A Growing Consumer Threat: Counterfeit Checks

Oct 05, 2018

Fraudulent checks

Given the attention focused on digital payment technology and the growth of cybercrime, it may be surprising to hear that fraudulent schemes involving a traditional form of payment are making headlines and are on the radar of consumer protection agencies right now. Referred to as an “exploding epidemic” by the Better Business Bureau, fake check fraud has doubled in the past three years, with the average consumer being bilked of approximately $1,200. Crooks are deploying a variety of methods to con the public with counterfeit checks, some of which look so authentic that even tellers at financial institutions are being duped. Here’s what you need to know to about this growing consumer threat, and how to protect yourself from falling victim:

How does this scam work? In most cases, the party presenting the check will ask the intended target to deposit the check into their checking account, and then send a portion of the money back to the sender, usually by wire transfer.  By the time the forged check is discovered, the victim has already sent the requested funds to the con artist as requested. At that point, the depositor is generally responsible for the entire amount of the counterfeit check.

What do the fake checks look like? In some cases, counterfeit checks appear so real that even a trained eye may not catch them. Fraudsters use high-quality scanners and printers to create counterfeit checks in various forms, including cashier’s checks, money orders, corporate checks, personal checks, etc. The Federal Trade Commission cautions that these fake checks are printed with the names and addresses of legitimate financial institutions, and sometimes contain official-looking watermarks. Furthermore, a check may contain real account and routing numbers, yet still be counterfeit.

How are criminals getting away with this? Not only do scam artists print counterfeit checks that appear so genuine today as to fool bank tellers and depositors alike, but they also take advantage of the window of time between which a check is deposited, and when it clears an account. Under federal regulations, banks and federally chartered credit unions must make funds available to the account holder within 1-5 business days, depending on the type of check. Although these funds become available quickly, this does not mean that the check is valid. It may take up to several weeks to discover that the check is counterfeit, at which point the financial institution will normally recover their funds by deducting the amount of the bounced check from the depositor’s account.

The cover stories scammers use: Con artists use a number of different scenarios to dupe the intended victim into depositing bad checks, from posing as a buyer on a classified ads site or online auction, to feigning to pay the intended victim as a mystery shopper hired to evaluate a money transfer service. Fake foreign lotteries, bogus vacation rentals, phony tech support services and fictitious work-from-home jobs are other shams used by criminals seeking to cash in on fraudulent checks.

In one type of employment scam, the job seeker is told to deposit a check, then to send the money to a vendor in order to receive equipment and office supplies in order to get started on a work-at-home position. The check then bounces as the criminal collects payment that was supposedly sent to the supplier. In another variation of a remote work scheme, the scammer pretends to hire an individual to process checks, asking that the first check be deposited and that the worker subtract their compensation before sending back the remaining amount of the check.

When it comes to online advertising sites, fraudsters often attempt to trick sellers by coming up with a seemingly plausible reason for sending a check for more than the cost of the item, and asking the seller to send the “extra” money back to them. Sometimes, this is explained as something as simple as the “buyer” having written the check for more than the amount “by accident.”

Another popular trick among criminals is to send a potential victim a letter announcing sweepstakes or lottery winnings (often from a foreign country), along with a cashier’s check and instructions to begin the claims process by depositing the check and wiring money back to the sender to cover expenses such as taxes, customs, processing and legal fees, etc. Of course, the check is no good and there is no prize to collect. It’s all a ploy to get the target to wire the scammer money.

Why does the person who got scammed end up paying the price? If you deposit a check that turns out to be fraudulent, you are responsible for the loss and your financial institution will seek to recover these funds from you. If there are not enough funds in your account to cover the bounced check, your bank or credit union may take funds from your other accounts at that institution, or even by suing you. As the National Consumer League explains, this is because the individual who accepted the check as payment is in the best position to assess the risk, as they have been dealing directly with the individual who provided the check. In fact, law enforcement could even bring charges against the person depositing the fake check if it appears they could be involved in the scheme.

How to avoid falling prey: To steer clear of fake check scams, keep in mind that there is no valid reason why someone you don’t know would send you a check as payment and ask you to wire money back. If they try this, refuse. Also shred any offers that request that you make any payments for a prize or gift, and avoid entering foreign lotteries. According to the FTC, it’s actually illegal to play a foreign lottery through the mail or telephone. If you do take a check from someone you don’t know, never accept one for more than the agreed upon amount and ask that it be from a local financial institution, or one with a local branch, so that you can go to the bank or credit union to verify that the check is valid. If you can’t visit the financial institution, call them to verify funds after getting the phone number from a trusted site or directory assistance. Better yet, have the buyer send you the money through an online payment service like PayPal, Venmo or Google Wallet.  For more tips on “How to Spot a Fake Check – and What to Do About it,” visit NerdWallet.

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