26.3 Million Treasury Checks Going Out: What Every Teller Should Know

26.3 Million Treasury Checks Going Out:
What Every Teller Should Know
by BOL Guru Mary Beth Guard

Over the next few weeks, your institution will be seeing a large number of U.S. Treasury checks as the government mails out a total of 26.3 million checks for Child Tax Credit Advance Payments in three large batches, with smaller additional mailings thereafter. The first batch went out July 25, and will be followed by mailings on August 1 and August 8.

There are four issues you will want to know about:

whether you are required to cash a U.S. treasury check for a noncustomer;
what kind of endorsement you should require;
what happens if the Treasury Department later determines an item you accepted was bogus or not endorsed properly;
how to tell whether the item is a genuine Treasury check.

Cashing Checks for Noncustomers
At the present time, there is no federal law that requires you to cash U.S. Treasury checks for noncustomers. There is a greater potential risk for cashing an item for a noncustomer, because in the event the item turns out to be counterfeit or altered, or the endorsement is not genuine, you do not have an account you can charge the item back to.

Ask what your institution's policy is on cashing Treasury checks to noncustomer payees and follow it.

As always, be sure to ask for identification from the payee.

Endorsement Requirements
If the check is made payable jointly to two or more payees (names separated by "and"), you must obtain the endorsement of all named payees.

It is not uncommon for one payee to later claim that his/her endorsement was forged by the party who brought the check to your bank. Check signatures. If both parties are not present and the party who endorsed outside the bank is not a customer (and you therefore do not have a specimen of their signature), consider making a quick phone call to a number you can find for the out-of-bank individual to verify that they signed the item.

Be especially suspicious when the check is being deposited, without endorsement, or with the endorsement of just one party into a recently opened joint account. A common ploy when a couple has recently separated or divorced is for the one who receives the check to fraudulently open a joint account in the names of both parties in order to deposit the joint check, without the knowledge or consent of the other payee, and gain sole access to the proceeds. Don't be fooled by this type of fraud.

When the Item is Bogus or Not Endorsed Properly
U.S. Treasury checks are governed by their own set of rules, found at 31 CFR Part 240. Those rules govern the length of time Treasury has to examine checks, as well as the length of time within which it can pursue a claim for bad endorsement.

Suffice it to say that the rules are written in a manner that is extremely favorable to the Treasury, both in terms of the length of time Treasury has to discover a problem with one of its checks and in terms of giving Treasury an easy route (reclamation) to recoup funds from you. You may learn of an endorsement problem months after the fact. And unlike a normal financial institution, which would have to reject a counterfeit or forged item by the midnight deadline, Treasury is given much wider latitude.

The bottom line is that it is unlikely the loss will fall on Treasury. That makes it vitally important for you to verify the identity of the payee, make sure all endorsements are genuine, and detect and reject any counterfeits. You must do all three to really protect your institution against loss.

Proposed amendments to the rules are currently pending. To see what changes might be in store, click here.

What to Look For

Special Wording. These special Treasury checks, unlike ordinary checks, will bear the words "TAX RELIEF FOR AMERICA'S FAMILIES," in all caps at the bottom;
Amounts. Most, but not all, of these checks will be in amounts that are multiples of $400. [The reason some will be for odd amounts is that the government has the right, in some instances, to offset the payments to collect delinquent amounts the taxpayer owes to the federal government.];
Six Security features on U.S. Treasury Checks. There are six security features on U.S. Treasury checks. Examine each Treasury item presented to you to ensure the following security features are all present:
1. Watermark. U.S. Treasury checks are printed on watermarked paper that reads "U.S. TREASURY" from both the front and the back of the check and can be seen only by holding the check up to the light.
2. Silhouette of the Statue of Liberty. The front of a U.S. Treasury check has a silhouette of the Statue of Liberty's head as part of the printed background.
3. Microprinted Endorsement Line. Microprinted words are printed so small that they appear as a line to the naked eye. The endorsement line on the reverse of the U.S. Treasury check is actually a line of microprint that, when magnified, spells out: "USAUSAUSAUSAUSAUSAUSAUSAUSA." The microprinted endorsement line on counterfeit checks is usually a solid line or a series of dots.
4. MICR Line Issue Date. On the MICR line of a U.S. Treasury check is a six-digit transaction code field that represents a two-digit agency code, two-digit month and two-digit year (XXMMYY).
5. Symbol and Serial Check Digit Numbers. The four-digit symbol number and the eight-digit serial number are printed on every U.S. Treasury check and located on the upper right-hand side of the check. These two sets of numbers are repeated on the MICR line printed across the bottom of the check, followed by a security digit.
6. Ultraviolet Overprinting. There is a protective ultraviolet pattern, invisible to the naked eye, consisting of four lines of "FMS" bracketed by the FMS seal on the left and the United States seal (eagle) on the right. This pattern can usually be found under the payee information and amount area and is detected under a black light.