We have a few business accounts who will bring employees payroll, signed by the employees, and cash for them. However, recently we have had a new PPP business bring in over $10,000 worth of payroll checks issued by her, as well as endorsed by her, as in she signed the employee and her name to the back of the checks. I personally feel this is a little fishy. I know that It is not our responsibility to enforce the fair labor laws or to detect padded payrolls, but this just seems rather sketchy. A CTR is being filed on her, so that is not an issue, currently. Any suggestions/opinions are welcome!

Thank you,

1. Are the checks payable to the owner, the employee, etc.?
2. Have you asked the customer why she's doing it this way?
3. Does you due diligence of the customer determine that these employees actually exist based on your knowledge of the business operations?
4. Have you seen this article on PPP Loan Fraud? https://www.justice.gov/opa/pr/two-charged-rhode-island-stimulus-fraud

You question seems to indicate that you initial concern is undocumented workers, but there's a lot more to consider than immigration. Depending on the outcome of your investigation, there may or may not be a SAR in your future.

She just stole the company's payroll and you cashed them without the endorsement of the employees? The bank is going to be the hook to all of these employees. She had no right to endorsement those checks to herself.

Great questions! I am just reviewing CTRs the analyst has questions about and this one caught my eye. I will certainly forward this article to our BSA officer.

In response to your questions:

1. The checks are made payable to the employee
2. I have not, but I am trying to get the questions started with the help of this thread.
3. I will have to do further research to make that determination. It is a construction company, so cashing payroll for employees is not unusual.
4. this is really my main concern, since it is a PPP funded account

Thank you for your response!

She is the company, technically. So she didn't actually steal them from the company. It's the endorsement of the employees BY her that I am concerned about. I'm just trying to get a little feedback to bring back to the BSA officer.

Of course one of the biggest attractions of the PPP loan is that it is partly forgivable, based on retention (or rehiring) of employees. You could have a major fraud going on involving the PPP loans. As for the payees on the checks, if there was never any intention that they actually receive the checks, they have no claim. UCC 3-110(a). But the FBI will jump all over your customer if her intent is to pad the payroll to fraudulently claim forgiveness on part of the PPP loan.

If you dig and suspect there is fraud here, you should do two things quickly, in this order:
1) File a SAR
2) Notify the FBI of your SAR filing

We've already had a couple of arrests in my area for attempted PPP fraud at the start of the program (reported in the news article linked a few posts earlier).

I own a company - you are my employee. I write you a $1,000 payroll check. The money belongs to you. I forge your endorsement and cash your check. You, the employee has a $1,000 claim against the bank. Whether she is involved in the company or Joe Blow stole the check out your mailbox - the bank ends up in the same place.

Thank you so much! That is what I was afraid of and just wanted to make sure I wasn't looking into this too much. I have submitted my SAR referral and will contact my BSA officer now.

To John's point, if you didn't perform $1,000 worth of work because your employer laid you off but fraudulently wants to represent that you are still working, then you couldn't claim forged endorsement because the check was written to defraud the U.S. Government, not to pay you for earned wages.

And yes - this smacks of PPP fraud, but this transaction should have never happened regardless.

Absolutely agree. Here's some irony while we're on this topic. The DOJ just published another fraudulent loan application. $5 million.

https://www.justice.gov/opa/pr/texas-man-charged-5-million-covid-relief-fraud

I totally agree! It should never have happened. I don't let things go as easily as some because I'm such a stickler for the rules. I just needed to make sure I wasn't overreacting before acting. That location will be contacted and this activity will be ceased.

Thank you all for your input!

He clearly believed in "Go BIG or stay home"! He shoulda stayed home. Desperate times make for desperate people.

Oh wow!