A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

Question

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This statement is describing the concept of "warranty of genuineness" in banking. When a bank encodes information on an item (such as a check) and issues it, they are warranting to any subsequent bank that the information (such as the account number, signature, and other details) is correct. This means that if the information is not correct and the item is dishonored, the issuing bank may be held liable for the loss.

A Bank That Encodes Information on an Item After Its