A customer claims to have written a check for $54.00. The check shows to be written for $600.00; the party to whom she said the check was written has sent us a letter that they never received the check. The customer claims that the check was "chemically altered" as to amount, payee, and signature [a new one on me...if that is truly possible, that makes writing any check a scary proposition]...a bank officer saw the original check [I have a copy] and the signature showing on the check does not match what we have on file. Moreover, the bank officer said that the original check did not appear to be altered in any way, as to erasures, white out, strike overs, etc. The back of the check is supposedly endorsed by the payee [as "chemically altered"], but the BOFD does not show any evidence of identification obtained when they cashed or processed the check.
We are of course, well past the midnight deadline, but could we return the check on the basis of forged endorsement? We have no idea if the person who endorsed the check is in fact the one who altered it...the endorsement on the back does not match the writing any place else on the check...maybe a weak argument, but it is possible, I suppose. The check was supposedly mailed, and it has been said by the customer that it was intercepted by someone other than the intended payee, and altered.

I don't think pursuing a forged endorsement claim will yield the results you want, as the payee line has been altered. Fortunately, alterations also fall under the transfer warranty umbrella. So you can still send a without entry claim, just make sure you're using the alteration as your reason.

Unfortunately, chemically washed checks are being presented/cashed at financial institutions with much more frequency. There must be an instructional web site out there! Some of the more professional chemical alterations involve altered payee names and very high dollar amounts. Some of the "washed" checks I've seen contain tiny dots of ink residue that is easier to see on the back side of the item. U.S. Postal Inspectors strongly encourage the general public to take outgoing mail containing checks (bill payments, etc.) to a secured mail box. Mary Beth can tell you first hand what it feels like to have someone steal your outgoing mail.

An instructor at a seminar I attended washed a check during the seminar. I was amazed at how simple it was and how quickly it could be done. I never put outgoing mail in our mailbox anymore.

Mike,
I only want to reiterate JacFSB's advice; the depositary bank has breached its warranty that the check has not been altered. The midnight deadline does not apply if you return this check directly to the depositary bank as an altered item along with a customer affidavit.

Fast forward to almost 2 months later...the check was returned to the depository bank with a cover letter explaining the alteration, and the customer's affidavit.
I just received the following denial from the depository bank..."based on our investigation this item bears a forged maker signature; therefore, XYZ Bank [to keep them anonymous]is not liable for this item. UCC Sections 3402, 3403)a) and 4401 state that the drawee bank is responsible for a forged maker signature."
What recourse, if any, do we have now? And what can I cite, if anything, to back up our rightful claim to reimbursement?

Rereading your original post, it appears that the maker's signature was washed and forged also. So the BOFD is hanging their hat on your liability (the forged signature,) while your focus is their liability (the alteration.) Technically, you're both correct, as the payment of the item over a forged signature does not preclude you from filing a breach of warrantly claim.

The question now is, is it worth it?

Asking nicely didn't yield the results you want, so your next step would be to file (or at least threaten) legal action. Before you take this step, consider the worth vs. the cost, and your likelihood of winning.

First of all, a very belated thank you to all who had responded on this matter. I appreciate your input. As far as this specific instance is concerned, it just was not worth it to pursue with an attorney.

A follow up question about a possible preventive measure that our customers could take...we have been given an article from a leading retirement magazine which cites that there is one type of ink, the kind in gel pens, which is counterfeit proof to acetone or any other chemcial used in check washing. If this claim is correct, we are even thinking about providing our customers with such a pen.
Does anyone know if this claim is in fact correct? If it is, is it likely a matter of time before a determined crook finds a way to wash this type of ink as well?
Thanks again for your input and insight.

I have heard the same claims about gel pens. However, certain colors of gel ink are very hard to read in images. You could later be counseling customers to ditch the pen and get another color once Check 21 image problems crop up.

I have also heard that felt tip pens and Sharpies are as resistant to washing as gel pens, but without the imaging problems.