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Is Bank Responsible For Cashing Forged Check

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What Happens If I Deposit A Fake Check

More than $2,000 withdrawn from victim’s account with forged check

If you deposit a fake check, it can take weeks before the bank realizes that its counterfeit. The federal Expedited Funds Availability Act requires banks to make deposited funds available quickly. In many cases, funds deposited via check are available for withdrawal the next business day after being deposited.

Your check may clear within one or two days, and you can withdraw the check amount, but that doesnt mean the check is necessarily legitimate.

The bank may not find an issue with the check until the other bank returns it unpaid. It can be weeks before that happens and in the meantime, you may spend the money because you thought it was available in your account.

Once the check is returned unpaid, the check will bounce meaning it cant be cashed even if you didnt know that the check was bad. And youll likely be responsible for repaying the bank the amount of the faked check.

How Does Check Fraud Happen

Check fraud can take several different forms:

  • Stealing check blanks to use for fraud
  • Using someones account and routing number to create fake check blanks
  • Taking a check written out to someone else, using chemicals to erase the ink, and writing it out to yourself
  • Altering the amount on a check written out to you and cashing it
  • Giving someone a bad check to pay for something and having them give you cash in return
  • Signing checks that are not yours
  • Endorsing and cashing a check that is not made out to you
  • Writing checks from closed accounts
  • Purposefully depositing a bad check into an account and withdrawing the funds

Who Pays For Check Fraud

If a bank customer deposits a check that doesnt clear due to fraud, insufficient funds, or any other reason, the customer is responsible for any payments that have been drawn against that check and any fees that ensue as a result of those payments. At that point, the customer may try to recoup their losses from the person or business that issued the check.

In some cases, customers may leave an account overdrawn after depositing a fraudulent check, and then, the bank may end up paying for the losses. If someone comes into the bank and uses a check to make a fraudulent withdrawal from an account that is not theirs, the bank is typically liable for the fraud. Similarly, if a bank cashes a check that was created fraudulently, the bank is also responsible for covering those funds.

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How Do You Detect Check Fraud

To detect check fraud, you need analyze the information, signature, and other details on checks and flag checks with issues that may indicate potential fraud. At that point, your bankers can manually review the check and decide which actions to take.

Additionally, you may want to invest in special software that allows business customers to print a barcode on each of their checks. The barcode contains all the details on the check, including payee and amount. When you accept the check for processing, your system reads the barcode and ensures all the details match. If the barcode is missing or the check has been altered, the system picks that up immediately.

Forged Endorsement: Deposit Of Two

Cashier

08/04/2003

We have a customer who is a personal injury attorney. It is not unusual for him to deposit very large settlement checks into his business account. These checks are made out to his client and himself as their attorney. I believe he is endorsing their name and then his own. On all of the checks, the endorsements look the same. I brought it to the tellers’ attention that they are accepting checks that I believe to be possibly forged endorsements. One of them said they think he has POA on his clients. Should we required him to provide us a copy of the POAs before allowing him to deposit the checks?

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How Can I Protect Myself From Fake Check Scams

Here are some things you can do to help protect yourself from check fraud.

  • Verify the check with the bank. If you receive a check, contact the bank that issued the check to verify its legitimacy. Dont call the number listed on the check counterfeit checks often have fake numbers. Instead, look up the banks customer service number on its website.
  • Check the amount. If someone owes you money and writes you a check, review the check amount. If its for more than what youre owed, thats a red flag.
  • Dont send money. Theres no reason someone would write you a check and then ask you to pay fees. If youre asked to send money after receiving a check, youre likely dealing with a scammer.
  • Wait until the check is verified. While it may take weeks before the check is verified, its a good practice to wait to spend the funds until the bank has reviewed the check. It pays to be careful, especially if youre getting a check from strangers.

What Is A Forged Check

The term forged check is often used to describe a check on which the drawers signature is forged or unauthorized. Such a check is meaningless as far as the drawer whose signature is forged is concerned.

The drawee bank that pays a forged check is generally responsible for the resulting loss. A counterfeit check has been regarded as the equivalent of a forged check.

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Can I Go To Jail For Depositing A Fake Check

Going to jail for depositing a fake check may sound severe, but it can happen.

But whether youll face criminal penalties can depend on the laws in your state and if you cashed a bad check intentionally. If you are the victim of a scam and deposited a bad check in good faith, youre unlikely to face criminal charges. But if you knowingly deposited a fake check, you might face fines and jail time. Here are a couple of examples.

