Fraud Prevention
Mar 2, 2019

Security Tips to Avoiding Counterfeit Check Fraud

Some of the common counterfeit check scams include:

Selling Goods:
You sell goods in the marketplace (i.e. over the Internet). The buyer sends you a check for the price that you have agreed on and you ship the goods to the buyer. The check turns out to be fraudulent.

Excess of Purchase Price:
This scenario is similar to the one described above. However, the buyer sends you a check for more than the purchase price and asks you to wire some or all of the excess to a third party. The buyer explains that this procedure allows the buyer to satisfy its obligations to you and the third party with a single check. The check turns out to be fraudulent.

Unexpected Windfall:
You receive a letter informing you that you will receive a substantial sum of money. For example, the letter may state that you have won a lottery or are the beneficiary of someone's estate. The letter will state that you have to pay a processing/transfer fee before you receive the money and that the cashier's check will cover that fee. You are to deposit the check into your account and wire the fee to a third party. The check turns out to be fraudulent.

Mystery Shopping:
 You receive a letter informing you that you have been chosen to act as a mystery shopper. The letter includes a check and you are told to deposit the check into your account. You are told to use a portion of the funds to purchase merchandise at designated stores, transfer a portion of the funds to a third party, and keep the remainder. The check turns out to be fraudulent.

The result of these scams is that the counterfeit check will be returned unpaid. The bank will then deduct the amount of the check from your account or otherwise seek repayment from you, and you will lose either the goods that you sold, the money that you sent to the third party, or both.

What is a fraudulent cashier's check? A cashier's check is a check issued by a bank and payable to a specific person. Because a cashier's check is issued by a bank, the cashier's check is paid by funds of the bank and not the depositor. Therefore, if an item is genuine, there is very little risk that the instrument will be returned. Sometimes, however, a cashier's check is not genuine and if you unknowingly accept a fraudulent cashier's check in exchange for goods or services, you will likely be the one who suffers the financial loss.

How can you tell if a cashier's check is fraudulent? It can be very difficult for either you or your bank to tell. When you deposit a check into your account, your bank is required by law to make the funds available within a specific period of time. This is true even if the check has not yet cleared through the banking system. Therefore, even if the funds have been made available to you, you cannot be certain that the check has cleared or is good.

What are your rights? If you find yourself in this situation, you ordinarily would have a remedy against the person who wrote the check. However, you will have great difficulty pursuing any remedy against these scammers, especially if they reside in a foreign country or have disguised their identities.

Tips for avoiding Check Fraud:

  • Try to know the people with whom you do business.
  • When you use the Internet to sell goods or services, consider other options such as escrow services or online payment systems rather than payment by check.
  • If you do accept a check for payment, never accept a check for more than your selling price if you are expected to pay the excess to someone else.
  • If you want to find out whether a check is genuine, call the bank on which the check is written. Do not use the phone number on the check, look in a directory for the correct phone number. That bank will be in a better position to tell you whether the check is genuine.
  • Know the difference between funds being available for withdrawal from your account and a check having finally cleared and paid.
  • If it seems too good to be true, it probably is. Consumer beware!