Counterfeit Cashier’s Checks are on the Rise in the Northwest

NWCUA experts advise credit unions on what to look for and how to respond.

8/21/18

Katie Clark, Northwest Credit Union Association Director of Regulatory Compliance and Risk Management, sheds light on a recent uptick in cashier’s check fraud occurring throughout the Northwest.

Fraud alert imageCashier’s checks used to be associated with guaranteed payment — they were basically as good as cash.

But in today’s climate, most cashier’s checks presented for deposit are met with scrutiny due to the never-ending stream of counterfeit checks that financial institutions are seeing.  Unfortunately, cashier’s checks today are often times counterfeited and used as part of a scam that can result in the recipient losing money.

The Northwest Credit Union Association sends out fraud alerts when a credit union notifies us of a counterfeit check. Lately, we have been sending out alerts weekly as it seems like credit unions in the Northwest are being targeted.

This begs the question — how are the scammers obtaining the information needed to create the counterfeit checks in the first place? Recently, one credit union was able to shed some light on this question.

The credit union indicated that their members are being instructed to purchase small-dollar cashier’s checks from the credit union — normally around $5, payable to the member’s charity of choice. Then, the check is sent to the scammer who uses the information from the check to produce numerous counterfeit checks that all bear the correct routing and account number.

Now that the credit union is aware of how the scammers are obtaining the check information, they are careful and question any request for small-dollar cashier’s checks.

Now that we know one of the ways the check information is getting into the system, it is important for institutions on the receiving end of counterfeit cashier’s checks to know the steps they can take to protect their members and the credit union.

  • First, ask the member if they know the person that they received the check from (i.e., is it related to an online job, something sold online, a random lottery winning, or long-lost relative inheritance, or someone they met online that they have never met in person). If they don’t know the person or have only dealt with them via email, text, or phone, chances are it is a scam.
  • Next, ask them if they are being asked to do anything with the funds. These scams are attempted because the successful ones result in legitimate funds being sent to the scammers in the form of a wire transfer (via the credit union or a third party), gift cards, Automated Clearing House, or a legitimate cashier’s check. If the member is supposed to deposit the item and send most of the funds elsewhere, this is a pretty good indication that the check is related to a scam.
  • And, if the credit union team member accepting the check has a funny feeling about it, even if the member doesn’t mention anything odd, this can also be an indicator of fraud.

The best way to identify if the check is legitimate or not is to contact the financial institution that issued the check. Unfortunately, not all institutions will verify if they did or did not issue the check, but a good majority will.

It is important to use a phone number for the institution that is obtained interdependently (i.e., internet search or phone book) and not the phone number printed on the check. Credit unions can also look at past fraud alerts issued by the Association (available on our website), recent alerts from their bond carriers, and the list issued by the OCC.

If you have questions about counterfeit check schemes, please contact the NWCUA’s Compliance Department at compliance@nwcua.org or 800.546.4465.

If your credit union has counterfeit checks circulating in its name, you can fill out this form and we will generate a fraud alert.