Don’t Cash That Check-How Fake Cashiers Check Scams Work
Fake check fraud is a huge problem, with complaints to government agencies and consumer advocacy groups doubling over the last three years. Millions of fake checks worth billions of dollars circulate every year.
And millennials are being targeted more than any other age demographic.
If someone emails you and asks for money, you’d probably be very skeptical.
But what if the person sends you a check in advance, you cash the check, and your bank tells you that money is in your account?
Sounds like a safe deal, especially if it’s a cashier’s check, which is as good as gold. Right?
Wrong.
Here’s what crooks know, but you may not: even when a check is credited to your account, it does not mean the check is good.
A week or so later, if the check bounces, the bank will want the money back. And you, not the fraudsters, will be on the hook for the funds.
Tens of thousands of people every year are getting taken:
“Buyers” send a check for more than the full price to sellers of cars or other items on Craigslist and other online classifieds sites.
“Employers” send a check to “new hires” to buy supplies needed to do the job from home.
Sweepstakes or lottery “winners” are given a check to pay taxes so the award can be delivered.
All of these are scams involving counterfeit checks which are often altered versions of business checks from real companies.
Fake check fraud is a huge problem, with complaints to government agencies and consumer advocacy groups doubling over the last three years. Millions of fake checks worth billions of dollars circulate every year.
“Fake check fraud is an exploding epidemic,” says Elaine Dodd, Executive Vice President of the Oklahoma Bankers Association.
“More education and enforcement to stem this problem are clearly needed.”
Relevant Articles:
11 of The Best Side Hustle Ideas for 2019
9 Best Ways to Save $7K This Year
Here are two things to know and tell your friends about fake check fraud:
- Having the funds credited to a bank account does not mean the cashed check is valid.
Federal banking rules require that when someone deposits a check into an account, the bank must make the funds available right away – within a day or two.
But the bank also has the right to recover the money from the account holder if the check is counterfeit. It is only when the check works its way back to the bank that supposedly issued the check that it is discovered to be counterfeit.
2. Cashier’s checks and postal money orders can be forged.
A cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds and signed by a cashier. Cashier’s checks are treated as guaranteed funds because the bank itself, rather than the individual account holder, is responsible for paying the amount of the check.
Cashier’s checks are commonly required for real estate and brokerage transactions. If a person deposits a cashier’s check, the person’s bank must credit the account by at least $5000 the next day. The same holds true for postal money orders.
Fake Checks: How Big is this Problem
The Postal Inspection Service has stopped fake checks with a face value of $62 billion in 2017. Postal Inspectors intercepted 13,724 counterfeit postal money orders, and 550 non-counterfeit postal money orders, with a total face value of $14,157,204.
During 2016, total check frauds cost banks $789 million, a 25 percent increase from two years before. Efforts by banks stopped $7.8 billion in losses to victims in 2016.
What are fake checks?
Fake checks are simply counterfeited checks, usually copies of business checks from real companies.
Three different types of financial documents are commonly involved in fake check frauds: regular checks, cashier’s checks, and money orders.
Some appear to be created in the U.S. and Canada, but many are shipped in from overseas and then sent to victims.
• The regular fake check purports to be from a business, and usually contains a real account and routing number. These are not handwritten, and they look quite professional. The name of the business will appear on the check, and they often include a phone number as well.
• Fake Cashier’s checks look like they are from a bank or financial institution.
A genuine cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds and signed by a cashier. Cashier’s checks are treated as guaranteed funds because the bank itself, rather than an individual, is responsible for paying the check amount. These are commonly required for real estate and brokerage transactions.
The Office of Comptroller of the Currency has issued an alert about fake cashier’s checks.
• Money orders are issued by banks and the United States Postal Service. These are effectively a cash substitute. Money orders can be cashed at a bank and postal money orders at a post office. They are printed on special paper with watermarks to make them difficult to counterfeit.
The Postal Service has issued an alert on how to detect a fake money order or a money order scam.
Fake checks are used in a variety of frauds such as mystery shopper or nanny “jobs”, as well as prize and sweepstakes scams.
What the scams have in common is that victims have to send money to the fraudsters.
After depositing the check, victims are asked to quickly wire money or buy gift cards that eventually make their way to the fraudsters before the checks bounce.
Regardless of the format, the checks usually look professional and convincing.
To test the actual validity of a check, consumers should not call a phone number printed on the check but should instead look up the telephone number for the supposed source of the check and call directly to see if it is real.
