A business customer of ours had an employee who was writing business checks to herself and cashing them. She also provided the account information to other people as there were ACH withdraws coming out of the account. We have one check that was returned to the paying bank (they accepted it through mobile deposit) as fraudulent, however, it was returned late. The business customer noticed the fraud on their account within a week of it happening. We received the check on August 16th and returned it on August 24th, so yes it was returned late. The paying bank returned it to us today stating it was late and requesting provisional credit within 20 days. We returned multiple checks to multiple banks, this is the only bank that has denied the return.

I have been asked to put this out here on the forum asking for guidance on how to respond and handle this. There is an active criminal case against this employee of our business customer. My thought is, we give provisional credit to the bank and try to get our money back through the case with the police, because it was returned late. However, this isn't my strong suit, and I just wondered if we have any other options. The check was for $2000.00, so did not require us to notify the bank in advance.

Any help and guidance would be appreciated. My apologies if I didn't explain it well.

Thanks!

If the employee was not an authorized signer on the business account, then you had an obligation to identify forgeries or improper signatures and return them by your midnight deadline. The bank of first deposit is under no obligfation to accept your late return.

Unless (under the advice of your legal counsel) you plan to hold your customer responsible for some or all of the losses claiming that their negligence contributed to the loss under Section 3-406 of your state's Uniform Commerical Code, then you owe your customer the money and the bank takes the loss.

If your customer were to sue you for any funds you did not reimburse for improperly payable checks, the burden of proof of negligence would be on the bank. As noted above, this is a legal question that should be directed to bank counsel.

Thank you so much Brian! I appreciate your help as always!