What is a check cashing store’s responsibility to verify the identity of a person cashing a check on someone else’s behalf?

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What is a check cashing store’s responsibility to verify the identity of a person cashing a check on someone else’s behalf?

I am a manager of a check cashing store. We recently had a customer of ours call and ask if he can have his brother cash his tax refund check because he’s just had surgery. The teller verified certain information such as SSN and date of birth. After verifying that it was indeed, our customer, we told him to send in his brother and we would be happy to cash it for him. It is now 3 months later and recently our customer’s wife came in demanding to know how her husband’s check could have been cashed because he’s been incarcerated for the last 6 months. Are we liable?

Asked on May 24, 2011 under Business Law, Connecticut

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Your state licenses check cashers and therefore has statutes and regulations covering your books and records requirements. You need to check with your regulator to determine if it can issue any opinions or has issued any opinions regarding such matters.  As an initial reaction, you did not verify that the person physically cashing the check had the authority to do so, like as in a notarized affidavit or power of attorney. If the check was issued to X, and you think X called allowing Y to cash the check, without any additional validation, you actually may be responsible for paying X that money and therefore may be out the additional money.


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