B-129299, OCT. 11, 1956

B-129299: Oct 11, 1956

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OUR COMMENTS ARE REQUESTED AS THE RESULT OF OUR DECISION TO ABANDON RECLAMATION PROCEEDINGS ON CHECK NO. 1. OUR DECISION WAS BASED ON THE FACT THAT THE MANILA BANK WHERE THE CHECK WAS NEGOTIATED. IT WAS DOUBTFUL WHETHER THE UNITED STATES WOULD BE SUCCESSFUL IN RECLAMATION THROUGH JUDICIAL PROCEEDINGS. THE CONTROLLER STATES THAT THE CHECK IDENTIFICATION CERTIFICATE WAS ADOPTED BY YOUR REGIONAL OFFICE. AT THE REQUEST OF SEVERAL BANKS AND WAS INTENDED ONLY TO IDENTIFY A CHECK PAYMENT AND NOT TO IDENTIFY A PERSON. HE STATES FURTHER THAT THE BANKS WERE WELL AWARE OF THE INTENT OF THE SERVICE AND. IT WAS AGREED THAT THE VETERANS ADMINISTRATION. THE BANKS REALIZED THAT THIS PROCEDURE WAS NOT AN ABSOLUTE PROTECTION BUT FELT THAT ITS USE WOULD DISCOURAGE MANY PERSONS FROM ATTEMPTING TO CASH CHECKS TO WHICH THEY WERE NOT ENTITLED.

B-129299, OCT. 11, 1956

TO ADMINISTRATOR VETERANS ADMINISTRATION:

IN LETTER DATED JULY 20, 1956, FILE VBC3A, ADDRESSED TO OUR CLAIMS DIVISION, YOUR CONTROLLER REQUESTS OUR COMMENTS UPON THE CHECK IDENTIFICATION CERTIFICATE PROCEDURE USED BY YOUR MANILA OFFICE TO FACILITATE THE CASHING OF VETERANS ADMINISTRATION CHECKS BY THE PAYEES AT MANILA BANKS.

OUR COMMENTS ARE REQUESTED AS THE RESULT OF OUR DECISION TO ABANDON RECLAMATION PROCEEDINGS ON CHECK NO. 1,104,503, DATED MAY 31, 1953, DRAWN TO THE ORDER OF MAXIMA ABELLO VDA DE NAVA, XC-6,192,048, IN THE AMOUNT OF 4327.20 PESOS. OUR DECISION WAS BASED ON THE FACT THAT THE MANILA BANK WHERE THE CHECK WAS NEGOTIATED, RESISTED TREASURY DEPARTMENT RECLAMATION PROCEEDINGS ON THE BASIS THAT IT RELIED ON THE CHECK IDENTIFICATION CERTIFICATE ISSUED BY THE MANILA VETERANS ADMINISTRATION OFFICE FOR IDENTIFICATION PURPOSES. ACCORDINGLY, AND IN VIEW OF THE CIRCUMSTANCES SURROUNDING THE NEGOTIATION OF THE CHECK, IT WAS DOUBTFUL WHETHER THE UNITED STATES WOULD BE SUCCESSFUL IN RECLAMATION THROUGH JUDICIAL PROCEEDINGS.

