Scams, Scams, and More Scams

Written By: Jay L. Hack


A business customer comes to a bank, opens an account with copies of corporate papers proving incorporation in New York, and deposits a large check payable to the corporation. After an extended hold for a new account, the customer comes back to withdraw substantially all of the funds. The branch manager is suspicious and refers it to the Fraud Department. The funds were not released even though the check had been paid by the drawee bank. When called by the Fraud Department, I recommended that the Bank contact the maker and the payee of the check. A quick call to the payee revealed that it did not have an account at our client’s bank. The police are now looking for the perpetrator.

A check payable to John Smith, or to John Smith Corporation, is entitled to be endorsed and collected only by the intended payee. Another individual or corporation with the same name has no rights to the proceeds of the check. If he deposits the check into his own account and then absconds, the bank that permitted the withdrawal is liable. This is the result even if the depositor didn’t know of the error and thought the money was intended for him.

Today’s Takeaway? Always do more diligence than just taking a filing receipt and certificate of incorporation and sticking it into a file. PO Box addresses, cell phones without landlines, and the lack of cogent explanation of the company’s business should all raise alerts. I know that site visits are a pain, but they go a long way to verifying the bona fides of a business account.

about the authors

Jay L. Hack


Mr. Hack’s primary practice focus is providing a full range of legal services to banks and other financial institutions.

View Profile