Counterfeit Check (Cheque) Scams are all over the Internet

The amount of counterfeit checks (cheques) being circulated via various Internet scams, and even the classifieds (paper media) is on the rise.

A new trend is also being seen, where people are getting these counterfeits items in the mail (unsolicited). Some of us, who watch this closely, suspect they are data mining information off job sites, like Monster.com and Craigs List.

Last April, I did a post about a Better Business Bureau (BBB) employee, who got a lot of negative attention after she accepted a job to cash bogus intruments and send the money overseas.

Common scams in which these checks are sent for someone to cash and wire the money back to fraudsters are the check cashing (job), lottery, auction, secret shopper, romance and Nigerian letter varieties.

According to the National Consumers League, counterfeit checks schemes rank near the top of the scams reported to them by victims.

High quality counterfeit money orders and travelers/gift cheques are making the Internet fraud scene, also. In the recent past, these have included Postal Money Orders, Travelers Express (MoneyGram) Money Orders and most recently, American Express Gift Cheques.

The NCL has an interesting page on their site about the most prevalent scams reported to them in 2007, here.

And don't expect the bank to tell you (whether or not) a check is good. Since they have no liability in the matter, they will often say the item is good, give you provisional (temporary) credit, then take the money away from you when it is determined to be a fraud.

Here is a previous post about how this occurs:

Don't Trust a Bank to Tell You Whether a Check is Good, or Not

Some of these scams direct you to places like Walmart to cash the item, and wire the money back to them, also. I've had readers leave comments and send me e-mails about getting arrested after attempting to pass one of these items at Walmart.

Before we smear Walmart, consider that with the amount of these items in circulation, its getting harder and harder to determine, who is and who is not, really a victim.

Check fraudsters are now posing as victims, and are scamming the scammers by cashing the items. If they are caught, they claim to be innocent victims.

I've personally spoken to a few of these alleged victims, and for some reason; they never seem to have wired (or sent) any of the money back?

Interestingly enough, the scammers love to direct people to Walmart (probably because they cash checks and wire money), but they could care less if you get arrested.

The bottom line is that even if the check is initially considered good, it can easily return, and the person passing it is held responsible.

Deb Radcliff (cybercrime author) did an interesting blog post about how law enforcement, and the companies having their brands used on these checks aren't going after the cuplrits, here.

Unfortunately, they normally don't have much to go on, and the crime is normally initiated from a foreign country.

Does anyone know - whether or not - check fraud is on the rise?

I sometimes wonder - whether or not - anyone really knows how much check fraud is out there?

Law enforcement jurisdictions often have dollar amounts (some fairly high), which must be met before a case is actively investigated - causing it to be recorded as a statistic. And in the private sector - a lot of NOT very "clear reasons" are used to return checks, which might or (might not) mean fraud.

My two favorites reasons the banks use to return checks are "refer to maker" and "stop payment." This might mean someone was unhappy with a service that was performed, or it could mean the item is counterfeit and the owner of the account placed "stop payments" on the checks. It's even possible that items returned as NSF (non-sufficient funds) are forgeries, or counterfeits because the owner of the account has yet to discover their account has been compromised.

The same holds true with "fraud accounts" that banks open for crooks (new account fraud). New account fraud occurs when fraudster(s) open an account (often with fake information), write a series of checks for a lot more than what is in the account, and disappear (literally).

Often they do this over a weekend, and withdraw the amount they initially deposited, also.

New account fraud items normally return as (NSF) non-sufficient items until the bank closes the account. Once this occurs, they are classified as "account closed." Non-sufficient fund and account closed items are normally not considered a fraud classification.

The only thing that is certain is that the loser is going to be the party, who accepted the check, and not the banks. In fact -- some believe the banks are the winners in this process -- because they make a lot of money from "bounced check" fees.

In a lot of the recent Internet scams, customers have even gone to a bank employee to ask if an item is good. After trusting the employee's expertise, the check was deposited and the funds were made "available." A few days later, the item was returned as fraud and the customer's account was "garnished."