  • Florida In Florida, cashing a worthless check with the intent to defraud is a felony. If convicted, you could face up to five years in prison.
  • Pennsylvania If you live in Pennsylvania and knew that the check you cashed would not be paid, you could be charged with a misdemeanor or felony. The charges depend on the check amount. For example, knowingly cashing a bad check for $1,000 to $74,999 will be treated as a misdemeanor, while doing the same for a check for $75,000 or more will be treated as a felony. The misdemeanor could result in a fine between $1,500 and $10,000 and jail time up to five years. For the more serious felony, fines range from $2,500 to $15,000, and you could face up to seven years behind bars.

What Is A Fake Check

Man wanted for forgery after faking identity and cashing counterfeit checks

Fake checks can be difficult to identify. Because technology has advanced so much, people can produce fake checks and money orders that are difficult for consumers and even bank employees to identify as fraudulent.

In most fake check scams, the person will ask you to deposit or cash a check. Once you deposit the check, theyll ask you to purchase gift cards or refund them a portion of the check amount.

When the bank later finds out that the check is counterfeit, you not the scammer will likely be held responsible for returning the money to the bank.

Scams are constantly evolving, but some of the most common ones will claim that

How are these scams so effective? They can be very convincing. The fake checks may look like legitimate checks with appropriate watermarks, and they may appear to be issued by legitimate financial institutions. In some cases, they can be checks written from the accounts of identity theft victims who have no idea someone is writing checks in their name and withdrawing their money.

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Is Check Fraud A Felony

Depending on the situation, check fraud can be a felony or a misdemeanor, but in many cases, check fraud isnt detected or punished. Generally, the line between misdemeanor and felony depends on the amount of money involved in the fraud. Many states classify check fraud under $500 as a misdemeanor, and they consider fraud over that amount to be a felony.

If You Dont Write Or Receive Many Checks Check Payments Account For Just 83% Of Non

But in 2018, check fraud resulted in $1.3 billion in losses related to bank deposit accounts making up nearly half of all fraud losses associated with deposits, according to the American Bankers Association.

Thats even more than the $1.2 billion in losses attributed to debit card fraud.

The consequences of depositing a fake check can be serious, even if youre the victim in the situation. In a typical fake check scam, victims lose $3,000 to $4,000. On top of that, you may have to pay costly bank fees or penalties.

Heres how fake check scams work and what you can do to protect yourself.

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Handling Refer To Maker Return Items

08/11/2003

What are our rights to return an item when it is returned through the Fed — post the 24-hour rule — for “refer to maker?” We find this occurs most often when we discover a check kite and start returning items to the other bank — all of a sudden they start returning checks for “refer to maker” that are long past the right of return.

Bank Responsible For Forged Checks Cashed

Bank Check Definition

Brian Crow: The bank of first deposit is not in a position to discover a forgery, the drawee bank is. If the drawee bank initiates a return of the checks by its midnight deadline, you must debit your customer’s account for the items and attempt to recover any subsequent overdraft from your customer.

If the items are not returned by the midnight deadline, the drawee bank is liable to its depositor for honoring the forged items.

Ken Golliher: Hint: You said that more than one check had been returned to you. The likely scenario is that they were written and paid over a period of time and discovered only when Mom reviewed her bank statement. If the drawee bank sent them all back to you at once, it’s abundantly clear that they did not meet the midnight deadline Brian referenced on all of them, perhaps none of them.

Inspect them one at a time, carefully. Then, get ready with your “Too bad, so sad” response.

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What Are The Penalties For Check Fraud

Generally, misdemeanor charges for check fraud can lead to criminal fines plus up to a year in jail. With felony charges, the fines can be thousands of dollars, and jail sentences may be over a year or even several years, depending on the extent of the crime and specific state laws.

Civil penalties for check fraud vary from state to state. In some cases, the victim may have the right to claim two or three times the amount of the check plus the victims attorney fees. Some states outline a minimum civil penalty of $10 to $100, and others have a maximum penalty of $1,500.

As A Rule A Bank Will Be Liable To Its Customer If It Pays A Check Over The Customers Forged Facsimile Signature Unless The Customer Has Signed A Facsimile Signature Resolution Shifting The Burden Of Loss From The Bank To The Customer

A cardinal rule under the Uniform Commercial Code is that a payor bank may only debit a drawers account for checks that are properly payable. Moreover, the UCC states that a check is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and the bank. Consequently, a check generally is not properly payable if it does not bear the drawers authorized signature ).

An authorized signature may take various forms. For instance, a signature may be made by the use of any name including a trade or assumed name. A signature may be made by a word or mark or symbol adopted by a person as his or her authentic signature. Or a signature may be made by a device or machine ).