Who are fake check fraud victims?
Young people. Fake check frauds affect victims of all ages and income levels.
However, the Federal Trade Commission’s Consumer Sentinel complaint database shows that the biggest age range for victims are those between 20 and 29 years old, at 21 percent of the total.
By contrast, less than 10 percent of the victims were 70 or older.
The results are consistent with the findings of BBB in its study Cracking the Invulnerability Illusion, which found that millennials are most likely to be victims of fraud.
- Small businesses. Check frauds affect not only individual consumers, but small businesses as well. The American Banking Association survey for 2016 found that bank losses from small business accounts increased to 22 percent for fake check fraud, up from 14 percent from two years before.
- Lawyers. Some sizable law firms have lost hundreds of thousands of dollars to collection fraud. The attorney deposits a fake check from the client’s “debtor”, deducts their legal fee and use a bank-to-bank wire transfer to send the remaining money to the supposed client.
- Banks. Those depositing fake checks are responsible for losses when the checks are found to be counterfeit. Banks can take funds from victims’ bank accounts or take collection action if they do not have enough to cover the losses. When victims don’t have the money to cover fraudulent deposits, banks may end up absorbing the losses.
FDIC insurance does not cover losses due to theft or fraud.
If a check is fraudulent, the company that has its name on the check is not liable as long as it has no knowledge of the fraud.
The person who deposited the fake check is responsible for returning money to the bank that made the money available to the depositor. This is explained in the Direct Deposit Account Agreement people sign when they open a bank account. Of course, victims have a right to sue those who defrauded them, but fraudsters are often difficult to find.
Stories from victims of fake check fraud
A St. Louis college student, Isayas, was looking for a part time job online, and found an offer to hire him as a mystery shopper. He took the job, and received a very professional-looking letter outlining his tasks.
Isayas got a cashier’s check in the mail written on the Patelco Credit Union in California for $1,987.22.
He deposited the check in his bank, and the following day the money was credited to his bank account.
He was told to go to McDonald’s, Subway or Starbucks, have a meal, and complete an evaluation form.
Then he was to go to WalMart and send money twice to addresses in Seattle and Tacoma, Washington.
He withdrew cash from his account and sent $885 to the two addresses specified, filled out the evaluation form, and sent it back.
Then the bank informed him that the check was no good and wanted the money returned.
His family helped him to set up a payment plan with his bank. They then reported the fraud to the police and to BBB.
__
Kathy, from the Chicago suburbs, was contacted on LinkedIn by someone impersonating a competitor of her employer. Kathy had heard very good things about this company, so she was excited. The person she was dealing with used the name of the real head of HR at the company. In addition, the email she got looked very professional, and the email address looked like it was from the company.
Kathy interviewed over a chat feature and was offered a job. She was told that she would need to buy office supplies, a laptop, a printer, and other items needed for the work.
The impersonator emailed several checks to Kathy so she could buy these items from the “company’s vendor” in Huntington, West Virginia. Kathy printed the checks and deposited them into her bank. Kathy says she waited until her bank told her the checks had cleared, and then sent several payments to the “vendor” through Western Union. She sent about $2,000 in all.
After that Kathy’s bank completely froze her account – for three months. The checks did not have the correct routing number for the company for which she believed she was working Kathy reached out and tried to contact the real company, but never heard back.
Kathy reported this to the police and BBB. She never received the supplies she had sent money for, and never heard any more about the supposed job. Kathy was surprised by the level of detail the crooks were able to provide, and urges people to be extra cautious, especially if a check is involved. She advises people to never take a job found online without meeting the employer in person.
Common Frauds that employ fake checks
For fraudsters, the possibilities are almost endless in how they exploit people’s erroneous belief that having the money credited to a checking account means the check is good.
Mystery Shopper Check Scams
The most common frauds that employ fake checks are mystery or secret shopper frauds.
Police and other agencies across the U.S. and Canada routinely issue warnings about this fraud.
Those operating this fraud contact victims, often by mail, offering jobs as mystery shoppers and enclosing fake checks. After receiving a mystery shopping check in the mail, victims are directed to deposit the check into their own checking account, then to mystery shop a retail location, often Walmart.
Consumers are told to wire part of the money from the check they received, write up a report on their experience at the store, and keep the “remainder” as their pay. For example, if the fake check is for the sum of $2,500, the victim may be directed to send $2,100 and keep the “remainder” as pay.
But the checks are fake, and the victim is simply sending his or her own money to the crooks.