And in all the cases, I've heard where this happened, the bank didn't accept any liability. Here's a post, I wrote about this:

Don't Trust a Bank to Tell You Whether a Check is Good, or Not

The other day, I came upon an article by SmartPros, indicating that a "possibility exists" that check fraud will rise in the coming year.

According to SmartPros:

Identity theft trends in the next year may include an increase in check fraud, check synthesizing and check counterfeiting, according to The Identity Theft Resource Center, a nonprofit victim assistance center.

SmartPros story, here.

In case no one has been watching - check fraud appears to have been growing rapidly over the past several years. It's true that all the bogus "financial paper" circulating aren't only checks, we are seeing a lot of counterfeit money orders, also.

Counterfeit cashier's checks and other bogus paper financial instruments (money orders, travelers and gift cheques) have been showing up in secret shopper, romance, lottery, work-at-home and auction scams at ever increasing rates. The situation seems to be getting worse - as more and more people - become Internet users.

In fact, eBay recently announced they will no longer offer any protection for paper financial instruments on their site.

And so far as the amount of them out there, there is evidence that bogus paper financial instruments are being produced on an industrial level:

Are Counterfeit Documents being Mass-Produced in Nigeria?

The Federal Deposit Insurance Corporation sends out alerts on all the counterfeit cashier's checks, which are pretty hard to keep up with. If you want to see what I mean, link here.

We read a lot about "DIY" (do-it-yourself) kits being sold to commit phishing and eBay fraud in shady Internet crime forums -- but in the case of checks -- DIY kits are openly sold in stores, and available on e-commerce sites.

In fact, there are a lot of "legitimate companies" selling all sorts of software, printers and even magnetic ink, which are capable of turning out some pretty convincing counterfeits. Throw in a computer, and it's not very difficult to start making checks.

To show all the "DIY check technology" for sale on the Internet, I ran a Google search, here. Of course, a lot of this (including the paper) can be bought at your local office supply store, also.

As with a lot of fraud, technology seems to be enabling the problem.

Although check fraud might continue to grow, there is little doubt that it's already a huge problem. BankersOnline did an article in 2002 stating:

About five years ago, U S NEWS and WORLD REPORT did the most in-depth study on this that we've had, and I've used their figures ever since. They probably are low by now. They said the financial institutions in the United States lose about $12 Billion a year in check fraud, and the retail industry loses a like amount. The total loss being $24 Billion as a result of check fraud. I think identity theft is getting a lot of publicity now - but it's been around for a long time. We just never gave it the designation of identity theft.

Since this report is now 5 years old and it is using figures that were 5 years old -- no one probably knows how much check fraud is really going on.

I guess until everyone comes up with some uniform standards, it's going to be impossible to determine how much check fraud is really out there.

BankersOnline article by Barbara Hurst, here.

A great resource on check fraud is the National Check Fraud Center. Their site provides a lot of expert information on check fraud and how to protect yourself from it.

Is check fraud on the rise? Despite the lack of statistics - my best guess is that it is!

Fraudulent Gift Cheque Update from American Express

Since September, I've been writing about counterfeit American Express Gift Cheques showing up in a variety of Internet fraud schemes.

Readers have reported receiving these items primarily as a result of work-at-home scams, but they can show up in a variety of Internet fraud come-ons. They might also show up in secret shopper, romance, lottery and auction scams.

The fraudsters want you to cash these counterfeit gift cheques and send (normally wire) the money back to them. When they are discovered to be fraudulent - you end up taking the "rap" and they disappear in an "electronic mist."

Several readers reported being asked to wire the money to Nigeria and the United Kingdom. I recently wrote a post based on large amounts of counterfeit financial instruments being found at airports in the United Kingdom (allegedly from Nigeria), here.

Most of the counterfeit gift cheques, seen thus far, have been in the $500.00, or $1000.00 denominations. Note American Express doesn't issue gift cheques for more than $100.00.

American Express states in their bulletin that gift cheques are safe when verified prior to negotiating them. Anyone can call them and verify an item at 1-800-525-7641.

Unfortunately, a lot of people don't verify these items. Many people have also deposited them, initially received credit, and then had their accounts garnished when the items returned.

