to another (or want to add a new account holder) you may need the agreement of all account holders. If you have concerns about the operation of a joint account, contact the bank. It may freeze the account until you have resolved your differences. (See our Quick Guide Joint accounts.)
A bank must act in accordance with the arrangement you have specified. In general, transactions not in accordance with the mandate are unauthorised, and a bank is responsible for any resulting loss. If it can be established that a transaction in breach of mandate benefited the account holder, then generally there is no loss (except in very limited circumstances such as children's accounts). Sometimes, a bank will not be responsible for all of a loss if a customer has contributed in some way to the breach or failed to mitigate the loss.
When setting up your account make sure the mandate accurately records how you want the account to be operated.
Bank unable to apply different limits to account mandate
Ana and her husband Lee had a joint cheque account with a mandate allowing either to sign cheques. Ana wanted to change the mandate so that both had to sign cheques over $10,000. When she emailed her request to the bank, it did not respond.CASE 2
Unauthorised use of account led to $9,000 loss
Jamie complained about her bank allowing her former husband, Alex, to take out a loan in joint names and open an account in her company’s name without her permission when they were still together.CASE 3
Dying wife changed access to just one account
Ravi complained to us that his bank had not carried out an instruction to add him as an account owner on all of his wife’s accounts.
Deceased customers' accounts
A bank will freeze a deceased customer’s individual accounts when notified of the death. This includes transactional accounts, term deposits, credit cards and loans.
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Children don’t have unrestricted use of bank accounts. Nor are they free to open bank accounts on their own. To do that, they need an adult’s involvement. The role of adults (usually the parents) is to decide what type of account would be best for the child. They also decide who can have access to the account.
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