Counterfeit Checks

Question: Our customer came in with a counterfeit check from his statement that we paid over three weeks ago. It looked like it was a scanned copy of a check he had written about four months ago, which was paid against his account back then. The number and the signature were the same, but the payee, amount and date had been changed, and the check was a different size and paper stock from his. The original check was for $250. The counterfeit is for $9,000. Do we have any defense on this at all, or are we just stuck?

Answer: Maybe not quite stuck for the whole thing. In our conversation, I learned the original check was payable to a radio station in another state, paying an invoice for advertising. The "new" payee on the phony check had deposited the check into an account in a financial institution in that state.

Some investigation is in order. Some questions need to be asked. For instance:Are there still funds in the account in the other financial institution that you could indemnify them for to attempt partial recovery?

Did (or does) the payee work for the radio station? Discovery of this fact may involve investigation on your part. Try calling the radio station.

If she did (does) work at the radio station, in what capacity? A bookkeeper, perhaps? Or a job where there is responsibility for processing or negotiating checks and payments?

Obviously the check copy was obtained either after your depositor wrote it and before he mailed it - or else it was copied while it was at the radio station. If there was negligence on the part of the radio station, there could be a "sharing" of liability. The UCC talks about theft by employee and the liability if negligence is a contributing factor in section 3-406 - and it might at least give you a fighting chance in an action against the radio station.

And as a reminder - don't forget to file a Suspicious Activity Report on the payee.

Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 6, 10/10