Pub. 7 2012-2013 Issue 6

March | April 2013 17 Extraordinary Service for Extraordinary Members. When Is a Check “Good?” What Every Bank Customer Should Know Charles M. Towle , Senior Vice President, Kansas Bankers Surety Company SECURITY OFFICER’S BY-WORD W ITH THE INCREASED USE OF the Internet and email, the number of ways in which good, well-known bank customers are being scammed continues to grow. These scams vary in size from a few hundred dollars to hundreds of thousands of dollars stolen from a single customer. Many stories— too numerous to list—are used in these scams; however, all of these scams have two things in common. First, the scams involve convinc- ing the good bank customer that the stranger is “trusting” the victim with his funds. The crook wants to put the victim in a position to “prove” he can be trusted. Second, a check of some sort is sent to be deposited to the victim’s account. The check names the good bank cus- tomer as the payee. When the victim is a longtime, well-known customer of the bank, the bank will not likely refuse to accept deposit of the check. The check may be drawn on an account of a large, well-known company or it may appear to be a U.S. government check or a cashier’s check. In every case, however, the check is not valid. It may be a completely fictitious check drawn on a nonexistent entity at a nonexistent bank. It may be a fictitiously created check drawn on an actual company’s account. It may be a check drawn on a Canadian bank. It may be a properly issued check that was stolen from the mail, chemically washed to remove the original payee, and altered to show the victim as payee. How Does the Crook Get the Money? The crook convinces the victim to send part of the check proceeds to an accomplice as soon as the bank will allow the customer to withdraw the funds. The reason given for sending the money varies. Perhaps a percent- age was agreed to be paid as part of the “deal.” Funds may need to be paid to release additional funds. Funds may need to be paid for alleged taxes, licenses, fees, or attorney fees for the deal. The amount of the check may be more than what was owed so a portion of the funds needs to be returned. The customer may be told that a foreign company needs an agent to cash a check in the U.S. and then wire the funds. The stories are sometimes very believable. How Long Should I Wait to Know the Check Is “Good”? It is almost impossible to tell when you have waited long enough. It is possible to be liable for the check for several years. Just because an account is credited and the bank releases any holds on the funds does not mean the check is good. It is possible under nor- mal circumstances for a check drawn on another U.S. bank to be returned for a forged maker’s signature two weeks after the deposit is made. If the check is drawn on a Canadian bank, the check can be returned several months later. If it is a fictitious check drawn on the U.S. Treasury, the credit can be reversed many months after the check was deposited. However, waiting weeks or even months is not always safe. If a legitimate check was stolen from the mail and then altered, the check can be returned for three years, or more, after it was deposited. When the check can be returned to the depository bank, the depository customer will be liable for the check. Q Check — continued on page 18