How would you handle this forged endorsement issue?

Customer A wrote a check drawn on their account at another bank payable to Customer B, forged Customer B’s endorsement, and deposited the check into their own (Customer A’s) account at our bank.

Customer B has learned about this and has brought it to our attention. Customer B says they are not technically due any money, but they do not want Customer A forging their endorsement on anything else.

Can we legally provide information about the check to Customer B? Should we obtain an Affidavit of Alteration/Forgery and return the item forged endorsement and put an alert on Customer A’s account to verify endorsements on any checks presented payable to Customer B? What is the return timeframe on forged endorsement?

Why would you put an alert on someone's account to watch for forged endorsements? And how realistic is it that you can catch those checks presented through all channels? Why not just close the account? (Or talk to the customer and get their side of the story and then assess whether to close the account or not.)

B has already said they have no interest in the check. You should be sure that conversation is documented in case the paying bank ever asserts a breach of warranty claim against your bank. (You don't mention the amount of the check - if it is significant, you may want to be more formal in your documentation of the payee's statement that they have no loss.) You cannot return a check that was deposited to your customer's account and drawn on (and paid by) another bank.

File your SAR and close Company A's account.