What are altered checks? What are the actions that a bank can take when it encounters a case of check alteration?

Question

What will be an ideal response?

Answer 1

Sometimes a check is altered before it is presented for payment. This is an unauthorized change in the check that modifies the legal obligation of a party. The payer bank can dishonor an altered check if it discovers the alteration. If the payer bank pays the altered check, it can charge the drawer's account for the original tenor of the check but not the altered amount.
If the payer bank has paid the altered amount, it can recover the difference between the altered amount and the original tenor from the party who presented the altered check for payment. This is because the presenter of the check for payment and each prior transferor warrant that the check has not been altered. This is called the presentment warranty. If there has been an alteration, each party in the chain of collection can recover from the preceding transferor based on a breach of this warranty. The ultimate loss usually falls on the party that first paid the altered check because that party was in the best position to identify the alteration. The forger is liable for the difference between the original tenor and the altered amount—if he or she can be found and is not judgment proof.