Question

When I worked at the oil & gas company, we had a check for $250,000 for compressor rentals that was stolen and the payee name changed. The check was initially payable to a compressor company in PA. We wrote thousands of checks each month, when we reconciled the account we just made sure the check cleared in the proper amount. It did! However, the name was changed from the compressor company to an individual. The individual cashed the check and wired the money to a bank in California where the scheme originated. After about 2 months, the compressor company called us to say we missed a payment. We looked and said the check was cashed. So we requested a copy of the check and immediately you could see the check was altered. We notified the bank and they covered the loss because of the forgery of the payee name. They investigated and determined the individual was an innocent party and a victim of the fraud. They made him believe it was their check and if he deposited it and wired the money elsewhere, they would donate something to his favorite charity. It was part of the scam. The bank then informed us that they offered a Positive Pay service (that we had to pay for) but that would protect us from fraudulent checks. We signed up and sure enough a couple months later the same people tried to make a fraudulent check on our account (they had the account number, the signature of the CFO and the check number sequence). Positive Pay caught the check and we reported it as fraud. The perpetrators moved on after that! Fraud is amazing, if you think about how people come up with these schemes! Banks have to constantly be on guard.

Do you feel it is fair that the bank forces clients to pay for a service to protect their accounts? Do you feel it is the bank's responsiblity? Does anyone have any stories of check fraud?

Answer 1

Firstly, your case is a learning for me.

I guess, banks are the public institutions in which public keep their trust in investing or depositing their money. Banks are not doing it for free. The money which the general public keep will be traded by banks in the form of their liquidity funds. Its Bank's responsibility to keep the money safe. Fraudulent actions should tightly checked and control measures should be developed and this is not a one time things. This needs to be taken care on a realtime basis.

I haven't came across any fraud on the checks, but have observed another type. So, when we are auditing a bank, specifically loans, we came across an account for which there is no interest. We were informed that its a ERP error and immediately changed it. The interest was calculated retrospectively for that. But, we have been through some other petty issues revolving to the account. So, we went in depth regard to all the accounts of that particular customer. We observed that, there was a payment transfer from one particular account every three months. So, we traced back to the sender's account. Guess what, both accounts are of same customer with different customer IDs. In one customer ID, he is getting loans and using them in repaying the other account. Basically, these loans are given based on the performance of their business. At the end, we made the bankers mark it as NPA- Non Performing Asset and an action was taken on that customer. Obviously few bankers are included in this fraud and they were immediately got transferred based on the Flash report we gave.