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Home >> Checks/Money Orders >> Checks You Received
Responsibility for Forged Check
My company sells maritime equipment and we recently sold a boat for $1,000,000. The customer made the initial deposit for $100,000 which the bank confirmed. The customer called the next day and said that he had an emergency and needed $60,000 back that he would redeposit within the next few days. We wired him the money to his bank account in England.
A few days later our bank informed us that the initial deposit that the customer made was a forged cashier's check, and that we owed them $60,000. Are we responsible for this? Shouldn't the bank have taken precautions to ensure the validity of the check?
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 Your bank was responsible to forward the check for payment, not for verifying its authenticity. Some banks won't accept requests to verify checks drawn on them, and even a valid check can be drawn against insufficient funds by the time it arrives at the paying bank. In short, even if your company's bank allowed you to withdraw from the funds from the uncollected check, your company is responsible to the bank for the check, based on its endorsement, or the fact of the deposit to the bank account.
Businesses have to be circumspect when dealing with new, unknown customers. Your company probably would not have delivered the boat until it knew that all funds had been received and that any checks had cleared. That's because the company is in the business of selling boats and other maritime equipment, not in the business of extending credit. If it sells on credit, it needs to check the creditworthiness of a client before delivering goods.
The scam artist in this case threw your business a curve ball. It asked for something your business isn't used to doing. Because you had a piece of paper (the check) that hadn't been collected, your "client" was asking you to extend credit to the tune of $60,000. Your company did so, without sticking to the basics of verifying creditworthiness.
Obviously, you'd like to believe that your bank caused this problem. However, there was ample opportunity for this fraud to have been nipped in the bud long before your company wired out the $60,000. This is not the responsibility of your bank.
Published on BankingQuestions.com 6/05/08
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