I do not understand how it was even possible for a “Check” with a wrong name on it to be cashed, that is a primary defense of fraud in the banking system. To fail at this simplest of controls, twice is pretty disconcerting for USAA.
Not really, USAA didn't handle it any differently than any other bank would. When I retired I handled fraud/forgery investigations and as REWahoo said this is a simple forgery and that crime has been going on for as long as there have been checks to forge.
Bear in mind that it is by far the exception that a human actually reads any given check except at the point where it is initially passed. So if I have davismills's valid account number that is all the information I need to create a check, make it payable to "Donald Duck" and then deposit it into Mr. Duck's account that I have previously created for this purpose. When the check clears I withdraw the money and I'm outa there. What's so hard about that? Or I can have fake I.D. made up in Donald Duck's name and go out and buy a new car, writing a check for it.
As far as it being prosecuted, that is now entirely up to USAA or whoever ultimately takes the loss. davismills has been made whole and other than being slightly inconvenienced he has suffered no damages so his legal status changes from "victim" to "witness". The victim is now USAA unless they can kick it back to the bank where the check was accepted, then that bank becomes the one holding the bag and becomes the victim. And that bank may in turn kick it back to a merchant, such as a car dealer, since this was in the amount of five figures, and that car dealer would take the loss.
And that bank or car dealer or whoever, then has to decide "Is it worth my time and effort to prosecute this thing? Is there a viable suspect, and is he in the U.S. or Bangladesh? What are his assets that I can get to to recover my damages?" And so on. If there is a suspect but he has a net worth of $1.28, well, going after him is a waste of a business's time and they're probably not going to bother. Why throw good money after bad in the form of paying employees to go to a trial, perhaps in a different state with all the attendant travel costs without even a slight assurance that the trial judge will order restitution?
So you can see this then becomes a business decision, not a moral or legal one.