Pub. 5 2016 Issue 2

The loss above resulted in the bank that accepted checks through its ATM being liable for failure to see that the checks were deposited to the account of the payee. This liability was imposed even though this bank had no knowledge of the name on the account in the other bank. Some ATM network agreements can contractually define which of the banks is liable to the other bank under what conditions. If your bank is accepting deposits through your ATM for deposit to cus- tomers of other banks, your employees should be verifying the endorsements and verifying that the checks are de- posited to an account in the name of the payee of the check. Failure to do the proper verifications could result in significant liability to your bank unless a network agreement allows passing the liability to the other bank. If your ATM system does not allow you to know the complete name on the account at the other bank, you should reconsider whether or not you will accept the substantial risk of blindly taking deposits to accounts in other banks through your ATM. You also may want to reconsider whether or not you will allow your cus- tomers to make deposits in other banks’ ATMs. Unless the other banks have a contractual obligation to your bank requiring them to verify endorsements and follow restrictive endorsements, you may have a substantial risk when you allow your customers to make deposits in other banks’ ATMs. All ATM deposits need to be verified in the same manner as other deposits received by your bank. Your employees must look at the payee, the endorse- ment and the name on the account to which the check is being deposited to make certain that the check can be properly deposited to such account. In cases where the ATM system prevents this proper verification process, checks should not be accepted for deposit. Crooks often choose to use ATMs to make deposits of checks payable to others because it is much easier than facing a teller. Unless the deposits are handled with care, banks can and will continue to have substantial losses. Brought to you by: Chuck M. Towle and the KBS Editorial Team To help protect your bottom line, call KBS to discuss this article and other loss prevention topics or products (785) 228-0000 Access more KBS Security Officer’s By-Word’s at: kbsforbanks.com /resources SUBSCRIBE FOR ENHANCED KBS CONTENT: http://tinyurl.com/kbssubscribe Connect with us on social media: twitter.com/kbsforbanks linkedin.com/company/kbsforbanks Smart Brief on Community Banking A weekly e-mail newsletter specifically designed for Community Bank Executives and Directors from our partner SmartBrief Sign up at http://tinyurl.com/smartbriefoncommunitybanking