Bouncing Cashier’s Check Fraud Scams

Compliance Matters

Quiet show of hands please. How many of you know of, have heard about, or are aware of one of your members who has fallen victim to a fake check scam?

This form of fraud is on the rise, and unfortunately, the victims are usually the people who can least afford to be taken. There are many variations of this scam, but they all operate in a similar fashion. Someone, who the member does not personally know, wants to pay them by check and have them wire some of the money to somewhere else.

Lottery scams, work at home scams, secret shopper scams, and check overpayment scams are all examples of this type of fraud scheme.

Lottery scams work by informing the victim that they have won a foreign lottery. All they need to do is deposit the enclosed cashier’s check to cover the taxes and fees. Once they’ve deposited the check they are to wire the money to the sender to pay the taxes and fees. Then the lottery winnings will be theirs.

Work at home scams work by the victim acting as an intermediary for someone else, such as a foreign national who can’t have a U.S. bank account, but is selling goods online. The victim will receive the “payment” for the goods sold and is to deposit the cashier’s check into their account and then wire the funds to the “seller”. The problem is that there was no sale and the check is fake.

Mystery shopper scams work when the victim responds to an employment ad to become a mystery shopper. Sometimes they even have to pay to get the employment service. Once they are employed they will receive their employment packet. The packet will contain business evaluation forms, a training assignment, and a cashier’s check that is typically in the range of $2,000-$4,000. Their training assignment is to deposit the cashier’s check into their account, withdraw most of the money, and then evaluate a money delivery service like Western Union. The money gram usually goes to someone in Canada. The catch is the check is fake.

Check overpayment starts when the victim posts an item for sale, usually online. A buyer approaches the seller and then sends a cashier’s check that is for more than the amount of the item sold. The buyer will tell the victim a story about why the check is for more money than the purchase price. Once such story is that the check is from a third party who owes the buyer money. The victim is to deposit the check and wire the difference to the buyer. The victim is out the money and the item they sold.

Ultimately the member-victim is responsible to make good on the fraud, but in most cases credit unions end up writing off a loss when they cannot recover the fraud from the member.

How to prevent fraud
A good offense is the best defense in this situation. We need to stop this fraud before it occurs. Education and awareness are our best tools. Make sure your staff is aware of this form of fraud and how it works. Keep abreast of the FDIC special alerts for counterfeit cashier’s checks.

Remember, the only checks you have to honor are the ones drawn on your credit union. If a member is bringing in a check that they want to deposit and then wire part of the money out, be suspect. You have the right to refuse the deposit.

Most cashier’s checks are legitimate, and are a valuable tool for the financial institutions. Just exercise additional care when you have a reasonable belief to suspect that everything is not as it seems.

Tips for members

  • There usually is no legitimate reason for someone to send you a cashier’s check and request to wire the money back to them, or to someone else. If someone is pressuring you to do this, run!
  • Only accept cashier’s checks from someone you know.
  • You are responsible for any item you deposit.
  • If it’s too good to be true, then it is.
  • Only accept the selling price for something you are selling.

Here are several websites that you can use to help fight this form of fraud.

Posted in Compliance News.