If an individual deposits a fraudulent check to a bank account (not their account) and then comes in soon after to withdraw cash from that same account using a fake ID with the account owner's name, is the bank liable for the withdrawn funds?

Yes.

Brian is correct, the bank of deposit would be liable.

Thank you both. That was my answer, too, but another bank is not agreeing.

Anon, it's easy - have them get another impartial decision.

"Your Honor, who is right?"

Liable to whom?

The bank that allowed the withdrawal for the imposter is liable to its depositor.

So perhaps we don't have all the facts here. If the drawee bank paid a counterfeit check and failed to return it by its midnight deadline, what happened at the bank of first deposit is irrelevant to the drawee bank. The drawee bank would be liable to its depositor for paying a counterfeit or forged check.

John Fraudster deposits a check at ABC Bank into the account of Bill Customer, check is fraudulent (how, we don't know yet) and written against XYZ Bank. Check clears, and next day John Fraudster enters ABC Bank with ID showing him to be Bill Customer and removes the same amount of funds deposited previous day.

Bill Customer is not out any money.

John Fraudster is walking away with whatever the amount is, chances are you will never find him

ABC Bank may or may not be out any money, depending on how the fraudulent check was returned to them, if it even was. If it was returned timely to them, they suffer a loss.

XYZ Bank would need to make a claim for fraudulent item (signature, altered amount, altered payee, other?) back to ABC Bank within the proper timeframe. If no claim made, or made untimely, then XYZ Bank is out the money. Depending on the claim type, timing of notice from their customer, and their account agreement, they may owe their customer funds.

Our bank is actually not involved in the transaction at all. The customer just happens to be both our customer and a customer of the other bank. They just told us about the situation, and the teller brought it to my attention because they thought it was strange. The other bank's fraud officer is telling the mutual customer that they (the other bank) aren't liable in this case to return the funds to the account owner.

It may be an issue of the reporting timeframes in his Depositor contract with the bank. He should take a look at the agreement; most clearly spell out error reporting timeframes and liability.

then I would not bother wasting time researching the "what if" scenarios...