Compliance Bulletin

Court Highlights Another Risk of Banking Check Cashing Companies
April 6, 2015

As if Operation Choke Point and banking regulators’ laser focus on BSA and money laundering risks were not enough, a recent court decision gives banks further reason to be cautious when providing banking services to check cashers. In HH Computer Systems Inc. v. Pacific City Bank three banks that took deposits from their check casher customers were found to owe a duty to a company that took losses when its faithless bookkeeper diverted checks made out to the company and cashed them at check cashing stores under false pretenses. The company sued and the banks unsuccessfully argued that the check cashers bore the duties of the bank of first deposit and, at any rate, the banks owe no duty of care to non-customers. The court reject both arguments. See CBA’s Regulatory Compliance Bulletin for more information. For more information, please see CBA’s Regulatory Compliance Bulletin.