Don't Become a Victim of Cashier's Check Fraud
Originally published: May 2013
Cashier’s checks – checks issued by a bank – are considered by many to be risk-free. The funds are paid out by the bank, not the buyer. So, requiring a cashier’s check for payment from a customer seems very secure. And it is … as long as the check is genuine.
Unfortunately, cashier’s check fraud has become a very popular crime. A December 2012 Notice from the Federal Trade Commission indicates that counterfeit check scams are on the rise, including scams involving cashier’s checks.
Why are counterfeit check scams increasing?
Cashier’s checks are widely considered a secure medium for obtaining payment. Most of us still trust checks issued by banks, despite the recent scandals, bailouts and frauds, perpetrated by some of the biggest banks in the U.S.
Current technological capabilities are also a factor in the increase of check fraud. High quality printers and scanners make it relatively easy to create counterfeits. The checks include names and real account and routing numbers and even authentic looking watermarks. Some fake checks look so good that even bank tellers can’t tell if they are real or a forgery.
The law itself assists the counterfeiter in carrying out his crimes. Under federal law, your bank is required to make the funds from cashier and other bank checks available within one to five business days. It can take up to two weeks for the check to clear the banking system and for your bank to receive payment from the issuing bank.
Some counterfeit checks are done so well that they move between banks for several weeks before the forgery is discovered. That allows plenty of time for the scammer to take the product and run, leaving you or your company to ‘take the hit’.
If you deposit a cashier’s check that turns out to be counterfeit, your bank will reverse the deposit from your account. If you have already spent some or all of the money, you are responsible for paying it back to the bank. Your only recourse would be against the person who wrote the check in the first place.
Unfortunately, it is very difficult to catch a counterfeiter, especially one who may have executed his crime several weeks before it was discovered. Many criminals perpetrating these scams are located in foreign countries, making it that much harder to find them and prosecute.
Typical Bank Check Scams
- An unknown buyer offering to pay C.O.D. with a cashier's check.
- An unknown customer submitting a cashier’s check for more than the price of the goods and asking that you wire the excess amount ASAP. If you accede to this request, the buyer will get your goods, which will usually be shipped upon receipt of the check, the money you supposedly received for the goods, as well as the overage you reimbursed to the buyer under the assumption that the bank check was good.
Avoiding Bank Check Fraud - Some Advice
- Be extremely cautious about accepting a cashier's check for payment.
- Never accept a check that is more than your selling price.
- Don’t accept cashier’s checks, or any check for that matter, for payment from buyers you do not know.
- If you are willing to take a cashier’s check in payment, insist on one drawn from a local bank or a bank that has a local branch.
What to Do If You Are a Victim of a Cashier’s Check Scam
If you believe your company, or you, have been a victim of bank check fraud, file a complaint with each of the agencies below (as appropriate):
- The Federal Trade Commission by completing their online complaint form.
- The U.S. Postal Inspection Service, if the check was sent by mail.
- Your state or local consumer protection agency. The web site of the National Association of Attorneys General (NAAG) includes a list of all U.S. state and territory Attorney Generals. (On the NAAG home page, scroll to the map of the United States under “AG Fast Facts”, move your mouse over your state and click on the blue box for the web page of your state’s Attorney General.)
Unless you know and trust the person you’re dealing with, it’s best not to rely on money from a cashier’s check, or any other type of check, until your bank confirms that the check has cleared. It can take weeks to discover and untangle forgeries. The bottom line is that until the bank confirms that the funds from the check have been deposited into your account, you are responsible for any money you withdraw against that check.