Let's Talk U.S. Treasury Checks

The Government issues millions of checks every year for a variety of purposes, including tax refunds, salaries, and Social Security benefits. Direct deposit has been an important defense against the losses connected with U.S. Treasury checks, and although counterfeiting currency is a source of financial loss to the American public, far more money is lost every year as a result of the theft and forgery of these Treasury checks. Unlike the counterfeiter who requires expensive equipment to practice his trade, the forger needs only a pen, a stolen Government check, and a victim.

Your check cashing policy can be very clear about checks that are drawn on you, or on another financial institution. But sometimes, when presented with a U.S. Treasury check, we tend to disregard policy. Here are questions that may help in your decision on whether or not to cash that check.

Q: What are the security features of a U.S. Treasury check?
A: There are several:

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.

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.

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.

MICR Line Issue Date: On the MICR (Magnetic Ink Character Recognition) 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).

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.

Ultraviolet Overprinting: There is a protective ultraviolet pattern, invisible to the naked eye, consisting of four lines of "FMS" (Financial Management Service) 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.

Bleeding Ink: The Treasury seal, located to the right of the Statue of Liberty contains security ink that will run and turn red when moisture is applied to the black ink of the seal.

Q: Are you required to cash a U.S. Treasury check for a non-depositor?
A: There is no federal law that requires you to cash U.S. Treasury checks for a non-depositor. At the same time, there is a great potential risk for cashing an item for such a person, because if it is returned for some reason, you do not have an account you can charge the item back to.

Q: I've been told endorsements can be a problem - what kind of problem?
A: It is common for tax refund checks to be payable jointly to two payees. In that case, you must obtain the personal endorsement of both payees.

It is not uncommon for one payee to later claim that his/her endorsement was forged by the party for whom you cashed the check. Check signatures. If both parties are not present and the party who endorsed prior to it being presented to you is not a depositor (and you therefore do not have a specimen of their signature), consider making a quick phone call to a number you can find for that individual to verify whether or not they endorsed 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 assume you can use your "For credit to the account of the within named payee. Absence of endorsement guaranteed" stamp. IRS checks are very specifically payable to both parties, and have the word "and" between the names. That means that both payees must endorse the check in order for the check to be negotiable. Almost all of our joint accounts are "or" accounts. We honor checks written by either party. It is entirely possible for one of your joint account holders to get the IRS check with the other payee on the check having no knowledge of its receipt. If you were to use the endorsement stamp, in this case, and accept the check with only one endorsement, the other payee can certainly come back to you for his/her portion of the check due them. You can't use the guarantee stamp if your joint account is an "or" account. Insist on both personal endorsements if the amount and the circumstances warrant it

Q: What happens if the Treasury Department later determines the check was bogus or not endorsed properly?
A: 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.

If you get a check back from the U.S. Treasury, they will charge your financial institution for the returned check, and send you a copy. It will be up to you to try to make recovery. You may protest the return. All check reclamation protests dated Jun 1, 2006 or later should be forwarded to: Dept. Of the Treasury: Financial Management Service; Financial Processing Division; P.O. Box 515; Philadelphia, PA, 19105-0515. Bank protests on check reclamations dated prior to Jun 1, 2006 should continue to be forwarded to the Hyattsville, MD address listed on the reclamation.

In order to further reduce losses, the Treasury is making signing up for Direct Deposit of Social Security checks even easier than before. For details, access www.GoDirect.org

Copyright © 2006 Bankers' Hotline. Originally appeared in Bankers Hotline, Vol. 16, No. 5, 7/06