Topic: Suspicious Activity Reports (SARs)
-
Do we need to have a legal document authorizing us to freeze a customer’s account, or can we initiate a freeze to investigate suspected fraud if our account agreement allows us this privilege? We believe a customer may be committing fraud, and we want to freeze their account before any more potentially fraudulent checks are deposited into the account.
—
by
No, we do not believe you need a document authorizing you to freeze an account if the terms of your account agreement allow you to freeze an account to investigate suspected fraud. Generally, your bank’s authority to freeze your customer’s account is governed by your account agreement. Additionally, we note that when investigating suspected fraud,…
-
We paid five checks for a customer in late December 2019 that turned out to be forgeries. Our account agreement provides customers with a 60-day period after receiving their account statements to report any unauthorized payments. This customer notified us that the checks were fraudulent on January 9, and we returned them on the same day — even though the midnight deadline for their returns had long passed. The bank of first deposit filed a claim of late return through the Fed’s adjustment process, and we filed a response. On January 31, the Fed reimbursed us for all five checks, and we credited our customer’s account. On May 18, we received letters from the bank of first deposit requesting that we credit them for three of the checks. Are we liable to the bank of first deposit for these checks? How long does the bank of first deposit have to request credit for the two remaining checks?
—
by
Your bank likely is liable to the depository bank for all five forged checks, since your bank did not return them until after the midnight deadline had passed. Regarding the two remaining checks, the depository bank has up to three years to request credit and bring an action against your bank for failing to pay…
-
One of our customers mailed a check to a vendor that was intercepted by a rogue postal employee who then generated their own check and forged our customer’s signature. The forged check was used to open a fraudulent account at another bank and cleared our bank. Our customer notified us of the fraud outside of the Federal Reserve’s return window but within the thirty-day window for customer notifications under our account agreement. Are we liable for the full amount of the check? Do we have any recourse against the depository bank? We had advised the customer to pay this vendor electronically rather than mailing a check.
—
by
We believe that your bank likely is liable for the full amount of the check since your customer reported the fraud within your account agreement’s reporting deadline. Whether your bank has any recourse for the check depends on whether the depository bank breached a presentment warranty to your bank or your customer’s negligence substantially contributed…
-
We discovered that our treasurer added herself as the POD beneficiary on her uncle’s account at our bank shortly before he died. We immediately removed the treasurer from the account and did not distribute the account funds to her. We plan to fire the treasurer very soon and will file a suspicious activity report (SAR). Is there anything else we should do, such as notifying the IDFPR and our primary federal regulator, the FDIC?
—
by
We do not believe that you are required to notify the FDIC or the IDFPR of the employee’s activity. The FDIC’s regulations require you to notify the FDIC regional office when filing a SAR for “violations requiring immediate attention, such as when a reportable violation is ongoing.” In this case, the violation is not ongoing,…
-
Our customer notified us of four forged checks posted to its account. The checks were purchased from a check printing company and were printed with the name and address of an out-of-state business, as well as our customer’s account number and our routing number. The checks were processed on December 31, and we returned them as “altered/fictitious” on January 13. We obtained an affidavit of forgery from our customer but did not attach it to the return. On February 28, the depository bank sent a claim of late return, and our account was debited for the checks. We have twenty days to contest the depository bank’s claim of late return, and we thought the depository bank only had twenty days to make their claim. Can we contest the depository bank’s claim of late return on the basis that it was untimely? If not, we believe we would be liable for the checks, since our customer reported the fraud within two weeks after the checks were processed. What are our options for recovering these funds?
—
by
The depository bank had two months to file a claim of late return — not twenty days. Additionally, a paying bank may only dispute a claim of late return with evidence that the return was not late. Consequently, it does not appear that your bank has a valid basis to contest the claim of late…
-
We have a business customer that deposited a fraudulent $100K cashier’s check at our bank. The customer waited two days for the funds to become available, then wired out $70K. After sending the wire, we received the $100K check as a chargeback with the notation that the check was an “altered fictitious check,” but we rejected the return as late (past the midnight deadline). Our customer later notified us that the $100K check they deposited appeared to involve a fraud scheme. We placed a hold on the remaining $30K in our customer’s account. After waiting thirty days, we have not heard from the paying bank, which apparently has a $100K loss. Is our customer entitled to keep the $30K from the fraud, or does the paying bank have a right to claim the remaining funds?
—
by
Whether the paying bank has a right to claim the remaining funds from your customer depends on the facts and circumstances of the fraud. If your customer was an innocent victim of the fraud and took the cashier’s check in good faith as payment for goods or services (or took certain actions in reliance on…
-
Under Illinois law, agents that sell lottery tickets must segregate the sales proceeds in bank accounts separate from their other funds. We have some customers who initially deposit lottery proceeds into their general operating accounts before transferring the funds to their segregated lottery accounts. Is this permissible, or must the lottery proceeds be deposited directly into the segregated accounts?
—
by
We believe that the proceeds from Illinois lottery ticket sales should be deposited directly into segregated accounts. The Illinois Lottery Law requires that all proceeds from ticket sales “shall be kept separate and apart from all other funds and assets and shall not be commingled with any other funds or assets.” Similarly, the Illinois administrative…
-
Our BSA Officer sought counsel from an attorney regarding a suspicious activity report (SAR) filing. I am the CEO of the bank, and when I asked about the nature of the guidance received, the BSA Officer said they were not allowed to tell me. Assuming the SAR is not based upon an action I have taken, is this accurate?
—
by
We agree that generally SARs and related information may be shared with bank management and the bank’s board, provided that your assumption (that the SAR does not involve you) is correct. The Bank Secrecy Act (BSA) generally prohibits disclosures of a “SAR or any information that would reveal the existence of a SAR” to…