I'm not sure about the amount of liability. However, who is liable depends on what was forged. The depositing bank (Bank A) is liable for a forged endorsement. The drawee bank (Bank B) is liable for a forged signature. In the case of a forged payee endorsement, Bank B can return the check within the midnight deadline to Bank A as a forgery. Usually, however, Bank B doesn't know that it's a forgery until their customer tells them. In that case, Bank B has to send a non-entry request via the US Mail (a letter), along with an affadavit of forgery, to Bank A requesting an official check as payment. Bank A must comply with this request. If the maker's signature is forged, then Bank B can return the check to Bank A within the midnight deadline. If Bank B discovers the forged signature after the midnight deadline they are out of luck. NO ITEM, regardless of reason for return, can be sent back through regular channels, ie., return cashletter, after the midnight deadline. Refer to section 18.3 of Federal Reserve Operating circular number 3. It can be found at www.frbservices.org.