Is the bank required to notify the customer when a "post no debits" hold is placed on the account for fraud?

Your bank is not entitled to take itself literally when it says "Post no debits."

"Treading water in a hurricane" will be more descriptive than you might like if your bank decides not to advise the customer. "Wrongful dishonor" is a UCC concept that says if the check was properly payable you should have paid it and, if you don't, you are responsible for consequential damages in unlimited amounts..

I agree and would 'assume' that the notification should be in writing since it is impossible to prove a verbal notification.

If there is fraud involved, why is the account even still open??

The checks in question were deposited in August 2014 and it was not until August 2015 that the roofing company advised the bank that their signature on the check was fraud. The bank should have never deposited these insurance checks the way they were signed and Never allowed them to be deposited into a personal checking. The teller should be fired but not my place to do so.
Branch manager spoke with the customer the day after the post no debits hold was placed, talked to her many times over the next few weeks as well as the customers visit to the bank to provide what she thought would show that it was ok for them to deposit the checks. The bank did not send notice in writing. The customer has filed a complaint with the CFPB who forwarded it to the regulator for the bank, the OCC. The customer wants the fees incurred due to returned checks etc which the bank more than likely will have to do.

I can't tell if "the roofing company" is the drawer or the endorser, but the situation is unclear enough that it probably looks like it's your fault whether it is or not. It is highly unlikely that your regulator's employee knows anything more about the UCC other than how to spell the acronym. If you can organize your facts correctly, you may be able to defend yourself, but drop the references to "post no debits," it's nothing but an internal phrase not something sanctioned by law or regulation.