Lubbock National Bank | Fraud Prevention 

Fraud Prevention - Cashier's Check Fraud



Fraud Prevention - Cashier's Check Fraud

Scammers take advantage of the trust people place in cashier's checks to steal money from your account or to avoid paying you for goods and services. It is difficult to detect fraudulent cashier's checks. When you deposit a fraudulent check into your account, the law requires your bank to make the funds available within a specific period of time even if the check has not yet cleared through the banking system. Once the check is returned unpaid, your bank, generally, can reverse the deposit to your account and collect the amount of the deposit from you.

Avoiding Cashier's Check Fraud

Many consumers have become victims of scams involving a fraudulent cashier’s check. A cashier’s check is a check that is issued by a bank, and sold to its customer or another purchaser, that is a direct obligation of the bank. Cashier’s checks are viewed as relatively risk-free instruments and, therefore, are often used as a trusted form of payment to consumers for goods and services.

However, cashier’s checks lately have become an attractive vehicle for fraud when used for payments to consumers. Although the amount of a cashier’s check quickly becomes "available" for withdrawal by the consumer after the consumer deposits the check, these funds do not belong to the consumer if the check proves to be fraudulent. It may take weeks to discover that a cashier’s check is fraudulent. In the meantime, the consumer may have irrevocably wired the funds to a scam artist or otherwise used the funds, only to find out later—when the fraud is detected—that the consumer owes the bank the full amount of the cashier’s check that had been deposited.

The following information from the OCC Consumer Advisory on Avoiding Cashier’s Check Fraud gives you information on some common scams and some steps you can take to avoid becoming a victim. Although this advisory focuses on cashier’s checks, you may find the information useful if you transact business using other official bank instruments, such as money orders and official checks.

Common Scams - Each scam involving a fraudulent cashier’s check may be different, but some of the more common scenarios are:

Scams also may involve other types of checks. For example, the fraudulent check may appear to be written on the account of a real person or company or be written on an account that contains insufficient funds to cover the check. Other scams involve fraudulent postal service money orders or fraudulent money orders that appear to have been issued by a bank.

The result of these scams is that the fraudulent 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, itself, 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 generally is required by law to make the funds available within a specific period of time (usually, one business day for a cashier’s check or other official instrument). This is true even if the check has not yet cleared through the banking system. Therefore, even if the funds have been made available in your account, you cannot be certain that the check has cleared or is "good."

Your bank also may not be able to determine that the check is fraudulent when you deposit it. Rather, your bank may learn of the problem only when the check is returned unpaid by the other bank-which may take a couple weeks or more. Scammers try to make the item look genuine, which will delay discovery of the fraud. Once the item has been returned unpaid, your bank, generally, will be able to reverse the deposit to your account and collect the amount of the deposit from you.

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.

What steps should you take to protect yourself from becoming a victim of fraudulent cashier’s check scams? Keep the following tips in mind.

Tips for Avoiding Cashier’s Check Fraud

Act with Caution

If you have become victimized by a fraudulent check scam, please follow these guidelines:

Anytime a scam involves a cashier’s check, official check, or money order from a bank, and you believe that it could be counterfeit, you should contact the issuing bank directly to report receipt of the check and to verify authenticity. When contacting the bank, do not use the telephone number provided on the instrument, as this number is probably not associated with the bank, but rather with the scam artist.

To locate a bank’s mailing address, you can check the FDIC’s Web site at: http://research.fdic.gov/bankfind/

In addition to contacting the appropriate banks, there are others whom you also should notify if you receive a counterfeit item. They include:

Finally, if you have a complaint or problem involving a check written on, or deposited in an account at, a national bank, and you cannot resolve the problem with the bank, contact the Office of the Comptroller of the Currency’s Customer Assistance Group by calling (800) 613-6743 or by sending an e-mail to: customer.assistance@occ.treas.gov.

Lottery Scams

In the lottery scam, you receive an eMail notification claiming that you have won an international lottery (Jamaican Lottery, Spanish Lottery, etc.). In order to claim your winnings, you must contact the claims agent, typically via an eMail address that is most often from a free provider (e.g., Yahoo, Hotmail, etc.). The agent then sends you a claim form to verify your identity. You must then return the form with your personal details, along with copies of your passport and/or driver's license to "verify your true identity." The fraudsters now have enough information to duplicate your identity. In addition, in order to claim winnings, you are required to wire funds to the fraudsters to cover the transaction, insurance, tax and legal fees associated with receiving their winnings. The victims are required to transfer the money requested via Western Union. You are now out the funds that you have wired to the fraudsters, and the fraudsters have your personal identification to continue to commit fraud.

Nigerian Scams

The Nigerian Purchase Scam is another form of fraud that is becoming widespread in auction sites and on business's ecommerce Web sites. A buyer will bid on or seek to purchase big-ticket goods (e.g., cars, boats, etc.) from the Web site. The buyer will "accidentally" overpay the seller, stating they "wanted to make sure there were enough funds for shipping." The buyer will then ask the seller to deposit the check and refund the amount of overpayment. The seller will deposit the counterfeit check and send the overpayment to the buyer prior to the check clearing through the international banking system. The seller is out the funds equal to the overpayment. In addition, the seller could be down the value of the shipped goods if those are sent at the same time.

To protect yourself, always be careful when transacting with unknown parties. If you question the legitimacy of a buyer, talk with your branch representative to determine the best way to validate the check and funds prior to shipping any goods or providing a refund for the overpayment.

Mystery Shopper

You get an eMail or a letter in the mail from a "mystery shopping company" often times the name of the company sounds official. Usually there is a check included or a promise to send a check. They tell you to cash the check and complete an assignment at a major retail store. Then they tell you to take the rest of the money that you didn't spend and send it to another mystery shopper via Western Union. The only problem is that's not a mystery shopper, that's a scammer! The check sent to you was not legitimate, but the bank won't realize it for at least a week. When the check is returned as fraudulent, you become responsible for the charges. Meanwhile, you just sent money to the scammer via Western Union and you're left holding the bag.

Check Scams

If you receive an eMail or letter in the mail saying you won a lottery and they send you a check or if you sell something on Ebay and the buyer pays with a check, you may think you can just take the check to your bank and cash it.

Unfortunately, you can't. What's worse, if you cash it in most states, you may be assisting a criminal in passing a counterfeit check, money laundering or worse. Blank checks are stolen every day from individual mail boxes, homes, businesses and even banks. Counterfeiters and scammers use these checks to create scams and frauds.

What can you do?

If you receive a check in the mail that you are not expecting, DO NOT CASH IT. You should call the issuing bank directly to verify that the account is valid and the check is real.

If you believe you may have fallen victim to this type of scam and wish to report it, please file a complaint with the U.S. government's Internet Crime Complaint Center at: http://www.ic3.gov

If you are a victim of a counterfeit check cashing scam, eMail the FDIC's Special Activities Section at: alert@fdic.gov.

Or contact them at:

FDIC's Cyber Fraud and Financial Crimes Section
550 17th St., NW, Room F-4040
Washington, D.C. 20429



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