Avoiding Cashier's Check Fraud

Recently, many consumers have fallen victim to scams involving a fake cashier's check - a check purportedly issued by a bank, and sold to a customer or another purchaser.Cashier's checks are normally relatively risk-free instruments and often used as a trusted form of payment to consumers.

However, cashier's checks lately have become a vehicle for fraud. Although the amount of a cashier’s check quickly becomes “available” for withdrawal by the consumer after deposit these funds do not belong to the consumer if the check proves fraudulent.

It can take weeks to discover a cashier’s check is fraudulent, and in the meantime, the consumer may have irrevocably used the funds – only to find out later that the consumer owes the bank the full amount of the cashier’s check that had been previously deposited. The following list details a few common scams involving cashier's checks and simple steps you can take to prevent fraud.

Common Scams
Each scam involving a fraudulent cashier’s check may be different, but some reported scenarios are:

• Selling goods You sell goods in the marketplace – for example, over the Internet. A buyer sends you a cashier’s check for the price you have agreed upon, and you ship the goods to the buyer. The cashier’s check turns out to be fraudulent.
  
  
• Excess of purchase price This scenario is similar, however, the buyer sends you a cashier’s check for more than the purchase price, asking you to wire some or all of the excess to a third party, often in a foreign country. The buyer may explain that this procedure allows the buyer to satisfy its obligations to you and the third party with a single check. The cashier’s check turns out to be fraudulent.
  
  
• Unexpected windfall You receive a letter informing you of your right to receive a substantial sum of money, for example, through a foreign lottery or as the beneficiary of someone’s estate. The letter will inform you of a processing/transfer tax or fee before you receive the money, but a cashier’s check is enclosed to cover that fee. The letter will ask you to deposit the cashier’s check into your account and wire the fee to a third party, often in a foreign country. The cashier’s check turns out to be fraudulent.
  
  
• Mystery shopping You receive a letter informing you that you have been chosen to act as a mystery shopper. The letter includes a cashier’s check, and you are told to deposit the check into your account. You are told to use a portion of the funds to purchase merchandise at designated stores, transfer a portion of the funds to a third party using a designated wire service company, and keep the remainder. The cashier’s check turns out to be fraudulent.
  
  
• 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 all these scams? The fraudulent check will be returned unpaid.A 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 you sold, the money 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.

How can you tell if a cashier’s check is fraudulent?
It can be very difficult. When you deposit a check into your account, your bank generally is required by law to make 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.” A 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 are extremely sophisticated.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.

Tips for Avoiding Cashier’s Check Fraud
Try to know the people with whom you do business. When possible, verify information about the buyer from an independent third party. Be cautious about accepting checks – even a cashier’s check – from people you do not know, especially since it may be difficult to pursue a remedy if the transaction goes wrong.

• When you use the Internet to sell goods or services, consider other options such as escrow services or use online payment systems - such as Paypal - rather than payment by a cashier’s check.
  
  
• If you do accept a cashier’s check for payment, never accept a check for more than your selling price if you are expected to pay the excess to someone else. Ask yourself why the buyer would be willing to trust you, a perfect stranger, with funds that properly belong to a third party.
  
  
• A cashier’s check is less risky than other types of checks only if the item is genuine. If possible, ask for a cashier’s check drawn on a bank with a branch in your area.
  
  
• If you want to find out whether a check is genuine, call or visit the bank on which the check is written.That bank will be in a better position to tell you whether the check is one they issued and is genuine.
  
  
• Know the difference between funds being available for withdrawal from your account and a check having finally cleared.Your bank may be required by law to make funds available to you even if the check has not yet cleared. However, it could take several weeks to know if the check will clear.
  
  

Act with Caution

• Be wary of taking action before you can be sure that the payment you received is good.
  
  
• Be suspicious if someone insists you send funds by wire transfer or pressures you to act quickly before you know the payment you received is good.
  
  
• If you receive a letter offering you a large sum of money for little effort other than sending a “processing” fee, remember:if something sounds too good to be true, it probably is.
  
  
• Reject any offer that asks you to pay for a “prize” or “gift.”
  
  
• Save your documents – you may need this paperwork if something goes wrong.
  
  

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 - 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

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

• Scams, generally–Federal Trade Commission (FTC):by telephone at 1-877-FTC-HELP or file an electronic complaint at www.ftc.gov.
  
  
• Internet-based scams–Federal Bureau of Investigation (FBI) Internet Fraud Complaint Center :www.ic3.gov.
  
  
• Mail-based scams–U.S. Postal Inspector Service:by telephone at 1-888-877-7644, by mail at U.S. Postal Inspection Service, Office of Inspector General, Operations Support Group, 222 S. Riverside Plaza, Suite 1250, Chicago, IL60606-6100 or via e-mail.
  
  
• 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.