I am kind of in a time crunch to find an answer so I am just hoping that someone can give me a reference of where to research. We have a customer whose routing transit number and account number got in the possession of a dishonest person who then had checks created. One of those created checks cleared the customer's account. We want to return this item through the fed due to forgery. I am unsure of our timeframe for return and if we have exceeded it. Can someone guide me in the right direction. Thanks so much!

The time frame is your midnight deadline. In other words, by midnight of the business day after the day the check was presented.

If the check posted to the customer's account last night, you can return it by midnight tonight.

My guess is you are past the deadline.

We are past that deadline. Do we have any other options?

I don't believe you do other than having the customer report the incident to the police.

We have had this happen before too and because they reported it, the police were able to apprehend the people who had created the fradulent checks.

Does that mean that the customer is the one liable or is the bank liable to reimburse the funds? We may have faced such a situation in the past but not since I have been involved in compliance. Is the bank who accepted the check as deposit liable since they are the ones who accepted a forged check?

From the bankers online info vault:

http://www.bankersonline.com/compliance/guru2012/gurus_comp040212c.html


Answer: If the checks are forgeries, the bank is liable unless it can demonstrate the customer contributed to the fraud through carelessness, for example.

Sorry to be so dumb, but we didn't cash the checks. An out of state bank cashed the check on our customer. Does the other bank that cashed the check have liability?

Only if you return the check by the midnight deadline, otherwise, the drawee bank is liabile.

Ok, thanks! Not the answer I wanted to hear, but thanks. That is what I thought but it just doesn't seem right. I guess no one asked me what I thought when the reg was written A customer who only checks their balance via their monthly statement would not catch this in time to return it...which was the case for our particular customer.

Checks are governed by your state's Uniform Commercial Code. Since the drawee bank has the relationship with its customer, signature card, etc. the law places the responisbility to discover a forgery on the drawee bank, not the depository bank who would have no way of knowing if an item presented to them is forged or not.

There was a time when banks had the time and people (and low enough check volume) to examine on-us checks before they were paid, actually comparing signatures against signature cards. I worked in such a bank back in the 1960s. We didn't have checking account numbers, and more than half our non-business checking account customers didn't have their names pre-printed on their checks. We literally posted and paid based on signatures. It's been the law since the 1700s (based on a British court case, Price vs. Neal) that a bank is charged with recognizing its depositor's signature, and that premise hasn't changed in spite of the technological change and huge volumes that banks are handling today. So if the check is counterfeit or the drawer's signature a forgery, the drawee bank is responsible to see that and make a timely return, or become accountable for the check. What has changed is that the UCC has had some tweaks added that give the bank some occasional relief when it comes down to trying to shift some of the loss to its own customer if the bank can prove the customer facilitated the forgery (leaving the business checkbook accessible to unauthorized access, etc.).

Thanks John, very enlightening!