Bearer Instruments

Because ownership follows possession, handing over the paper transfers the claim. No register shows who the owner is. Legitimate uses exist: banknotes are themselves bearer instruments, and some cheques and money orders are written to the bearer. The same features appeal to launderers and tax evaders, since value can be carried across borders in a bag or pocket without a bank record. FATF uses the term bearer negotiable instruments and expects countries to control cross-border carrying of them through declaration or disclosure systems. Many countries have restricted or abolished bearer bonds. Banks look harder when a customer deposits or cashes large numbers of such items, especially bundles of bearer cheques or money orders. Banks see no payer-to-payee record for such items, so reviewers fall back on questions about source and purpose.

At a bank branch, a walk-in customer presents 30 bearer cheques, each just under 10,000 and issued by unrelated payers abroad, and asks for them to be deposited and wired onward. The branch cannot tell who gave value for them. It asks for the source and purpose, escalates to the compliance team and files a suspicious transaction report when the explanations do not hold.