You are currently viewing IBAT Weighs in on Failures in Combating Check Fraud

Big banks have failed in their BSA/AML responsibilities and are enabling bad actors to commit check fraud. That’s the contention by IBAT and other state banking trade associations highlighted last week in American Banker.

Community bankers already know that “check fraud is out of hand,” said Chris Doyle, IBAT’s Chairman and President and CEO of Texas First Bank. “It’s an all-out war… the capture and washing of checks is out of control.”

IBAT has joined with other state banking trades in calling for the Office of the Comptroller of the Currency to crack down on the big banks and adopt prompt reimbursement requirements for community banks caught up in the fraud. Further, the associations have called upon regulators to shift the liability to the bank of the first deposit.

“Both the bank of first deposit and the paying bank are dependent on each other to police the system and one isn’t doing their job, and that’s the problem,” said Kelly Goulart, IBAT’s Senior Regulatory Compliance Manager. “The large banks game the system, their ‘know your customer,’ compliance isn’t up to snuff, and they are less than enthusiastic about responding to community banks’ issues about presentment warranty.”

IBAT is considering enhancements to the law, which would better hold responsible perpetrators of check fraud and their enablers.