Topic: Fraud
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A customer just notified us of unauthorized transactions on the customer’s personal account made through prearranged PPD ACH transactions. Some are from last month, and others are from over four months ago. Which, if any, do we have to reimburse him for?
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Regulation E requires you to reimburse the customer for the unauthorized ACH transactions that occurred within the first sixty days after your bank provided a periodic statement showing the unauthorized transactions. For unauthorized transactions on consumer accounts that do not involve a debit card or other access device, Regulation E requires banks to reimburse only…
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May a customer use online banking to transfer from a HELOC or line of credit to the customer’s checking account?
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Yes, your bank may choose to permit customers to transfer line of credit or home equity line of credit (HELOC) disbursements into their checking or other deposit accounts using online banking. We are not aware of any Illinois or federal law that would prohibit or restrict this practice. However, we note that this practice can…
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We received a Fedwire transfer request and paid the funds into our customer’s account. The next day, we learned from the originating bank that it very likely was a fraudulent transaction (related to an email scam), where someone impersonated the originator to initiate the transfer. The originating bank has requested that we return the funds, and we froze our customer’s account before he could withdraw the funds. We have confirmed the identity of the originator and originating bank and obtained a copy of the originator’s police report. Do we need any other documentation before returning the funds?
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No other documentation is required. The process of returning the wired funds is not governed by any laws or regulations related to Fedwire transfers. We recommend reviewing your account agreement with the customer to ensure that you are within your rights in freezing and removing funds from the customer’s account (which is likely in this…
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A customer signed blank checks, which the customer’s caregiver later filled out and made payable to himself. After the customer died, but before we became aware of the death, the caregiver cashed the checks at our bank. The customer’s account is now overdrawn. Do we have any recourse against the caregiver for the amount of the checks?
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Yes, if you can prove that the blank checks arose out of wrongdoing by the caregiver against your customer. The Uniform Commercial Code authorizes a bank to stand in its customer’s shoes and assert the customer’s rights against the payee of a check (in this case the caregiver) if the following requirements are met: (1)…
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If we believe the customer initiated a false debit card dispute (based on information provided to us by the police), can we offset the customer’s deposit account to recover the final credit we provided under Regulation E? The debit card has no credit or overdraft features.
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We believe that you may set off the customer’s deposit account in the amount of the credit that you provided to the customer under Regulation E. While Regulation Z places some limits on the right of offset for credit cards, those limitations do not apply to debit cards that lack any credit or overdraft features.…
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A deposit customer recently notified us of a large amount of forged checks paid over the past several months. Our account agreement requires the customer to notify the bank of any forgeries within 30 days. Are we liable for the forged checks?
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We do not believe that your institution will be liable for any forged checks that were not reported within the 30 days specified in your account agreement. Under the Uniform Commercial Code (UCC), a customer will be liable for any forged checks that are not reported with “reasonable promptness” (provided that the bank acted in…
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We just received a call from a payroll company saying that a large deposit will be arriving in one of our business customer’s accounts tomorrow morning in the form of an ACH transaction. The payroll company says that the transaction is a fraud. Subsequently, we spoke with the issuing bank, which told us that it already has placed an order for a reversal, which we should receive at the same time we receive the deposit. We have placed a hold on the funds, which we can do for one day under the ACH rules – but should we contact our customer? We believe this large deposit would be unusual activity for this particular customer.
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We recommend that you inform your customer of the situation today. Otherwise, in the event that your bank does not receive the reversal order tomorrow, you would still be placing a hold on the funds, but without your customer’s knowledge. You do not know any facts other than those asserted verbally by third parties in…
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One of our customers is writing checks to himself, which he deposits elsewhere. The customer is repeatedly overdrawing his account with these checks. Is this considered check kiting, and/or is this considered check fraud?
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We believe that the activities you described would be considered check kiting, and they also may be considered to constitute “bank fraud” in violation of federal and Illinois law. We cannot comment on a specific customer, but the definitions below will be helpful in determining whether to report these activities. In an October 2007 SAR…