Walmart says it never hires mystery shoppers and that it trains employees about common scams such as fake check fraud, even rewarding employees for spotting and stopping fraud transactions.
Gift Card Scams:
In more recent variations of the fraud, scammers mail fake checks and ask people to visit drug stores or other retailers. They ask “shoppers” to buy gift cards, take a photo of the numbers on the back of the card and send the photo back to the fraudsters before completing a report about the shopping experience. After being supplied with the gift card number, fraudsters sell the cards through underground marketplaces.
There is a real mystery shopping industry, but checks typically aren’t sent in advance to shoppers. Businesses may hire people to visit a retail location, make a small purchase and report back. This allows businesses to assess customer service, cleanliness and other aspects of a business location. Most of those engaged in this business are part-time workers who are paid after work is completed.
This industry is organized through the Mystery Shopper Providers Association (MSPA).
The MSPA is regularly contacted by victims of these frauds; Sarah Saar, the group’s executive director, says that it hears from as many as five to 10 victims daily. In addition, the fraudsters often impersonate the MSPA or its members.
Here is a batch of mystery shopper scam letters the U.S. Postal Inspection Service seized before they could enter the U.S. mail.
Here is the FTC warning about this type of fraud
Check overpayment scams
Fake check frauds appear to have originated with this type of fraud, and there continue to large numbers of complaints about it. The FTC issued its first warning about fake checks in 2004, and it was about this type of fraud. In overpayment scams, fraudsters contact people who are selling cars, boats, and other items over Craigslist or other websites and offer to buy them.
They claim that a third party owes them money, and this third party will send a check to pay for the item. The victim gets a legitimate looking check that is for more than the sale price. The fraudsters ask that the victim send them the difference through Western Union or MoneyGram. There is no real buyer — it is just a fraud to get the victim to wire money.
Fraudsters can review Craigslist posts from anywhere in the world, so it is an easy way for them to find potential victims. Craigslist has fairly prominent warnings about frauds, even stating directly: “Don’t accept cashier/certified checks or money orders – banks cash fakes, then hold you responsible.”
Another variation of this fraud involves a seller who requests that the buyer send a check to a supposed third party that will ship the car or other item. Victims do not realize that they are sending money to the original fraudster or a co-conspirator.
Fraudsters often engage in a variety of scams.
Car wrap scams
BBB receives many complaints from victims who are approached via email or social media to “shrink wrap” their cars with advertisements for energy drinks, beer, or other products in exchange for a monthly payment, often around $200 per month. Fraudsters tell victims that companies are happy to pay for this type of advertising. The FTC has issued a warning about car wrap scams.
Victims receive a counterfeit check, which they are told to deposit, and then to send money through Western Union or MoneyGram to the company that will supposedly wrap their cars. But the check is counterfeit, and by the time victims realize it, they have lost the money they sent by wire.
Energy drink company Red Bull reports it has reached out to the FBI about this problem. The company’s website posts a warning about this and other types of fraud using its name, stating
“Red Bull does not do such advertising at all and never asks third parties to brand their private cars.”
There are several businesses that really do pay people to place ads on their cars. Greg Star, one of the owners of carvertise.com in Delaware, pays Uber, Lyft and other drivers to wrap their cars for hospitals, colleges or businesses like Buffalo Wild Wings. Carvertise typically pays drivers $100 per month for periods of time between two and twelve months.
Star says that they never send people checks, instead sending drivers to the locations where they have their cars wrapped with an ad. Carvertise itself pays the company that wraps the cars. He also says that scammers have begun impersonating his business and that they hear from victims once or twice a week. He says this has been a growing problem that involves victims who are may be vulnerable.
Nanny or caregiver scams
Fraudsters often advertise “jobs” for nannies, babysitters, caregivers for the elderly or disabled, housekeepers or tutors on Craigslist, at Care.com or at other job web sites.
Those who are “hired” are told that they need to buy a wheelchair or other equipment for job purposes. Victims receive and deposit the fake check, and then wire money to a supposed third party to get the equipment needed for the job. But there is no real job, and those who respond lose their own money.
The FTC has both a consumer warning and a short video explaining caregiver frauds and how to avoid them.
Care.com is one of the largest forums for caregivers, operating in 20 countries with a membership of more than 28 million people. They regularly hear about these frauds trying to operate on their system, almost all of which involve fake checks.
