Washington Trust seeks to recoup $570K after suspected bank fraud

WASHINGTON TRUST Bancorp Inc. is the parent company of The Washington Trust Co. based in Westerly. /COURTESY GREATER CITY PROVIDENCE/JEF NICKERSON
WASHINGTON TRUST BANCORP INC. is the parent company of The Washington Trust Co. based in Westerly. /COURTESY GREATER CITY PROVIDENCE/JEF NICKERSON

PROVIDENCE – In an age of cybercrimes and international hacking schemes, old-fashioned bank fraud seems somewhat outdated.

But don’t tell that to the Washington Trust Co. customer who earlier this year found their account had been charged an unexpected $570,000 after two mailed checks were altered and cashed at Wells Fargo.

“This type of incident … happens from time to time. What makes this different is the size of it,” said David V. Devault, chief financial officer at the Westerly-based bank.

The issue surfaced last month when executives of the parent company, Washington Trust Bancorp Inc., reported third-quarter earnings. The results included an uncommon noninterest expense of $570,000, which the bank called an “isolated external fraud matter.”

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When pressed for more details, the company told investors Tuesday the issue stemmed from an incident earlier this year involving a customer who sent two checks to a vendor, according to federal filings.

The checks were altered to change the name of the payee and the amounts. The checks were then diverted “by an unknown party” and deposited at Wells Fargo. Washington Trust declined to disclose the original amounts of the checks, although Devault said the markup was “substantial.”

After learning of the fraud, Washington Trust promptly reimbursed its customer for the inappropriately amount charged.

Joseph A. MarcAurele told Providence Business News its common in these instances for the second financial institution to reimburse the amount. But Wells Fargo has thus far refused, and Washington Trust is pursing legal action in U.S. District Court to recoup the funds.

No Washington Trust employee or customer was involved in the incident, Devault added.

The cost to the bank didn’t make much of an impact on third-quarter earnings, however, as Washington Trust reported third-quarter profit of $13 million, representing a 5.2 percent increase compared to the prior-year period.

Washington Trust is the second largest Rhode Island-based bank with assets totaling $4.5 billion.

Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.

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