How to Spot Check Fraud

Schemes designed to defraud innocent people have become more elaborate in recent years. Technology advancements have made it easier for scammers to pretend to be from legitimate organizations – including government agencies – to win over the trust of consumers. Even when that number on your caller ID appears to be from the IRS, chances are, a con artist used technology to spoof the number and is eagerly waiting on the other end of the line to trick you out of your hard-earned money.

One of the oldest scams in the books is check fraud. They take many forms but check fraud schemes all have one goal in mind: to dupe unsuspecting victims into handing over their financial resources. The Federal Trade Commission received 2.2 million fraud reports from consumers in 2020. These consumers were tricked into giving up sensitive information like bank account numbers and passwords or cashing fake checks.

Trusting your gut is one of the best tools consumers have in protecting themselves against check fraud schemes. As a rule, if it seems too good to be true it probably is too good to be true. Here are some tips for spitting check fraud schemes before you fall victim to them, and what to do if you discover it is too late and you already were swindled.

Examples of common check fraud schemes

One of the most common check fraud schemes currently making the rounds involves advance payment or overpayment for products and services. A popular target for these scammers is businesses that sell products or services online. Let’s take an example of a social media consultant who receives a request for assistance from a prospective client. The person soliciting the request appears legitimate. They agree to sign a contract and begin work.

Since most consultants require an upfront deposit before work begins, the scammer offers to send it via check or money order overnight. The next day, the consultant receives a check for their services – only it is for double (or triple) the amount agreed upon with the client. When the consultant attempts to correct the mistake, the client asks them to go ahead and cash the check and just send them back a check for the difference, so they do not have to waste time and spend more money cutting you another check and paying to overnight it again.

Some people fall for this hook, line, and sinker. The check they were overnighted is fake. When they try to cash it, it will bounce. By then, it is probably too late since they already returned the “overpayment” to the customer.

Unsolicited check fraud is another version of this same scheme. You receive a check in the mail you were not expecting. It may resemble a rebate check or refund for overpayment. Signing a check like this could legally bind you to a contract with whoever sent the check. Scammers use this tactic to get unsuspecting consumers to authorize loans and memberships.

Check-cashing schemes are another form of check fraud. Scammers approach people and ask them to cash a check for them. They offer to sign it over to you, have you deposit it into your account, and then write them a check for the same amount from your account to them. The claim with this type of con is the person needs to cash the check but does not have an account at the bank.

Why do check fraud scams work?

There are several reasons why people fall victim to check fraud scams. One of the most common is thinking you are doing a kind deed for another person. This is how fraudsters pull off check-cashing schemes. They prey on the goodwill of others.

Another reason check fraud scams work is that businesses are eager to attract new customers. Small businesses are favorite targets of these kinds of scammers because many are looking to grow their brands and are willing to work with new people. Waving large checks in front of business owners who may be struggling to survive is tempting.

When check fraud schemers send cashier’s checks, victims are unlikely to question the validity. After all, the supposed benefit of cashier’s checks is they are guaranteed by a bank. Right? Wrong. Con artists have become quite skilled at imitating real cashier’s checks. They may look legitimate, but they are fake. It is a hard lesson victims learn when they try to cash it and hold the financial institution that supposedly issued it accountable when it ultimately bounces.

An example of an MICR line on a check.

How to detect a fake check

Fake checks are difficult to spot. Banks and other financial institutions process them regularly without spotting them. Scammers go to great lengths to pull off their heists. They often use the names and addresses of legitimate businesses and people – even other financial institutions – to trick people. In some instances, they may be real checks that belong to accounts of identity theft victims. It can, unfortunately, take banks and other financial institutions weeks to sort out check fraud. The money may immediately show as available in your bank account, but once financial institutions realize it is fake, they can withdraw it from your account, leaving you holding the bag.

There are some features on fake checks that can help give them away:

  • Bank addresses and logos. All legitimate financial institutions have street addresses. If the check you are holding has a P.O. box number, that is a huge red flag. If you are unsure, contact the supposed issuing bank to verify the information on the check is legitimate. Bank logos can be faked on checks, but when they are, they often appear faded or blurry from being copied from an online source.
  • Edges. Most legitimate checks have at least one perforated (rough) edge. When all edges of the check are smooth, that is a tell-tale sign it was printed from a home computer.
  • Check number. If the check is missing a number in the top right-hand corner, it is fake. Another sign of illegitimacy is if the number appearing in the top right-hand corner does not match the MICR line. The MICR line is the string of numbers across the bottom of the check. The last four digits should match the number at the top of the check.
  • Check amount. Checks that are less than $5,000 are popular among thieves because federal rules require deposits under that amount to be available within five days to the person depositing the check.
  • Routing numbers. At the bottom of every check in the MICR line is the issuing bank’s routing number. Legitimate routing numbers have nine digits. You can verify routing numbers on the Federal Reserve Financial Services website.

How to report a fake check

If you suspect you received a fake check or someone is trying to get you to cash a check you believe to be false, immediately contact your local authorities. You also can report fraud to the Federal Trade Commission. If the check was sent via the U.S. Postal Service, inform the U.S. Postal Inspection Service by calling 800-275-8777 or notify them online. Lastly, if the scammer contacted you online, file a complaint at the FBI’s Internet Crime Complaint Center.

Check fraud is a serious crime. If you face charges for check fraud, reach out to the team at Cameron and Russell to schedule a free consultation.

bank fraud, check fraud, check-cashing schemes

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