How do we get funds back if square payroll direct deposited funds into a fraudulent bank account?

[SarahD12]

My employee’s direct deposit bank account was fraudulently changed to a scammer’s bank account. The employee noticed after one pay cycle that they didn’t get the funds, and that that one payroll direct deposit was deposited into a fake account with “green dot bank”. the employee was able to confirm with green dot bank that the account was not in the employee’s name, although the bank account still accepted the funds. Green dot bank says they can’t reverse or refund the funds back to “square payroll” (who is the depositor) without square submitting a “letter of indemnification”. I filed a case with square, and they aren’t sure if they’ll be able to recoup the funds either. 

I looked into how to recoup the funds with green dot bank myself, but they seem to be very unhelpful and seem to be a bit of a scam themselves. The employee has since updated / changed their bank account for direct deposit (to not be the fraudulent one), and secured their square account. 

Has anyone had this issue before? Where the bank account was fraudulently changed and funds were deposited into someone else’s account? How did you get the funds back? Any help is greatly appreciated!

[Donnie-M]

@SarahD12 To give you a little bit of my experience, and each situation is very unique.  Direct deposits are extremely hard to reclaim unless the receiving bank is super super friendly.  But once that money goes out...it is out of your hands.

The question is, where did the issue happen?  

I can say this for you.  As far as liability goes, square payroll actually does you a big service in letting the employee handle ALL payroll enrollment.  and "Only team members can update Square Payroll information."

Now this sucks for the employee, because it sounds like he got hacked.  Or was willy nilly with his security.  OR, a more nefarious situation is that this was planned, and the person who got the DD was a friend/relative/accomplice.  The important thing is the employee needs to secure his account and set up 2 factor authentication.

So, in this situation the onus is on the employee, they can definitely file a police report for identity theft/theft etc.  And try to go about it that way.  For you, I would be careful.  You could fix it as a sign of goodwill, but without more information.  I would be suspect.

I am assuming they discovered all of this and then came to you.

I know this isn't much help, but I would just do the due diligence, but this is a bad issue.  It is like this:  If i leave work after getting paid with my paycheck, I go cash my check at the bank, and I walk home and drop my money on the sidewalk without knowing it, are you the employer responsible?  is the bank responsible?