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Avoiding Common Check Fraud Scams

Recently, many consumers have fallen victim to scams involving a fake checks (normal bank account checks or cashier's checks/money orders). Although the amount of a check quickly becomes "available" for withdrawal by the consumer after deposit these funds do not belong to the consumer if the check proves fraudulent.

The following list details a few common scams involving checks and simple steps you can take to prevent fraud.

Common Scams
Each scam involving a fraudulent check may be different, but the two most common scenarios are:

  • Simple Fraudulent Check: 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: 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.

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.

  • 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.
  • 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.


Source: OCC Consumer Advisory on Avoiding Cashier's Check Fraud

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