Court Casually Criticizes Bank Personnel's Inaction

by Sam Ott, BOL Guru

The defendant was a caregiver of an elderly customer. She enticed the customer to give her pre-signed checks without a designated payee. She filled in her own name or "cash" and cashed the checks. The defendant initially tried to cash the checks and was told the customer must be present. The defendant then had the customer accompany her to the bank when the withdrawals were made and the customer endorsed the items made payable to cash. On numerous occasions, bank tellers would question the customer regarding the transactions and even showed her the account balance. The customer always expressed her authorization of the transactions. The defendant ultimately withdrew approximately $135,000 from the customer's accounts.

It appears that the bank did everything possible to alert the customer to the possibility that the account was being depleted. The Court, however, stated "Despite suspicions over the validity of the withdrawals, given their frequency and the amount of cash being issued, bank staff never communicated with the police or their internal fraud investigators." The loss was borne by the customer and apparently no claim was made by the customer against the bank who did not suffer any loss.

The Court seems to intimate that further action on the bank's part should have been taken. Bankers, however, feel trapped within a Web of privacy laws and cases that restrict information disclosures.

The legal aspects of the case regarded the application of the Federal bank fraud statute, 18 U.S.C. 1344, to the actions of the defendant who was convicted of bank fraud and inducing someone to travel in interstate commerce in furtherance of a fraud scheme. The 3rd Circuit U.S. Court of Appeals of the Eastern District of Pennsylvania held that her actions did not constitute bank fraud because she only intended to defraud the customer and not the bank. Due to the fact that the defendant caused the customer to cross state lines to cash the checks, her conviction on that Federal charge was upheld.

First published on BankersOnline.com 1/15/03