Customer deposited check 6/7 for approximately $4800. No hold was placed. Customer came into branch today and withdrew $2,000. Teller at that time thought it was suspicious because they have never had funds of that amount in their account. They went back to look at the check and now think it might be fraudulent. Since then they have made some POS transactions, bringing the balance down to around $350. Branch manager then decides to put a hold on the remaining funds.

Now I haven't been on this side of compliance for a while, but that is not allowed correct? There is no valid reason to put a hold on the account right?

Few things to mention, I recommend reaching out to the customer and inquiring about the check. Depending on what the customer tells you, it might be a good idea to remind the customer they are liable for any items returned to the account (ie you might suggest they deposit the cash back into the account so when the check comes back they will only have to cover the difference). The horse is out of the barn and putting a hold on the remaining 350 doesn't really do much for the bank. I suggest contacting the other bank and if you get information the check is bad then I wouldn't have any issues about holding the remaining funds.