Usually, the item is not “properly payable” because it has not been “authorized by the customer.” In most cases, the bank that is directed to pay the check is strictly liable for charging its customer’s account for a counterfeit, forged or altered check.2 A depository and/or payor bank who wrongfully accepts for deposit and/or pays an unauthorized check may avoid liability in certain, limited circumstances, where it can show that “(1) its customer, the drawer, was negligent; (2) the drawer’s negligence ‘substantially contributed’ to the alteration and (3) the drawee/payor bank paid the check in ‘good faith.’”3 A bank, however, can take proactive steps to protect itself from strict liability by entering into a carefully crafted deposit account agreement with its customer, including requiring the customer to implement services, such as positive pay or cybersecurity standards such as hardware and software firewalls and VPN encryption, to help identify and protect against fraud.4 The following deposit account language may be effective in helping reduce a bank’s strict liability for paying unauthorized checks or transactions: You agree that if you fail to implement any of these products or services, or you fail to follow these and other precautions reasonable for your particular circumstances, you will be precluded from asserting any claims against [bank] for paying any unauthorized, altered, counterfeit or other fraudulent item that such product, service, or precaution was designed to detect or deter, and we will not be required to re-credit your account or otherwise have any liability for paying such items.5 Part II – Consumer/Personal Fraud Business Email Compromise Schemes Email fraud has continued to proliferate in recent years. Targeted phishing attacks had a single purpose — to take over the account of an executive and use the executive’s account 19 Nebraska Banker
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