Liability for alleged fraudulent checks in a business account

Question

I am dealing with a situation where alleged fraudulent checks were deposited into a business bank account. The bank informed the account holder that the checks were fraudulent only after holding them for 5-7 days before releasing funds. The bank hasn't communicated any actions yet. Can the account holder send a letter offering to reimburse anything the bank deems fraudulent, or does the bank bear any responsibility since they allowed the deposits initially?

James L. Arrasmith · Answer

Your situation with fraudulent checks in a business account creates a complex liability question. Under the Uniform Commercial Code (UCC), business account holders typically bear responsibility for verifying deposited items, even when banks initially accept them. The fact that the bank held the checks for 5-7 days before releasing funds might be standard procedure rather than an indication of their assumption of liability. 
 
You might consider sending a professional letter acknowledging the situation and offering to work with the bank on resolving any fraudulent transactions. However, keep in mind that most banking agreements include provisions that place the burden of verification on the account holder, regardless of the bank's processing timeframe. The bank's delayed notification doesn't necessarily transfer liability, though it could be a factor in negotiating the resolution. 
 
It would be wise to consult with a banking attorney who can review your specific account agreement and advise on your legal position. While preparing your letter, gather all relevant documentation including deposit records, notifications from the bank, and any correspondence about the fraudulent checks. This approach demonstrates good faith while protecting your legal interests during what can be a complicated banking dispute resolution process.

Q: Liability for alleged fraudulent checks in a business account