I've also had a couple of people write me and say they were arrested for trying to cash them. Presenting counterfeit financial instruments is considered a crime in most places. It will be up to the person arrested to prove they were a victim of a scam and not involved, intentionally.

American Express gift cheque bulletin, here.

Listed below are the posts, I've written since September, along with some scary comments from readers:

Counterfeit American Express Gift Cheques

Counterfeit American Express Gift Cheques (Update)

American Express Gift Cheques Being Circulated in Internet Scams

American Express gift cheques aren't the only items that have been counterfeited and passed via Internet scams. In the past we've seen a lot of Postal Money Orders and Travelers Express (MoneyGram) money orders being counterfeited, also.

Counterfeit Cashier's Checks Fuel Internet Crime

Tom Fragala - Truston Identity Theft Blog - and I were talking about how counterfeit cashier's checks have become a long-term problem in the world of Internet crime.

It's often difficult to verify that a check is counterfeit. They often use valid account numbers, which verify (easily) in the computerized telephone systems that most banks use today. Quite simply, unless the bank or the account owner is aware of that their account is being counterfeited - the item will appear to be legitimate.

Furthermore -- a lot of banks have taken the stance in recent years -- that they will not verify whether a check is good, or not. It's getting harder all the time to verify checks with banks.

The lottery, auction, work-at-home (check cashing), romance, advance fee (419) and secret shopper scams all have a common theme -- they often use counterfeit cashiers checks to lure victims into negotiating the item and wiring the money off to some far-away location.

The fraudsters often request that you use Western Union, or MoneyGram to wire money to them. They are also known to use wire transfers services offered by banks. Once the money is picked up (normally very quickly in scams), the sender has very little, or no recourse.

The golden rule is to never wire money to people you don't know, or only know from the Internet.

To understand why Internet fraudsters prefer counterfeiting these instruments, one can refer to the legal definition of a cashier's check (courtesy of Wikipedia):

Under Article 3 of the Uniform Commercial Code, a cashier's check is effective as a note of the bank. Also, according to Regulation CC (Reg CC) of the Federal Reserve, cashier's checks are recognized as "guaranteed funds" and amounts under $5000 are not subject to deposit holds, except under certain circumstances.

To the person receiving the item, they appear as if they are guaranteed by the bank and if the check is under $5,000.00 - there is no hold on the funds. The fraudsters know this and it will normally be 7-10 days before their victim discovers that anything is wrong.

There was a recent story circulating in the press about a "seemingly cautious gentleman," who decided to have his bank examine the item before he went forward with an auction deal. The bank told him the item was good (twice) and he deposited it. Several days later, while reviewing his online statement, he discovered that this wasn't the case and the bank had withdrawn the funds.

In the article, the bank blamed "Reg CC," because they are unable to hold the funds. Not completely true, an exception can be made if they have reason to believe the item can't be collected. The item may also be sent in as a collection versus depositing it in the account.

Nonetheless, in this instance, the bank had little to no liability because the item was counterfeit.

To illustrate, the amount of this activity, the FDIC sends out alerts on counterfeit cashier's checks. If you would like to see how many alerts -- they've issued recently (scary) -- link here.

Here are some things a person can do to see if a cashier's check is fraudulent:

If someone is asking you to wire money back to them - it's more than likely a scam.

Review the security features of a cashier's check. Despite the "booming" make your own check industry, some of the items out there are pretty amateur. Wikipedia has a good reference on the security features, here.

Review recent FDIC alerts - in a lot of cases, a warning has already been issued.

Verify the check with the issuing institution. Although this isn't 100 percent effective in the case of a counterfeit, they can normally verify certain items; like the ABA/account number, payee, check number, date of issuance, authorized signer and amount.

When you call the bank, never use the number printed on the check. Quite often - phony numbers with phony employees are set up to verify these items. Get the bank's number from a website, or telephone directory. Using 411 (information) might not be the best way to verify a number. Recently, there have been phony numbers set up that verify through - and reverse - through 411.

Since, there are also a lot of phony bank sites out there, if you use the Internet, TrustWatch is a good option for a search engine. TrustWatch will show you via a "coded coloring system," whether the site is verified to be legitimate, or not.

