The Supreme Court of Canada has confirmed that a financial institution will not necessarily be liable to its customer for funds derived from the negotiation of a counterfeit cheque where those funds are voluntarily returned to the victim drawee institution. If the drawee made payment based upon a mistake of fact, believing the cheque was good, it has a legitimate entitlement to return of those funds subject to limited defences. Provided that the recipients of the funds are unable to establish a good faith "change of position" the funds can be returned to the drawee institution without court order.

type Banking Litigation News - April 16, 2009 - Banker's Liability Alert: Chargeback of Cleared Counterfeit Items