Relevant Articles:
11 of The Best Side Hustle Ideas for 2019
9 Best Ways to Save $7K This Year
Sweepstakes and lotteries
This type of fraud was addressed in a June 2018 Better Business Bureau study on prize and sweepstakes fraud. This is the third most common type of fake check reported to BBB Scam Tracker (after “fake check fraud” and “employment”).
Victims typically get a letter in the mail announcing that they have won the Publishers Clearing House lottery or another major sweepstakes or lottery.
The letter tells them that they have won a large sum of money, and need to call a phone number to confirm their winnings. The fraudster explains that money is needed for taxes or other costs before they receive their winnings. They are told a check is enclosed with the letter to cover those costs. The victim need only deposit the check and send the money by Western Union or MoneyGram to a third party to pay these expenses and then receive their prize. But there is no prize, and of course the check is fake. Here is the FTC warning on prize frauds.
The U.S. Postal Inspection Service reported stopping and seizing over a million pieces of sweepstakes mail last year, with counterfeit checks that had a face value of $62 billion. USPIS issued this statement:
Foreign lotteries are illegal in the U.S. These lottery solicitations are almost always criminal scams designed to dupe victims into sending money to the scammers. Using the legal process, Inspection Service screeners interdict illegal lottery mailings and protect victims from criminal misuse of the mail. In FY 2017, interdictions removed 1,083,903 illegal lottery solicitation letters detailing 4,723 different scams.
Often these letters contain counterfeit checks or money orders.
Inspection Service screeners interdicted solicitations containing counterfeit checks with a face value of approximately $62 billion. Approximately 963 Canadian telephone numbers used in the illegal lottery scam letters were terminated as a result of these interdictions.
Small business fraud
An American Bankers Association survey found in 22 percent of the cases, banks lose money because of fake checks where the victim is a small business.
Fraudsters may use fake checks to “pay” in advance for goods and shipping costs. For example, one banker related that one of their customers sold paintings online. They received a fake check, but did not ship the paintings right away, learning later that the check they received was counterfeit.
Other complaints describe how businesses received checks made out for more than the amount owed for services provided and then were asked to send back the overage. These frauds often target photographers, sending checks and then asking that part of the proceeds be sent along to another party supposedly involved in the wedding or other event.
A recent BBB survey of frauds affecting small business identified fake checks among the top five scams that put small businesses at risk.
Why does this fraud work?
The public writes far fewer personal checks than in the past, thanks to alternatives such as debit and credit cards and online bill payment services.
With the decline of personal checks comes a decline in knowledge about how banks process checks. Just as a lack of knowledge can create a target-rich environment for frauds, more robust consumer education about checks and their processing may help prevent such check fraud.
Victims believe that they are protected because they think they have been provided with money in advance of the actions they are being requested to take. By reinforcing this belief, scammers build trust and alleviate concerns that the deal might be a fraud. And once consumers confirm that there is money in their account, they are far more willing to proceed.
Who is behind fake check scams?
Nigerians and nationals of other West African countries appear to be deeply involved in fake check frauds, though others are likely involved.
Every prosecution of fraud involving fake checks that BBB is aware of, where the victims respond by sending money, has involved Nigerian fraudsters. Nigeria is the most populous country in Africa, and it has an educated population, but many of its citizens have few job prospects. Moreover, Nigerians have migrated to countries around the world.
What to do if you have deposited a fake check into your account
• Notify your bank or the bank that appears to have issued the check.
• File a complaint:
◦ The Federal Trade Commission (FTC), or call 877-FTC-Help
◦ The Internet Crime Complaint Center, or IC3
◦ The U.S. Postal Inspection Service
◦ Western Union, 1-800-448-1492 https://www.westernunion.com/us/en/file-complaint.html
◦ MoneyGram, 1-800-926-9400 http://global.moneygram.com/nl/en/how-to-report-a-problem
◦Green Dot, 1-866-795-7597
◦Canadian Anti Fraud Centre, toll-free from the US at 1-888-495-8501
◦ Victims who are seniors or other vulnerable adults may be able to obtain help through Adult Protective Services, which has offices in every state and many counties. Find a local office at www.elderjustice.gov.
Resources
• BBB’s Scam Tracker allows you to report scams and see if others in your area have reported similar frauds.
• The Office of the Comptroller of the Currency has helpful explanations for many of the common questions that arise with fake checks.
• The American Banker’s Association has resources for consumers.
• Publishers Clearing House helps you check if you have won their sweepstakes, or complain about sweepstakes scams.