In some instances, good cashier's checks are copied, which defeats verifying the item by telephone. Once the counterfeit item is cashed, the fraudster negotiates the good item and the counterfeit is returned. This is also seen (occasionally) with counterfeit money orders.

If you are still uncomfortable after talking to the bank - ask to speak to a supervisor, or even better - someone in the fraud department. Ask if you can fax them a copy of the item for them to look at. A good way to do this - is to tell them you have a reason to suspect fraud.

Scams that involve, counterfeit cashier's checks, always represent something that is too good to be true. If this is the case, it probably is.

Don't Trust a Bank to Tell You Whether a Check is Good, or Not

Just because someone at the bank tells you a check is good, it might not be the case. Here is a story written by Caroline Mayer of the Washington Post -- where someone selling a car on a auction site received a check for more than the amount of the purchase -- and was asked to wire the extra money back to the buyer.

The seller was suspicious and asked a teller at his bank (twice) to verify the check and was told it was good. Here is what happened next as Caroline Mayer reports:

"Four days later, as he reviewed his account online, he discovered the check was not good. Even worse, the bank was demanding that he repay the $5,000."

"Had I made the deposit and not tried to make sure it was legitimate, I should have full obligation to make good on it," said Schaefer, 34, a facilities manager in Brattleboro, Vt. "But I checked with the bank twice, and now I find out they have no accountability."

"Schaefer is one of thousands of consumers who have been victimized by an increasingly common check scam that relies on the vagaries of the banking system to take advantage of unsuspecting consumers."

"Federal rules require banks to release funds from a consumer's deposit quickly, usually within one to five business days, depending on the kind of check. However, it can take weeks before a bank discovers a check is fraudulent."

Full story, link here.

This is a typical advance fee scam, where counterfeit checks, or money orders are used to dupe a seller.

So far, as the bank involved, I would recommend that they do a little "fraud awareness training" with their tellers to protect their customers from getting ripped off. Counterfeit checks often use good account numbers, which can be deceptive.

In my experience, the best way to verify a check is to contact the issuer of the item. If the check is counterfeit, or a forgery, laws in most areas allow it to be charged back for a year, or more.

And that is a long time to wait!

Counterfeit (MoneyGram) Travelers Express Money Orders

I'm surprised I haven't seen many reports in the media on counterfeit Travelers Express Money Orders. They seem to be frequently appearing in advance fee scams, particularly on auctions, such as E-Bay. Please note that these scams don't only happen on auction sites, they can occur on dating sites, within chatrooms and arrive via spam e-mails etc. etc.

I was even recently contacted by a reader where the (advance fee scam) attempt was made with a Qchex, (checks you can have e-mailed to you) as payment for a rental. Of course, the reader was then solicited to wire the excess $4,500.00 to someone, who was supposed to arrange furnishings. Upon verification, the check turned out to be counterfeit and our reader avoided becoming a victim of this scam.

Here is my most recent post on Qchex: Addressing QChex Fraud.

The counterfeit items reported to me are being made in the $1,000.00 to $1,500.00 range. They are being passed either for high value merchandise, or given as overpayments on the asking price of the merchandise. The seller is then being duped into wiring the money, normally overseas.

Some of the items reported to me also had Walmart and Ace Check Cashing logos on them.

Recently, there have been a lot of counterfeited U.S. and Canadian Postal Money Orders used in internet scams. Here is a post, I did on them: More on Postal Money Order Scam.

According to the U.S. Postal Service, they were being produced in Nigeria and Eastern Europe.

The items being passed seem to mutate. For some time, they were counterfeit cashier (official) checks, then came the official government money orders and now it seems, money orders in general. The thing to be aware of is the behavior, which is a come-on (normally over the internet) to cash the items for a percentage, or to negotiate them over the amount of something you are trying to sell and wire the excess money. Once in awhile they are to free some beautiful model from Eastern Europe, or Nigeria, who is facing oppression in her homeland.

For information on how to determine if a Travelers Express Money Order is good, click on the title of this post.