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Bank Responsibilities for Forged Checks

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Question: 
What responsibilities do we have as a bank whenever we find out that a check, that has been processed through our customer's account, is a forged item? Do we have the responsibility to return the item? Also, do we have the responsibility to then view all checks in our institution over a certain dollar amount comparing the signatures on the signature card to the endorsement(s)?
Answer: 

Although your question asks about endorsements, it sounds like you're asking about a forgery of the maker's signature. Assuming that your state has adopted the standard verbiage of the Uniform Commercial Code, in order to return a forgery of one of you customers' checks, you must make the return by the "midnight deadline" which is defined by article 4-104 as "midnight of the banking following the banking day it receives the item." Whether or not you are within your timeframe to return the item, you most likely are responsible for reimbursing your customer for an item that was not properly payable.

You are responsible under the Unifrom Commercial Code and your contract with your customer for signatures on all checks regardless of the dollar amount. Many institutions choose to accept the risk of loss due to forgery underneath a certain dollar threshold and do not examine all inclearing checks. This is a decision your institution must make for itself.

First published on BankersOnline.com 6/27/11

First published on 06/27/2011

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