An in-depth study about Wisconsin by Better Business Bureau found that, while consumers may write fewer checks in this era of electronic financial transactions, fake check scams are on the rise.
Fake checks are used in a variety of frauds, from employment scams to prize and sweepstakes fraud. In all cases, victims deposit the check and send money back to scammers. BBB Warns consumers to be on guard against these serious and pervasive frauds and their perpetrators.
The investigative study, Don’t Cash That Check: Better Business Bureau Study Shows How Fake Checks Scams Bait Consumers, looks at how fake checks dupe consumers. It digs into the scope of the problem, who is behind it, and the need for law enforcement and consumer education to address the issue.
Scammers often succeed because consumers do not realize:
- Crediting a bank account does not mean the cashed check is valid. Federal banking rules require that when someone deposits a check into an account, the bank must make the funds available right away – within a day or two. Even when a check is credited to an account, it does not mean the check is good. A week or so later, if the check bounces, the bank will want the money back. Consumers, not fraudsters, will be on the hook for the funds.
- Cashier’s checks and postal money orders can be forged. A cashier’s check is a check guaranteed by a bank, drawn on a bank’s own funds and signed by a cashier. If a person deposits a cashier’s check, the person’s bank must credit the account by the next day. The same holds true for postal money orders. Scammers use cashier’s checks and postal money orders because many people don’t realize they can be forged.
“People need to understand fake check scams in order to protect themselves,” said Jim Temmer, President and CEO of BBB Serving Wisconsin. “In particular, fake check scammers rely on misunderstandings about checking in order to trap their victims. In order to comply with federal regulations, banks often release the hold on a deposited check before they can verify that the check is valid. If the check turns out to be invalid, consumers are required to repay the bank. BBB Encourages consumers to verify the legitimacy with the check’s issuer before accepting it.”
Fake check fraud is a huge problem, with complaints to regulatory agencies and consumer watchdog groups doubling over the last three years.
Fraud employing fake checks is rapidly growing and costing billions of dollars. Fake checks were involved in 7 percent of all complaints filed with BBB’s Scam Tracker. The number of complaints received by the Federal Trade Commission’s Consumer Sentinel database and the Internet Fraud Complaint Center more than doubled between 2014 and 2017.
The study found this fraud affects victims of all ages and income levels, but consumers between 20-29 reported being victimized by the scam more than consumers of any other age range.
One St. Louis college student lost hundreds of dollars in a mystery shopper scam using a fake check. After responding to a very professional-looking online job listing for a mystery shopper, he was sent a cashier’s check for almost $2,000.
Per instructions, he deposited the check, “mystery shopped” several businesses and sent $885 to two addresses. His bank informed him later that the $,000 check was not valid, and he would have to repay the bank the $885 he sent. Although he was able to set up a payment plan to repay it, the loss has been difficult for the student.
The National Consumers League, which also receives complaints from fraud victims at fraud.org, found that fake check complaints in 2017 were up 12% and was the second most common type of complaint over all, after online order issues.
Nigerian gangs appear to be behind most of this fraud, often using romance fraud victims and other “money mules” to receive money from victims. Many fake checks and money orders are shipped to the U.S. from Nigeria.
The report recommends:
- Organizations such as BBB and regulatory agencies should do more to provide fake check fraud prevention education.
- With wide-scale use of money mules and others to assist in frauds, it would be useful for law enforcement agencies to work collaboratively to both identify these individuals and to take action to ensure that they end these activities.
- Investigative agencies may need more resources to effectively prosecute fake checks and other widespread frauds.
- Continued law enforcement coordination and training with enforcement counterparts in Nigeria and elsewhere should remain important and should be strengthened.
- Banks and financial institutions might consider more collective efforts to educate their customers about fake check frauds.
Victims who are seniors or other vulnerable adults may be able to obtain help through Adult Protective Services, which has offices in every state and many counties.