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ARTICLE · 23 NOVEMBER 2016

Florida Banks: Beware Of Eleventh Circuit Decision Implications

Banks beware: At the very least in Florida, you may be liable for negligence and "aiding and abetting fraud" to non-customers for trust funds deposited by a bank customer that were obtained...

United StatesFinance and Banking

Banks beware: At the very least in Florida, you may be liable for negligence and "aiding and abetting fraud" to non-customers for trust funds deposited by a bank customer that were obtained by the customer through fraud, according to a recent decision in JSI Chang v. JP Morgan Chase Bank, 11th Circuit, Case No. 15-13636 (Slip Op. November 8, 2016).

Introduction

Recommendations:
  1. Review your internal procedures for opening and monitoring escrow accounts.
  2. Consider requiring more due diligence about a customer if the sole relationship is a bank account, particularly an escrow account.
  3. Consider whether the banker in charge of an escrow account above a certain dollar threshold should be required to provide a monthly or quarterly report of account activity, unless that information can be pulled automatically by the bank's treasury management department.

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