A cleared check doesn’t always check out.
Take this scenario: Someone asks you to break a $20 in exchange for a few bucks. You give him or her the change, and then go buy gas with the $20 bill. But the cashier spots the bill as fake, and demands you pay up. Who’s to blame?
Checks can be counterfeit, too, and fake check scams are on the rise. Incidents of false-check schemes escalated 65% from 2015 to 2019, when they cost consumers more than $28 million.1
So how do they work? The criminal sends the victim a check to deposit – maybe as a contest winning – and asks for some money back. The victim deposits the check, sees that it has cleared, and sends the money.
Here’s the thing: Just like the alert cashier, the bank will eventually spot the bad check and eliminate the funds – and the victim is left holding an emptier bag.
Scammers know how to game the system that regulates banks. For example, banks are required to quickly make deposited money available – as soon as the next day if the check is for $200 or less.2 Yet it could take weeks for the bank to identify a check is fake, leaving plenty of time for the funds to be withdrawn and let the scammer get away.
In this scenario, the victim is stuck in the middle and could be responsible for reimbursing the bank.
Check fraudsters take many forms, targeting individuals as well as businesses. The check may be disguised as a prize, but the recipient must cover the taxes and fees. Or a check may exceed the price of a product and the “customer” will ask for the difference back. Even perceived job opportunities can be schemes, with a check sent as an advance, but requiring an activation fee.3
Think you’ve got a hot check? We compiled this checklist from the American Bankers Association and the Federal Deposit Insurance Corp.
✔ Rule out “Prank Bank.” A check from an unknown entity should be treated with skepticism. Verify the source. Ensure the check was issued by a legitimate bank, but note that some counterfeit checks will include a real bank’s name. The FDIC’s BankFind tool lists FDIC-insured institutions.
✔ Address the marks. Scammers may replicate money orders and cashier checks. If the check was mailed, be sure the postmark is of the same city and state as the issuing bank. Also, official checks often carry watermarks, security threads, or other protective features.
✔ Make it official with a ring. If a legitimate bank is listed, call it directly to verify the check. Look up the bank’s number on its website – the number on the check might belong to the fraudster.
✔ Second guess anything that looks “two eazy.” If the sender communicates in writing, look for poor grammar or misspellings.
If you think you or your business is being targeted by a financial scam, seek assistance immediately. These agencies can help.
The Federal Trade Commission at FTC Complaint Assistant.
The U.S. Postal Inspection Service, if the scam involves the mail.
State protection can be found at The National Association for Attorneys General, which lists state attorneys general.
For online crimes, file a complaint with the Internet Crime Complaint Center.
1 "This old-school scam has jumped 65% since 2015 and costs consumers millions,” By Sarah O’Brien, CNBC, Feb. 13, 2020, https://www.cnbc.com/2020/02/13/this-old-school-scam-has-jumped-65percent-since-2015-and-costs-consumers-millions.html
2 “How quickly can I get money after I deposit a check into my checking account? What is a deposit hold?” Consumer Financial Protection Bureau; Jan. 27, 2017; https://www.consumerfinance.gov/ask-cfpb/how-quickly-can-i-get-money-after-i-deposit-a-check-into-my-checking-account-what-is-a-deposit-hold-en-1023/
3 “FDIC Consumer News: Beware of Fake Checks,” FDIC, August 2019; https://www.fdic.gov/consumers/consumer/news/august2019.html
4 "Fake Check Scams Cost Consumers $1.2 Billion a Year Annually,” by Frank McKenna, March 19, 2020, FrankonFraud, https://frankonfraud.com/fraud-trends/fake-check-scams-cost-consumers-1-2-billion-yearly/
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