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What everyone needs to know about fake check frauds – and should tell their friends

There are a large number of frauds that depend on the use of counterfeit checks.  The National Consumers League recently reported that the number of complaints they got in 2015 was up dramatically.   Many of us assume that if we deposit a check, especially a cashier’s check, and the bank puts the funds into our account, this means that the check is good.

But it does not.  Only when the check works its way back to the bank it is drawn upon does anyone realize that it is counterfeit.  At that point the bank will remove deposited funds back out of our account, and hold us responsible even if we no longer have the money.  Some victims have even been arrested for passing bad checks.

Two things everyone needs to know. 

  1. Having the funds credited to my bank account does not mean that the check is valid.

Federal banking rules require banks to allow the use of deposited funds right away.  Thus          when I deposit a check the bank is required to put the money into my account right away    – within a day or two.  But the bank also has the right to recover the money from me if      the check is counterfeit.

  1. Cashier’s checks and Postal money orders can be forged as well. A cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds and signed by a cashier.  Cashier’s checks are treated as guaranteed funds because the bank itself, rather than individual with an account at that bank, is responsible for paying the amount. These are commonly required for real estate and brokerage transactions.  If I deposit a cashier’s check the bank must credit my account by the next day.   But again, it is only when the check works its way back to the bank that issued the check that I learn it is counterfeit.  The same holds true for Postal Money orders.

So how does the fraud get money from victims?

Fraudsters understand exactly how this system works.  The frauds always want victims to verify that the money from the fake check has been credited to their bank account.  Then the fraudsters ask the victim to send the funds to a supposed third party through Western Union or MoneyGram before the check bounces.   More recently some victims have been asked to withdraw cash and deposit it into a bank account opened by the fraudster in the local branch of a bank that operates nationally or internationally.  I explain several of the most common frauds using this approach below.

How often do fake check frauds happen?

Ask any bank teller about the problem of fake checks — they see these regularly.  The banking system does not release numbers on how many fake checks go through the system every year, but it is certainly very large.   When I’ve given speeches and ask for a show of hands on who has seen a fake check, at least one hand always goes up.  The FTC and Postal Inspection Service certainly view this as a large problem.  The FTC reported getting 14,424 complaints about fake checks in 2015, up significantly from the year before.  The National Consumers League reported that complaints about fake checks were up 35% in 2016.

What do these fake checks look like?

The checks used by the frauds look very realistic.  They are not personal checks.  Instead they are “from” real businesses, and often have the actual account number of the business.  I believe that these are being stolen out of the mail, and then they are photoshopped and altered.  For example, the check may even have the business telephone number on it — but that is not the real number – it is a phone number used by the crooks in case someone calls to see if the check is real.   In short, most of us would not be able to tell that this is a fake check.

How big are these checks? 

Fake checks are typically for $3000 to $4000. But they can be larger or smaller.

Where do these fake checks come from?

Victims will usually receive these in the mail or through Federal Express.  The crooks may mail them themselves, especially if they put them in the mail in Canada or somewhere outside the US.  But often the frauds hire people on internet job boards to work for them, printing and mailing these checks, and perhaps also picking up money for them at Western Union or MoneyGram.  These helpers may not even know that they are working for a fraud.   In addition, the crooks often use romance scam victims to help printing and sending these out.  It is not easy to find the source of these checks.

How can I tell if a check is counterfeit?

The best way is to look up the number of the company listed on the check and call them directly.  Again, don’t just call the phone number listed on the check.  Bank tellers may also be able to help.  But the only way to be sure is to wait a week or two until the bank  can confirm that the check has cleared.

Some of the Frauds that employ fake checks

 Check overpayment

Many of us advertise things for sale on Craigslist.   The Frauds contact people who are selling cars, boats, and other items and offer to buy them. They claim that a third party owes them money, and this third party will send a check to pay for the item (or for things such as shipping the car or other item).  The victim gets a legitimate looking check that is for more than the sale price.  The frauds ask that the victim send them the difference through Western Union or MoneyGram.   There is no real buyer – it is just a fraud to get the victim to wire money.  I’ve even seen this fraud contact people about  lower priced items such as snowblowers.

Here is the FTC warning about this fraud

 Nanny or caregiver frauds 

Fraudsters advertise for nannys or caregivers for elderly people at care.com or other web sites.  Those who are “hired” are told that they need to buy a wheelchair or other equipment for job purposes.   They receive and deposit the fake check, and then wire money to a supposed third party to get the equipment needed for the job.

FTC warning

Shrink wrap cars

There are many many complaints by victims who are approached to “shrink wrap” their cars with advertisements for Red Bull, Monster Energy Drinks, or other companies and receive a monthly payment for doing so.  For younger victims the promised money could go a long way to helping with car payments.  Victims receive a counterfeit check, which they are told to deposit, and then to send money through Western Union or MoneyGram to the company that will supposedly wrap their cars.  But the check is counterfeit, and by the time victims realize that this is the case they have lost the money they sent by wire.

Here is the FTC warning on this fraud.

 Mystery Shop Fraud

These contact victims, often by mail, offering jobs as mystery shoppers and enclosing fake checks. Victims are directed to deposit the check into their own checking account, then to mystery shop Wal-Mart.  Every US Wal-Mart has a MoneyGram counter.  Consumers were told to wire transfer part of the money from the check they had received, write up a report on their experience at the store, and keep the “remainder” as their pay.  For example, the fake check is for the sum of $5000, and victims are directed to wire $4600 and keep the “remainder” as their pay But the checks are fake, and victims are simply sending their own money to the crooks.  Wal-Mart has told me that it never hires mystery shoppers.

Here is the FTC warning

Sweepstakes fraud

Victims get a letter in the mail announcing that they have won the Publisher’s Clearinghouse lottery or other major lottery. The letter tells them that they have won a large sum of money, and need to call a phone number to confirm their winnings.  The caller explains that money is needed for taxes or other costs before they receive their winnings.  But don’t worry – a check is enclosed with the letter to cover those costs. The victim need only deposit the check and send the money by Western Union or MoneyGram to a third party to pay these expenses and then receive their prize.  But there is no prize, and of course the check is fake.

FTC warning on prize frauds

Law firm collection fraud

Yes, even lawyers are fraud victims.  Lawyers are often contacted by someone in a different country, usually by email, from someone who claims that they are owed money by a US business.  The lawyer is assured that if they collect this money they will receive a good fee. The law firm reaches out to the “debtor,” which sends a fake check to the law firm, supposedly to pay the debt. The law firm deposits it, and the “client” directs them to deduct their fee and wire the remainder to this supposed client.   Some big law firms have lost large sums of money to this fraud, and it is the rare lawyer which has not been contacted by this fraud.

Here is a warning about this fraud in the California Bar Journal

Student job scams

We have recently been seeing a big increase in frauds supposedly hiring college students.  I’ve even heard of them advertising in college newspapers.  In one case a student was “hired” to do some online work from home.  But in order to do the job he had to buy a special laptop and some software.  He got a fake check to pay for this, and then sent off several thousand dollars to the supposed third party.  There was no job.

Here is a recent warning on student job frauds

More Resources

Steve Baker

February 23, 2017