Facsimile Signatures

When a signature is made by a device or machine, it is commonly referred to as a facsimile signature. Depositors use facsimile signature machines to expedite the signing of a substantial volume of checks at a reduced cost. Before a financial institution permits checks to be signed by facsimile signature, however, it should obtain a resolution or agreement from its customer shifting the loss resulting from the payment of forged checks to the customer. This is because forged facsimile signatures are virtually impossible to detect and easy to counterfeit.

Validity of an Agreement Shifting Liability for Forged Facsimile Signatures

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What Are The Consequences Of Depositing A Fake Check

Each year, roughly 500 million checks are forged. While a number of these checks are written intentionally, even people who are not knowingly writing false checks themselves may accidentally come into possession of a fraudulent check. Since this is a wide-spread problem, understanding how banks handle fraudulent check deposits will help you protect yourself from scams and legal problems.

Victim Of Forgery May Have To Prove Bank Was Wrong To Cash The Check

Man Charged With Cashing Forged Checks He Stole From Mailboxes

    Q: My daughter wrote a check to herself on my checkbook for $3,000 and forged my name, and the bank cashed it. This caused other checks to bounce. The bank says its not their fault, and wont reimburse me, but arent they responsible for making sure the signature on the check is really mine?

    A: Maine law states you are not liable on the check unless you signed it or you authorized the signature. If an unauthorized person forges your signature on your check and if the bank pays the check, in most cases you can make the bank reimburse you for the amount of the forged check. But you must be alert. If the bank missed the forgery, someone has to spot it, and this means you. Review your statements. If you spot a forgery, contact the bank immediately. Maine law sets a one-year time limit, but dont let the grass grow under your feet. If you are late, the bank is usually under no obligation to reimburse you.

    In some cases a bank may refuse to be responsible because customer negligence caused the forgery. If your daughter has done this before and if you did not keep your checks in a safe place, maybe you were negligent. But even if you were, it may not be the end of the story. If you could show that the bank was also negligent say it was cashed by a teller who has known you personally for years the bank may be held partly responsible and be required to reimburse you in part.

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    Texas Supreme Court Holds Customer Liable For Forged Check Loss Where Bank Makes Available Statements Of Account

    The Texas Supreme Court has found that where a bank makes available a statement of account, consistent with Section 4-406 of the Uniform Commercial Code , the customer must bear the loss of forged checks, even when the bank did not send physical statements for the account. Compass Bank v. Calleja-Ahedo, 2018 Tex. LEXIS 1314 .

    Plaintiff opened an account with Compass Bank in 1988, directing the bank to hold all correspondence. The Plaintiff further testified that he directed the bank to send statements to his brother at a Texas address. The bank sent such statements through June 2012. In June 2012, an unidentified person identified himself as the Plaintiff, changed the delivery instructions for the statements to a California address, ordered checks, and drained the account through forged checks in 2012 and 2013.

    The plaintiff first learned of the fraudulent activity in January 2013. In January 2014, the Plaintiff disputed the debits, but was denied a recredit by the bank, and filed suit. The trial court found for the bank, holding that, under UCC § 4-406, the bank had made statements available to the Plaintiff, who waited beyond the UCCs one-year statute of repose to raise the fraudulent activity with the bank. The Texas court of appeals reversed, holding that sending the statements to the California address did not satisfy the requirement to send them to the Plaintiff, and rejecting the contention that making the statements available by other means was sufficient.

    Basch V Bank Of America

    CARLO BASCH, Respondent, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION , Appellant.

    COUNSEL

    Louis Ferrari, G. D. Schilling, James S. De Martini, D. Bianco and Hugh L. Preston for Appellant.

    Belli & Leahy and Marshall E. Leahy for Respondent.

    OPINION

    CURTIS, J.

    A preliminary statement of the general principles governing the question of liability as between a bank and its depositor when forged checks are involved will facilitate the discussion of the controversial points raised for consideration on this appeal.

    “The weight of authority, and perhaps of reason, supports the view that when a depositor’s pass-book has been written up and returned to him with canceled checks which have been charged to his account, it is his duty to examine such checks within a reasonable time, and if they disclose forgeries or alterations to report them to the bank, failing in which he cannot, if his failure results in detriment to the bank, dispute the correctness of payments thereafter made by it on similar checks.

    “This rule, however, assumes that the bank itself has not been guilty of negligence in making the payment, for when by the exercise of proper care it could have discovered the alteration or forgery, it must bear the loss notwithstanding that the depositor failed in his duty to examine the accounts. “

    The import of the relationship between a bank and its depositor is authoritatively treated in 7 American Jurisprudence, page 371, section 516, as follows:

    SCHAUER, J.

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