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#311251 - 02/01/05 08:58 PM Altered Checks

We are the bank of first deposit. Our customer deposited a very large check that was returned without entry after nearly one month as "altered payee." The check does not appear altered in any way, but I don't doubt that it was. How is the bank supposed to protect ourselves from these types of losses? The longest available Reg. CC hold will not prevent a loss in which the paying bank has one year to return an altered item. I could understand if the item was visibly altered, but when items are this good what can you do?

Any suggestions?

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#311252 - 02/01/05 10:18 PM Re: Altered Checks
HappyGilmore Offline
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Joined: Jun 2004
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Pulling people out of the ditc...
Wait a minute, you say it was returned altered payee, the check does not appear altered in any way, but you don't doubt that it was (altered). These statements are not compatible with one another. If you can't detect an alteration, I'd hesitate to make it good. Ask for proof.
Providing alternative truths since the invention of time

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#311253 - 02/01/05 10:48 PM Re: Altered Checks
Pup Offline
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Contact the maker of the check and ask for documentation of the original check (check register, Positive pay information, etc.). We had a case like this many moons ago and were given a copy of the original check as it was issued by the insurance company.

You should also be given an affidavit signed by the intended payee stating that he/she never received benefit from the negotiation of the check.

I agree with need proof. I recently argued with USPS in reference to a Money Order which the payee claimed he never received it. We had put it into his account here. Had I not looked into the transaction, we would have simply taken an unnecessary loss.

Good luck.

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#311254 - 02/02/05 01:38 AM Re: Altered Checks

I got an affidavit of altered payee from the maker's FI, which happens to be one of the largest banks in the world. Even though the item doesn't appear altered to me, the fact that the customer also tried to negotiate other altered/counterfeit items leads me to believe it is indeed altered.

This is one of three checks, all drawn on different banks with different makers that our customer negotiated throught his business account. Two of the checks were returned altered payee, the other turned out to be a counterfeit.

It was part of a scam that involved wiring funds to Canada. I have spoken to the maker of each item. All were originally made payable to different businesses and sent to Ontario, Canada. Two of the three were shipped to PO Boxes in Ontario. I think someone from the Canadian Post Office stole the items from the mail. The counterfeit item turned out to have a Canadian routing number (even though they slickly added US dollars to the check) and was outsorted at our Operations area and sent in for collection. The other altered item was returned before our 10 day hold expired.

These three items total over $225,000. My contact, a US Postal Inspector, said we would have better luck with the Canadian Post Office than he would because we are the victim FI.

I hoped I explained the situation a little better this time. Sorry, just very frustrated. This loss equals my banks total net losses from last year!!

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#311255 - 02/02/05 02:40 PM Re: Altered Checks
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,684
Cape Cod
Not that this helps you with the current case, but you say that your Operations area outsorted the Canadian item for collection. When Canadian items are handled this way (and they should be), the deposit account should be charged for the amount of the item and informed that credit will be given on receipt of good funds. Clearing of Canadian items is notoriously slow.

You won't have any Reg. CC worries, since you are dealing with a foreign item (besides, what you are essentially doing is refusing to accept the item for deposit).

Smaller Canadian items typically deposited by businesses that accept Canadian checks for goods and services might be handled differently, if you are confident of your depositor's ability to handle charge-backs weeks after deposit.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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#311256 - 02/02/05 03:06 PM Re: Altered Checks

Total of three items. Two altered payee items and one counterfeit. We did not take a loss on the counterfeit item because we sent it in for collection because it was drawn on a Canadian FI.

However, we took a loss on one of the altered payee items because it took over a month to be returned. In my opinion, the alterations are very well done. We placed a 10-day hold on the deposit, but the funds already left the account. Half of which was wired back to a Canadian Bank.

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