Stolen Checks Deposited in ATM: Liability?

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Question:

If a bank's outside automated teller posts a deposit that includes stolen checks that are not made payable to the account holder's name, and the checks clear, thus laundered through the automated teller, for the benefit of the account holder, and the bank never monitors the checks, who is responsible for restitution of the funds stolen?

Answer:

Assuming that the rightful payee of the checks discovers the theft and files the appropriate affidavit of forgery, the machinery for recovering the stolen funds will creak into action, and ultimately there will be one or more claims made on the ATM owning bank, based on its endorsement or transfer of the checks. Of course, this also assumes that the claim is made within the one-to-three year (depending on the state) period during which a warranty claim can be made. That bank will end up with the liability for the stolen funds unless it is able to recover them from the account holder into whose account the funds were initially deposited.

First published on BankersOnline.com 6/07/10