Responsibility of the Treasurer
The State Treasurer is custodian of all public funds.1 As custodian, the Treasurer is responsible for the safekeeping, proper accounting, and oversight of deposits, securities and assets.2 In particular, the Pennsylvania Fiscal Code directs the Treasury to authorize the payment of public funds only if it “appear[s] lawful and correct.”3
If any payment appears to be in error, it is returned to the originating agency for “revision, correction or cancellation” as necessary.4 As it pertains to check payments, when alerted that a payment was fraudulently induced or incorrect, Treasury will promptly notify the Commonwealth’s issuing bank to stop the payment.
Modification of Commonwealth Checks
In an effort to prevent instances of fraud, any financial institution that negotiates a Commonwealth check must be aware of the following indicators, which are present on Treasury-issued checks, in addition to other security features.
- On the front of the checks, there is an indication of the issuing agency and/or the purpose of the check.
- On the back of the checks, “POSITIVE PAY PROTECTED” is printed in the center at the bottom of the check, on the PADLOCK feature, which lists some of the check’s security features and fraud indicators.
- On the back of the checks, directly below the positive pay notification, “FOR VERIFICATION” is printed, followed by the verification phone number (717-783-8798) and the verification email address (email@example.com).
- On the back of the checks, directly below the signature line at the top, there is a checkbox to indicate whether the check has been submitted for mobile deposit.5
- On some Commonwealth checks, “POSITIVE PAY PROTECTED” is printed on the front of the checks, along with the verification phone number (717-783-8798). These checks do not have a checkbox to indicate whether the check has been submitted for mobile deposit.6
These changes are designed to inform financial institutions of the nature of the check payment, to alert them to the possible fraud risk, to provide an accessible email account and phone number by which an inquiry can be made to confirm if the check is valid at the time of the inquiry, and to notify the holder that the Commonwealth check is subject to an automated fraud protection protocol with the Commonwealth’s issuing banks.
Holder in Due Course Claims
Please be advised that Pennsylvania Treasury will not recognize “holder in due course” claims asserted by financial institutions that fail to observe reasonable commercial standards of fair dealing applicable to circumstances in which fraud may or reasonably should be suspected.7
It is expected that financial institutions will act in good faith as a holder in due course, and will make inquiries to verify the identity of the presenter of the check, ensure the accuracy of the information provided, and confirm the validity of the check presented for payment.8 To fulfill those obligations in a manner that is consistent with existing statutory and regulatory requirements, financial institutions that seek to claim “holder in due course” status will be expected, at a minimum, to document the following:
- Receipt of valid identification in the form of a government-issued driver’s license or photo identification provided by the customer;
- Documentation of the customer’s complete name, date of birth, residential or business address that matches the address listed on the check, phone number, and federal tax identification number;
- A current photo of the customer at the time the check is presented;
- Validation check of the photo identification from the Pennsylvania state driver’s license database or third-party identification validator (e.g., LexisNexis/Accurint) of customer’s name, address listed on the check, birth date and federal tax identification number;
- Confirmation of the validity of the check from Treasury through either the existing phone number listed on Treasury’s website (717-783-8798) or the email address (firstname.lastname@example.org). Upon receipt of an inquiry, Treasury will validate the check, accurate at the time of the inquiry.
- Evidence that an employee of the financial institution has personally observed the customer endorsing the check.
Financial institutions that do not act in good faith by exercising reasonable caution in validating Commonwealth-issued checks assume the risk that Treasury will not make any reimbursement for payments made on dishonored fraudulent checks.
It is anticipated that the fraud risks impacting the Commonwealth’s payment system will continue. Accordingly, as custodian of public funds, Pennsylvania Treasury will strengthen its oversight to safeguard the payment process. Your cooperation with this endeavor is sincerely appreciated.
Any questions concerning this Updated Notice of Commonwealth Checks Policy should be directed to 717-783-8798 or email@example.com.
1 72 P.S. §§ 301-302.
2 The role of custodian involves the responsibility of assuming charge and control of ownership, implying the responsibility for the safekeeping and preservation of the funds and assets under the custodial control of the Treasurer. See Black’s Law Dictionary 347 (5th ed. 1971).
3 72 P.S. § 1502.
5 The Check 21 Act places the responsibility for multiple payments of a check that has been deposited via mobile deposit on the bank that accepts the mobile deposit. 12 U.S.C.S. § 5004.
6 On or about January 2023, all Commonwealth checks will appear as described in numbers 2-4.
7 See 13 Pa.C.S.A. § 1201(b)(20).