Stolen Checks, Two Banks: Who Pays?
by Mary Beth Guard, BOL Guru Guru BIOS
Question: A husband’s checks and a wife’s I.D. were stolen. The checks are written on the husband’s
account at bank A, and deposited into the wife’s account at bank B. Then the money is withdrawn from the wife’s account at bank B. Who is liable for the repayment of funds to the customers?
Answer: Depends on who’s doing all this and what the exact facts and circumstances are. How did the
checks and I.D. get stolen? Who stole them? When did the couple discover the theft? What steps did they take to try to prevent forgeries from occurring? Did they notify their bank of the theft, try to close the account or at least put stop payments on the items? When and how did they discover the forged items had been paid? Did they promptly examine their bank statement and notify the bank?
All of those questions must be answered before you can begin any analysis of liability. The checks are not properly payable, because they are forged. On the other hand, if the customers’ negligence substantially contributed to the making of the forgeries, that will
impact their ability to pass the loss to the bank. And if they failed to exercise their duty to promptly examine their bank statement and notify the bank, that is also going to be a factor.
You’ll also need to look at where the proceeds of the checks went, and how the money was withdrawn from Bank B. In what manner were the banks negligent? No quick answers to these fraud scenarios.
The original version appeared in the March 2004 edition of the Oklahoma Bankers Association Compliance Informer.
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