Claims, Part II: Forged Maker's Signature

An account holder comes in and tells you he checked his statement, and found there are two checks charged to his account that he did not write. He doesn't get his checks back with his statement - only images of them - so he doesn't have the actual checks. But it's clear to see when you look at the micro images that the handwriting on the checks does not even resemble his. He's a good customer, and you want to help him. The checks are fairly large amounts - one is for $600 and one is for $800. They appear to be a different size than his personal checks, and they're a different style. There is no number on the checks.

What you are probably looking at are computer manufactured checks bearing your customer's account and transit numbers on the MICR line. (Magnetic Ink Character Recognition - it's the line across the bottom of the check.) The reason the whole matter has landed on your desk is easy to ascertain - your account holder wants his $1400.00 back.

What do you do now? First you ask some questions.

Known payee?
Is the name of the payee familiar or known to your depositor? If the name of the payee is a family member, or is personally known to the customer, it will make your job more difficult. It means the family member or friend is stealing from your depositor. You need to get out of this situation as quickly as possible - and you don't want your financial institution to be paying for your customer's problems. Unfortunately, with the ability to create checks being so easy with the right computer software, this problem is much too common.Armed with the facts that the customer knows who received the cash, and how they got his account and transit number, you should inform the customer that before you can proceed with the claim, you'll need a copy of the police report informing authorities that money has been stolen from his account with an item bearing his forged signature, and that the perpetrator is known to your depositor. Stick to your requirements in this case. And don't accept the claim on behalf of your financial institution until he comes back with that official copy of the police report. If and when he does, you'll now require an affidavit of forgery from him, including the statement that he will assist you in prosecution of the payee in your attempt for reimbursement.

Unknown payee
Let's assume he has no idea of the identity of the payee. Next questions - Does he have any idea on how someone got his account number? Could he possibly have given it out to anyone either over the telephone or on the Internet? Did he mail a check to an unknown or different address, out of the ordinary for him during the past couple of months?

If the answers satisfy you that he indeed knows nothing about the creation, manufacture or transaction of the checks, your next step is to quickly call bookkeeping (or access his statement, if you have the capability) and see if any of these checks came in yesterday or today that can be returned. If so, have returns stamp them "Signature does not agree with that on file - Counterfeit item" and return the check through the work. These are timely returns. If there are any already paid and in file or posted on the statement, you'll need copies of those items as quickly as possible.

Then you should put a hold on the account, freezing it until you can get it closed. This has become more of a problem in these days of direct deposit and automatic withdrawals, but in a case where the account and transit numbers have been compromised, it's a necessity. Open a new account for the depositor, and transfer the funds from the existing account to the new account. If possible, find what checks the depositor has outstanding that have not yet come in for payment. Make a list of all his properly payable checks, and when they come in for payment against the old account, simply charge them to his new account. By making a list of exactly which checks to pay, you'll inconvenience your customer less than if he had to go to all the people to whom he wrote checks that are still outstanding and explain the situation and give them new checks. You may have to leave a few dollars in the account until any direct deposits are changed over. Keep a daily watch on the account until it is finally closed out.

Before the customer leaves, have him sign an affidavit of forgery for each check that was paid fraudulently against his account. After he goes, you'll need to obtain good copies of the front and back of the checks from the records. (Impossible to tell you exactly how to do that on this page - there are more systems out there than we could cover.) Ask your bookkeeping supervisor how to get those copies. Check 21, when it arrives in full force, may make this job easier ... or much more difficult!

As part of your investigation, check with your in-house files to see if you have the name of the payee as one of your account holders. It's possible the check was used to open a new account right at your financial institution. (I speak from experience!!)

Depending on the results of your investigation, you may or may not want to fill out a Suspicious Activity Report. If nothing else, it will get the name of the payee on the data bank, which could be important in another investigation.

Contacting the other bank (on the back of the check) for assistance in recovering your funds is also a possibility - though your chance of recovery there is probably pretty slim. It will at least let you know what financial institution was involved in the crime. It will also tip them off to the fact they may have a less-than-desirable account holder.

I've deliberately chosen a computer created check by an unknown thief to illustrate this particular claim page. Bottom line - you'll have to charge your general ledger account and reimburse your depositor $1,400. We'll go into other stolen checks, with their different set of questions, on the next training page on claims.

Affidavit of Forgery
As for the Affidavit of Forgery for forged signature - if you do not already have one, we've included one in with this training page. At the bottom of the affidavit, in the case illustrated above, it probably would not be necessary to go to the trouble of a Notary. You may just want to have a witness sign the document instead. Affidavits become more important in different scenarios which we will address on later training pages.

Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 10, 1/04