Not sure how to handle this type of situation so I just have a few questions.....new account opened on April 24th and has deposited $10,000 into it so far. After two weeks of activity we believe this account is being used to defraud people for "computer repairs". The checks deposited are coming in from all over the county and a few have been returned as stop payment. Our operations department just placed a 30 day hold on the funds and said under Reg CC if it's a new account they can place a 30 day hold. Is this accurate? I'm thinking because we believe it to be illegal activity it's acceptable to hold the funds regardless of Reg CC rules but am still unsure. A SAR has been filed and law enforcement has been notified. Any other precautions or steps we should be taking? We really don't run into this very often. Any advice is welcome. Thanks!

Does the account disclosure given to the customer when the account was opened state you may place a 30 day hold?

Good point. No it doesn't, we use the model language for our Funds Availability Notice and don't state anywhere in our Terms and Conditions that a 30 day hold may be applied.

If that length of time isn't in your initial disclosure I don't believe you can place a 30 day hold.

If this is really a fraudster - who is going to complain and what would their complaint be??

The last thing I ever wanted to do was sit in front the board of director and explain the reason why we lost $10,000 on this deal is that we didn't want to violate Reg. CC.

I agree, Randy. Our customer is more the mule for the fraudster in this scenario. Just the middle man collecting the checks and apparently instructed to send the money to India (which hasn't happened yet). I was more concerned that our operations department believes that Reg CC allows for a 30 day hold on the full account balance, that's how they understand the 30 day new account exception.

So what do other banks do in these scenarios? We've never really had an account like this where it's so obvious that the customer is a mule and the funds are from a scam. Do other banks just place a hold on the funds until law enforcement steps in?

Truth. The struggle when one is both the Compliance Officer and the Security Officer is real. I've been known to purposely violate Reg CC to save the bank a boatload of money from a loss due to a counterfeit check and I have no issue in doing so.

hopefully you meant "our former customer" as you've asked them to bank elsewhere...