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Avoiding Cashier's Check Fraud

Avoiding Cashier's Check Fraud

 

At one time or another, almost everyone has used a cashier’s check. A cashier’s check is a check that is issued by a bank, and then sold to its customer or another purchaser. The check is a direct obligation of the bank. Cashier’s checks are viewed as a relatively risk-free method of payment and so are often used as a trusted form of payment to consumers for goods and services.

However, recently cashier’s checks have become an attractive vehicle for fraud when used for payments to consumers. US Department of the Treasury reports that many consumers have become victims of scams involving a fraudulent cashier’s check. Although, the amount of a cashier’s check quickly becomes "available" for withdrawal by the consumer after the consumer deposits the check, these funds do not belong to the consumer if the check proves to be fraudulent.

 It may take weeks to discover that a cashier’s check is fraudulent. In the meantime, the consumer may have wired the funds to a scam artist or otherwise used the funds—only to find out later, when the fraud is detected—that the consumer owes the bank the full amount of the cashier’s check that had been deposited.

The U.S. Department of the Treasury recently released information on some of the common scams involving cashier checks and steps you can take to avoid becoming a victim. Each scam involving a fraudulent cashier’s check may be different, but some of the more common 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 that you have agreed on, and you ship the goods to the buyer.  The cashier check turns out be fraudulent.
  • Excess of purchase price - This scenario is similar to the one described above. However, the buyer sends you a cashier’s check for more than the purchase price and asks 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 that you have the right to receive a substantial sum of money. For example, the letter may state that you have won a foreign lottery or are the beneficiary of someone’s estate. The letter will state that you have to pay a processing/transfer tax or fee before you receive the money, but a cashier’s check will be 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. Again, 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.  And once again, the cashier’s check turns out to be fraudulent.

The result of all of these scams is that the fraudulent check will be returned unpaid. The 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 that you sold, the money that you sent to the third party, or both.

How can you tell if a cashier’s check is fraudulent? It can be very difficult for either you or your bank to tell. When you deposit a check into your account, your bank generally is required by law to make the 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."

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 try to make the item look genuine, which will delay discovery of the fraud. 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.

What steps should you take to protect yourself from becoming a victim of fraudulent cashier’s check scams? Keep the following tips in mind.

  • Try to know the people with whom you do business. When possible, verify information about the buyer from an independent third party such as a telephone directory. Be cautious about accepting checks—even a cashier’s check—from people that you do not know.
  • When you use the Internet to sell goods or services, consider other options such as escrow services or online payment systems 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, who may be 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 you can, 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 or not.
  • Be suspicious if someone insists that you send funds by wire transfer or otherwise 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 In addition to contacting the appropriate banks.

Government agencies that can be of assistance with fraud scams include:

 

-         Federal Trade Commission (FTC):by telephone at 1-877-FTC-HELP or file an electronic complaint via their Internet site at http://www.ftc.gov.

–       Federal Bureau of Investigation (FBI) Internet Fraud Complaint Center: http://www.ic3.gov.

 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 at https://postalinspectors.uspis.gov/forms/MailFraudComplaint.aspx

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