Does your Bank have procedures in place for reviewing endorsements on in-clearing checks? Our bookkeeping department spends 1-2 hours daily reviewing endorsements on in-clearing items over $2500 to ensure that the item is endorsed as drawn.

I believe there is a statute or UCC filing somewhere that places the burden of verifying/confirming endorsements on the bank of first deposit, but I don't know where to begin to look for it. If anyone can cite it for me, it would be great.

It's my personal belief that we should not spend the time on this process, but our Senior Manager has "always done it that way" so we continue. We go so far as to contact our account holders when an item is presented that is missing an endorsement and confirming with them that the payee received the item.

To date, we have never had a single issue with an endorsement.

I can't find where it says that about the BOFD taking the liability...but I know they do.

We do check items over $2500 but not specifically for endorsements. We check them for anything 'weird'. Most of ours are the same entities over and over, so if we see different check stock or a different signature, it sticks out to us like a sore thumb. Same thing if it's a personal check made out to an individual, we might scrutinize it a little bit.
As for endorsements, we might only get a little anal for the title companies sake if the payees are Joe AND Jane when only Joe endorsed it. Other than that...we don't get too excited.

Two sections of the UCC to look at: 4-205 makes it kosher to accept a check for deposit from a customer without indorsement, and the depository bank warrants that its customer received cash or credit for the check.

And, since the depository bank indorses the item itself, it gives transfer and/or presentment warranties.

In short, the bank of first deposit warrants that the payee or holder received credit. If the payee claims non-receipt/forgery, the bank of first deposit stands the loss.

Thanks John - your reply says "Two Sections of the UCC...", but I only see one reference in your reply - will you share the other?

Thanks!

Sorry. The other "section" is actually a group of four on transfer and presentment warranties. 3-416, 3-417, 4-207, 4-208.

One other item to consider is what other banks in your area are doing.

My bank has decided to raise the level for review to 10,000 and assume the risk on the others. We were spending hours each day and decided the time could be used more efficently if we were willing to accept a little more risk. Monitoring hasn't should any difference in our losses.