THE CONTROLLER STATES THAT THE CHECK IDENTIFICATION CERTIFICATE WAS ADOPTED BY YOUR REGIONAL OFFICE, MANILA, AT THE REQUEST OF SEVERAL BANKS AND WAS INTENDED ONLY TO IDENTIFY A CHECK PAYMENT AND NOT TO IDENTIFY A PERSON. HE STATES FURTHER THAT THE BANKS WERE WELL AWARE OF THE INTENT OF THE SERVICE AND, PRIOR TO THE ADOPTION OF IT, THE MANILA BANKS REPORTED LOSSES OF THOUSANDS OF DOLLARS AS A RESULT OF CASHING CHECKS OF PERSONS OTHER THAN THE RIGHTFUL PAYEE. ALSO, THE PAYEES, ON THE OTHER HAND, OFTEN FOUND IT EXTREMELY DIFFICULT TO PROPERLY IDENTIFY THEMSELVES. AS A RESULT, AND IN A SPIRIT OF COOPERATION, IT WAS AGREED THAT THE VETERANS ADMINISTRATION, MANILA OFFICE, WOULD ISSUE A CHECK IDENTIFICATION CERTIFICATE WITH THE UNDERSTANDING THAT IT WOULD NOT BE BINDING UPON THE VETERANS ADMINISTRATION AND WOULD MERELY SERVE AS AN ACCOMMODATION TO THE PARTIES CONCERNED. THE BANKS REALIZED THAT THIS PROCEDURE WAS NOT AN ABSOLUTE PROTECTION BUT FELT THAT ITS USE WOULD DISCOURAGE MANY PERSONS FROM ATTEMPTING TO CASH CHECKS TO WHICH THEY WERE NOT ENTITLED. THE CHECK IDENTIFICATION CERTIFICATION HAS SERVED ITS PURPOSE AND HAS UNDOUBTEDLY PREVENTED MANY FRAUDS. THE CONTROLLER FURTHER STATES THAT BEFORE RELEASING THE CERTIFICATE TO THE ALLEGED BENEFICIARY IT WAS THE POLICY TO REVIEW THE RECORDS AVAILABLE IN THE MANILA OFFICE AND ASK QUESTIONS WHICH COULD ONLY BE ANSWERED PROPERLY BY A CLOSE RELATIVE OR ONE CLOSELY ASSOCIATED WITH THE DECEASED VETERAN. THIS SERVICE WAS PERIODIC FOR EACH CLAIMANT AND COMMENCED SHORTLY AFTER THE REOPENING OF YOUR MANILA REGIONAL OFFICE FOLLOWING LIBERATION. HOWEVER, EFFECTIVE AUGUST 16, 1952, IT WAS RESTRICTED TO INITIAL PAYMENT CHECKS ONLY.

WHILE THE ORIGINAL UNDERSTANDING BETWEEN THE BANKS AND THE VETERANS ADMINISTRATION WAS THAT THE CHECK IDENTIFICATION CERTIFICATE WAS ISSUED ONLY TO IDENTIFY A CHECK PAYMENT AND NOT TO IDENTIFY A PERSON OR TO MAKE THE VETERANS ADMINISTRATION RESPONSIBLE FOR CHECKS NEGOTIATED FRAUDULENTLY THROUGH USE OF THE CERTIFICATE, IT IS CLEAR FROM THE ACTION OF THE BANK IN THIS CHECK CASE THAT THE BANKS ARE NOW RELYING ON THE CERTIFICATES AS A DEFENSE FOR CHECKS FRAUDULENTLY NEGOTIATED THROUGH THEIR USE.

THE STATEMENT THAT PRIOR TO THE ADOPTION OF THE CHECK IDENTIFICATION CERTIFICATE THE BANKS REPORTED LOSSES OF THOUSANDS OF DOLLARS AS A RESULT OF CASHING CHECKS FOR PERSONS OTHER THAN THE RIGHTFUL PAYEES WARRANTS THE INFERENCE THAT THE USE THEREOF HAS BEEN BENEFICIAL TO THE GOVERNMENT AS WELL AS TO THE BANKS. THAT BEING THE CASE, AN ADMINISTRATIVE DETERMINATION TO CONTINUE ITS USE WOULD APPEAR JUSTIFIED. HOWEVER, IF IT SHOULD BE SO ADMINISTRATIVELY DETERMINED, AND IN ORDER TO PREVENT ITS USE BEING DETRIMENTAL TO THE INTERESTS OF THE GOVERNMENT, THE CERTIFICATE SHOULD BE REVISED TO PLACE THE BANKS ON NOTICE THAT ITS USE IS NOT INTENDED AS AN IDENTIFICATION OF THE PAYEE OF THE CHECK AND THAT THE VETERANS ADMINISTRATION DISCLAIMS ANY LIABILITY FOR CHECKS FRAUDULENTLY NEGOTIATED THROUGH ITS USE FOR PAYEE IDENTIFICATION PURPOSES.