Topic: Suspicious Activity Reports (SARs)
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We are a national bank, and we recently moved our wealth and farm management groups into a separate, state-chartered trust company that will be regulated by the IDFPR and the Federal Reserve. Do the ID theft/red flag requirements and the FACT Act apply to the trust company? Also, if our trust company obtains cash from an estate in a fiduciary capacity and deposits the cash at our bank, which entity is responsible for the CTR filing? Would both the bank and the trust company file the CTR? If the trust company files a SAR on its own, could it use the bank’s filing number?
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State-chartered trust companies are subject to the Fair and Accurate Credit Transactions Act of 2003 (FACTA), including its identity theft/red flag requirements. With respect to who should file currency transaction reports (CTRs) in the scenario in your question, we believe that either the bank or the trust company may choose to file the CTRs for…
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If a customer reports a fraudulent check after receiving their statement, is it true that we have only 24 hours to return the check after receiving it, regardless of the fraud?
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Yes, banks generally must return checks by midnight on the next banking day after receiving the check, as required by the Illinois Uniform Commercial Code (UCC). Although federal Regulation CC permits certain limited extensions of the UCC midnight deadline rule, they almost certainly are unavailable when the fraud is not discovered until after the customer…
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Is it permissible to pay interest on business checking accounts held by a customer who is a property manager for each of the properties they manage, when the interest is used to pay for the customer’s management software?
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Banks are permitted to pay interest on demand deposit accounts held by businesses and are under no obligation to police how that interest is spent. Your customer likely has a management agreement in place with the owners of the properties it manages, setting forth the property manager’s duties and compensation. However, your bank is under…
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What are the consequences for our bank if one of our employees signs a cashier’s check for an amount higher than they are authorized to sign (for example, where an employee has authority to sign up to $10,000 but signs a cashier’s check for $50,000)? What if the employee steals and writes a cashier’s check? In either of these cases, can the check be returned? We tell our customers that they must wait ninety days and sign an affidavit of loss before we can put a stop payment on a cashier’s check.
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We do not believe your bank would be able to return or stop payment on an unauthorized cashier’s check if presented by a holder in due course, unless it sent notice of dishonor before your midnight deadline, on the next banking day after the check was received. As a general rule, a bank may not…
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One of our elderly customers deposited a cashier’s check, which she believes was sent by someone who promised to marry her. We called the issuing bank before making the funds available from the deposit, and they confirmed that the cashier’s check was legitimate. About a month after the deposit, the customer requested a wire to send the funds, which we have not yet executed. We have frozen the customer’s account, which still contains the majority of the funds from the deposited cashier’s check, and reported the potential elder financial exploitation of our customer. Is there any chance that the deposited cashier’s check could be returned?
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First, we do not believe that the issuing bank could return the cashier’s check. The Illinois Supreme Court has held that a cashier’s check is the equivalent of cash. In Illinois, as a general rule, once the cashier’s check enters the stream of commerce, the issuer is liable under the UCC if it refuses to…
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A customer deposited a large insurance proceeds check made payable to both our customer and his mortgagee bank (together, not alternatively). However, the check was missing the required mortgagee bank’s endorsement, and we are now concerned about fraud. Can we freeze the customer’s account while we investigate?
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Your bank may freeze the customer’s account to investigate suspected fraud associated with the account, provided your account agreement includes language effectively authorizing the bank to place a hold on the account’s funds when it is concerned about potential fraud. In general, your bank’s authority to freeze your customer’s account is governed by your account…
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One of our customers signed an affidavit of forgery relating to four checks that were drawn on her account (we believe this is related to elder abuse by her son). We paid two of the checks and returned two NSF. We are going to refund the two checks that were paid. Can we return these checks? The midnight deadline already has passed. Does Rule 9 apply?
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No, we do not believe that you may return the checks after the midnight deadline. Generally, your bank must return a check, including a forged check, by midnight on the next banking day after receiving the check, as required by the Uniform Commercial Code (UCC) (with certain limited extensions permitted under Regulation CC). In this…